President Obama announced to a crowd of college students he will implement a new law to lower student debt next year.
“This is something Michelle and I know about firsthand; I’ve been in your shoes,” Obama said. “By the time we both graduated from law school, we had between us about $120,000 worth of debt.”
The new law lowers the maximum amount of required payment for student loans from 15 percent of discretionary annual income to 10 percent. It also shortens the length of time required to pay back loans.  Under the current law, loans are forgiven after 25 years of payment.  The new law cuts down the number of years to 20.
Students also have the option to consolidate all federal loan payments into a single monthly payment.  The students who choose to participate in this offer will receive a 0.5 percent reduction on some of their interest rates.
Mississippi House of Representatives Education Chair Cecil Brown said he believes the debt reduction will have a positive effect.
“Anything that lowers the debt burden on students will be welcome,” he said.  “Too many students graduate with a huge mountain of debt to climb.”
Congress passed the law last year, and it was originally intended to go into effect in 2014, but the White House has been working to speed up the process, and the law will now take effect in 2012.
Students at Mississippi State University are excited about the new loan repayment program.
Courtney Hill, senior kinesiology major who is relying on loans to attend college, said she hopes to benefit from the decrease in payments.
 
“I figured up that it should take about 10 years for me to pay off my student loans,” Hill said.  “If they lower the minimum payment, it won’t be as much of a financial burden.”
Obama said the program would make attaining an all-important college education easier for financially-challenged students.
“We should be doing everything we can to put a college education within reach for every American,” Obama said. “It’s never been more important, but let’s face it: It’s also never been more expensive.”
The plan to decrease student debt was created as a way to help revitalize the economy.
Yet, research from Daniel Indiviglio, associate editor of The Atlantic, indicates it will not make as much of a financial impact as originally anticipated.
“The monthly savings for the average student loan borrower would be between $4.50 and $7.75 per month,” Indiviglio said.  “Even someone with $100,000 in loans would only cut their monthly payments by $28.50.”
Brown also said he finds it unlikely the law will stimulate the economy.
“Obama suggests for students to put aside that extra 5 percent in savings, which wouldn’t actually help the economy,” Brown said.  “It will definitely boost morale, though, and help an awful lot of people that are concerned about their futures.”
For MSU students, the new debt reduction may only offset the higher cost of education.  Last year, the Mississippi Institutions of Higher Learning board of trustees approved a 6.3 percent increase in tuition for fiscal year 2012.
This legislation will only affect students carrying government-backed loans issued by the private sector known as Federal Family Education Loans and direct loans issued by the government.