David Indiviglio at The Atlantic takes a look at the Obama student loan debt reduction plan, and finds the average savings a little wanting:
How much would an interest rate reduction of up to 0.5% affect payments?
For the average borrower, the impact would be small. In 2011, Bachelor’s degree recipients graduating with debt had an average balance of $27,204, according to an analysis done by finaid.org, based on Department of Education data. That average has ballooned from just $17,646 over the past decade.
Using these values as the high and low bounds of average student debt over the last ten years, the monthly savings for the average student loan borrower would be between $4.50 and $7.75 per month. Clearly, this isn’t going to save the economy. While borrowers with bigger balances would save more, this is the average. And even someone with $100,000 in loans would only cut their monthly payments by $28.50.
Every three months, you could see a movie with those savings!
One thing the Indiviglio post doesn’t get into: No one who’s already graduated from college is eligible for this. To qualify for the Obama plan, your loans must have originated during or after 2008, and you must have one loan that originates in 2012.
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