President-Elect Obama's Plan for Student Loans
December 02, 2008
One of the biggest concerns for parents in the United States is affording the cost of higher education. President-Elect Obama has highlighted on his website his plan to make loans available for parents. The plan has two elements:
(1) Create the American Opportunity Tax Credit: President Obama will make college affordable for all Americans by creating a new American Opportunity Tax Credit. This universal and fully refundable credit will ensure that the first $4,000 of a college education is completely free for most Americans, and will cover two-thirds the cost of tuition at the average public college or university and make community college tuition completely free for most students. Recipients of the credit will be required to conduct 100 hours of community service.
(2) Simplify the Application Process for Financial Aid: President Obama will streamline the financial aid process by eliminating the current federal financial aid application and enabling families to apply simply by checking a box on their tax form, authorizing their tax information to be used, and eliminating the need for a separate application.
Parents who are combining loans from various sources can find an excellent resource on Virgin Money's website called "The Lender Blender". This interactive tool allows the user to compare rates on various loan sources with average rates for each type of loan which can be adjusted.
Family or Friend Loans (4%)
Private Student Loans (11%)
Credit Cards (12%)
Home Equity Loans (5.70%)
Federal PLUS Loan (8.50%)
Other Loans (5%)
The Lender Blender will compute the amount of savings by using any loan which charges an interest rate below that of the average private student loan.