WASHINGTON (AP) — Borrowers hoping to consolidate their student loans through a special program created by President Barack Obama last year have just until Saturday to apply.
To much fanfare, Obama used executive authority in October to launch a short-term initiative to allow borrowers to consolidate multiple loans into a direct government loan — and to knock off as much as a half percentage point from their interest rate in the process. The window to apply opened in early 2012 and ends Saturday.
About 440,000 borrowers with loans totaling $10.6 billion have applied for the program, Education Department officials said. It’s a far cry from the 5.8 million borrowers the White House said in October could be helped by the program. But education policy analysts called it an impressive response from a notoriously hard-to-reach population: recent graduates.
“It’s a fairly large and disbursed population, and how you get the information into their hands is always a challenge,” said Terry Hartle, senior vice president of the American Council on Education.
The problems of paying down student debt and the government’s efforts to make it easier have been largely overshadowed by a longstanding congressional stalemate over a deal to prevent interest rates for student loans from doubling on Sunday, the day after the special consolidation program closes. The House and Senate were poised to vote on a deal Friday to avert the increase.
Borrowers who miss the deadline can still apply for a regular consolidation, but they won’t get the interest rate deduction.
The student debt issue is one Obama hopes will resonate on the campaign trail, where he is counting on avid support from students and young voters who helped him claim victory four years ago. According to 2008 exit polling, voters ages 18-24 broke for Obama 66 to 32 percent. They made up 10 percent of the electorate.
Obama promoted the student loan plan as an economic stimulus measure when he unveiled it in October, using his “We Can’t Wait” slogan to argue that his administration would sidestep Congress when necessary to bring relief to struggling Americans.
“Our economy needs it right now and your future could use a boost right now,” Obama said.
About 2 in 3 college graduates borrow to pay for undergraduate education, and the average borrower graduates with about $26,300 in debt, the White House says.
Borrowers can simplify the repayment process by consolidating multiple loans into one monthly payment. But the process isn’t seamless.
To consolidate, borrowers must sort out every individual loan they took out for their education — as many as 20 for some borrowers, who may have moved several times since leaving school and may not have their original documents. Some loans can be consolidated, others cannot. And loans may have been bought and resold by various servicers, making it hard to keep track of which loan is which.
Among those who felt overwhelmed by the process was James Thompson, who finished a graduate degree last year at Stanford University and is in between jobs as a product designer. Thompson got an email from the Education Department alerting him to his eligibility for the special consolidation, but said he couldn’t muster all the information needed to apply.
“It’s like this odd thing that just exists in my life. I really have no idea how it works or what I owe to whom or how I even pay for the loan. It’s all just a mess,” Thompson said in an interview. “I feel very disempowered to actually get in there and just pay the thing.”
Education Department spokesman Justin Hamilton said officials contacted almost the entire population of eligible borrowers to encourage them to take advantage of the program.
Even if Obama wanted to extend the special program to allow more borrowers to apply, his hands are tied. Legislation enacted in 2011 precludes the government from offering the interest-rate deduction as an incentive after July 1.
AP Deputy Director of Polling Jennifer Agiesta contributed to this report.
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Education Department site: http://studentaid.ed.gov/specialconsolidation
Copyright 2012 The Associated Press.