According to a White House fact sheet, a teacher $25,000 in debt and earning $30,000 a year will see their payments reduced to about $114 a month.
Cohen is one of a handful of Congress members who are attempting to create a path for students with private student loan debt to declare bankruptcy
“It’s really important to realize that the faces of student loan borrowers are not just young people who went to traditional colleges,” Loonin said. “The faces of student loan borrowers are also older people, non-traditional students, working adults. It’s a much broader community.”
One particular concern is the rise of publicly traded for-profit colleges — programs like the University of Phoenix, which often serve non-traditional students and confer degrees online — which has produced a high rate of default among its students.
Loonin said that about 70 percent of the people she works with at the NCLC, most of who are already in default, attended for-profit colleges.
“There’s rampant fraud in that sector, and deception,” she said. “A lot of people are being deceived into signing up, ent, faculties, and deceived about the prospects at the back end. The for-profit issue is really a consumer fraud issue.”
In a Wednesday statement, Sen. Dick Durbin, D-Ill., praised Mr. Obama for his proposal but pointed to students at for-profit institutions as being in need of further government assistance.
“Today’s announcement by President Obama is welcome news for the millions of students and recent graduates who are struggling to pay off their student loans. Plans to cap monthly payments, provide greater access to loan repayment programs, aid in the consolidation of student loans and to provide students with more information about financial aid before they go into debt are all important steps to help students manage the skyrocketing costs of getting a degree,” Durbin said.
But, he added, “For a growing number of students, this help may not be enough. Students in some for-profit schools are increasingly burdened with massive debt and little to show for their education. Meaningful accreditation standards and safeguards for taxpayer investments need to be put in place to ensure students are getting the best education possible and federal funds are being used fairly and responsibly.”
Another group left out of the Obama administration’s plan are those who are struggling to pay off their private student debts, which are provided by private lenders like Sallie Mae and Citibank.
Cohen is one of a handful of Congress members who are attempting to create view a path for students with private student loan debt to declare bankruptcy
Deanne Loonin, an attorney at the National Consumer Law Center who works with clients mired in student debt, said the measures were “a first good step” – but suggested that the spectrum of those who benefit from the plan could be broader.
“It definitely shows that the administration is hearing the voices of financially distressed borrowers,” Loonin told CBSNews. “But the focus is more on students or student borrowers who have recently taken out loans – it doesn’t provide relief for people who have prior loans or who are in default.”
Loonin suggested that broader measures are needed to ease the burden of debt – not just for students with federal loans, but also for those with private loans or who are already in default
The Tennessee Democrat argues that as the result of the 2005 Bankruptcy Reform Bill, which stripped students of the right to declare bankruptcy on private loans, “the industry is giving out loans to people that may not be as creditworthy as they should be – because they know they can’t bankrupt them.”
“You ought to be able to discharge those loans through bankruptcy,” he said. “Why should private loans be different than debt you can accumulate with a credit card, or at a casino? There’s just no good reason for it. It was a really bad bill if you were an average or even a middle-class American. This was done for the industry, not the student.”