Last week, Pres­i­dent Obama announced a series of reg­u­la­tory changes aimed at easing the burden of stu­dent loans for recent col­lege grad­u­ates who may not be making enough money to repay their debts. Pro­fessor Jef­frey Born, a finance expert in the Col­lege of Busi­ness Admin­is­tra­tion, says while the changes may not help many recent grad­u­ates, they could help stu­dents who are preparing to grad­uate — espe­cially those with degrees that may not net them high-​​paying jobs.

What sort of impact will these changes have on col­lege stu­dents and grad­u­ates cur­rently paying back their loans? Was last week’s announce­ment a surprise?

Two parts of the plan announced by Pres­i­dent Obama could ben­efit grad­u­ates cur­rently paying back their loans. First, cut­ting the max­imum pay­back period for lower-​​income grad­u­ates from 25 years to 20 years, and second, pro­viding an oppor­tu­nity for grad­u­ates with loans to con­sol­i­date their loans into one (easier) pay­ment with an addi­tional sweet­ener of a 0.25 per­cent to 0.5 per­cent sav­ings on interest rates.

How­ever, most of the ben­e­fits will be obtained by future grad­u­ates who find work in rel­a­tively low-​​paying jobs and have a rel­a­tively high amount of loans. The White House esti­mates that 1.6 mil­lion stu­dents could ben­efit from the reduc­tion in income levels ded­i­cated to loan pay­ments. Cut­ting down the max­imum pay­ment period won’t directly affect anyone for a couple of decades.

While many of the changes pro­posed by the pres­i­dent were set to go into effect in 2014, it did come as some­what of a sur­prise that he has chosen to move the timetable forward.

What are some of the spe­cific con­di­tions that accom­pany the changes to fed­eral stu­dent loan policies?

For cur­rent stu­dents, the pres­i­dent has moved the imple­men­ta­tion of a reduc­tion in the max­imum amount of dis­cre­tionary income that can be used for loan pay­ments (15 per­cent down to 10 per­cent).  This reduc­tion was to go into effect in 2014 and it will be made avail­able to stu­dents who have taken on loans between 2008 and 2011, pro­viding they take more loans in 2012.

There are tests to deter­mine if one can have his or her loan pay­ments capped as a per­centage of income. Mar­riage and changes in income levels (through raises) can lead to an increase in pay­ments — but never to an amount greater than what would be paid under stan­dard terms offered other stu­dent loan bor­rowers. Remark­ably few bor­rowers (450,000) have taken advan­tage of the Income-​​Based Repay­ment (IBR) plan to date.

Do you think this fac­tors into the new “Occupy Wall Street” and the 99 per­cent move­ments? What role could poli­cies like this have in the upcoming election?

Many in this move­ment appear to be recent grad­u­ates, and most of these changes will not directly help them. How­ever, voters 18 to 29 years of age with some col­lege expe­ri­ence appear to have sup­ported the pres­i­dent by more than a 2-​​to-​​1 margin in the last elec­tion, and they voted more often than in recent elec­tions. With the pres­i­den­tial elec­tion season already underway, it is unlikely that this will be the last policy announce­ment designed to help solidify and improve the president’s approval with this key constituency.