President Barack Obama had good news for students with education loans when he announced changes to federal policy concerning student loan payments on Oct. 25. The changes will take effect in 2012.

The new legislation, referred to as “Pay as You Earn,” will cap student loan payments at 10 percent of a graduate’s yearly discretionary income — or the amount of money remaining after taxes that is not spent on basic necessities such as food and clothing — down from the previous 15 percent maximum.

For instance, take a graduate receiving an annual, entry-level salary of $36,000. Of that, approximately $19,200 is discretionary income. The graduate would have previously paid approximately $240 per month. Under the new legislation, the graduate will pay $160.

Additionally, student debt will be forgiven after 20 years, at which time the government will cancel the loan, and the student will not need to make additional payments if he or she had made consistent payments up until that point. Previously, it was 25 years.

The announcement comes at a time when debt is on the forefront of many student’s brains. Student debt hit an all-time high this year, according to a report released by the Project on Student Debt, a non-profit, independent research organization. The report states that the average graduate in 2010 left college with a diploma and $25,250 in student loan debt.

Student loan debt is the result of a few factors, including an economic recession and tuition hikes.

Tuition and fees for public, four-year colleges increased by an average of 8.3 percent nationally for the 2011-12 academic year, according to the College Board, a non-profit organization dedicated to education inequity that provides students with resources to help them choose and finance post-high school education.

California influenced these numbers significantly. Public universities in California had the highest percentage increase of in-state tuition and fees in the nation, with an escalation of 21 percent according to a report published by the College Board. The report states that if the California tuition hikes were factored out of the national equation, the average would be a rise of 7 percent rather than 8.3 percent for the 2011-12 academic year.

Despite the grim statistics, Cal Poly students do not seem to be bearing the brunt of the burden, according to Cal Poly director of financial aid and scholarships Lois Kelly.

The average Cal Poly student owes $18,783 dollars when he or she graduates — $6,467 less than the average student nationwide. As of Fall 2011, approximately 42 percent of enrolled students are using a loan to pay for part or all of their tuition, Kelly said.

Kelly said defaulting on loans is not a problem for the vast majority of Cal Poly students. The most recent data from the 2009 fiscal year shows that 1.6 percent of students defaulted, while the remaining 98.4 percent did not default — meaning they continued to make payments as scheduled.

While repaying loans does not appear to be an issue for students who have already accumulated debt, some avoid it in the first place by attending to cheaper schools.

Will Steinhauff, a former Cal Poly student, transferred to Oregon State University, in part due to tuition costs.

Steinhauff was an out-of-state student, and his parents were concerned about the debt he would accumulate — out-of-state students pay an additional $226 per unit compared to in-state residents, according to the Cal Poly Financial Aid website.

His mother, Mary Steinhauff, said he liked attending Cal Poly, and would have stayed if he could.

Mary was helping her son cover education costs at the time, and her concerns contributed to his decision to transfer, she said.

“I tried to have the kids not accumulate debt,” Mary said. “At OSU, he will not come out with any debt.”

His parents can afford in-state tuition, but they could not manage the extra amount, she said.

Mary said she and her husband, Eric, graduated from college with loans that amounted to $5,000 combined, and she appreciated not having the extra financial burden.

“Eric and I kind of feel like there’s still quality education for a cheaper price,” Mary said. “It’s like buying a car, you know? You don’t have to have the biggest fanciest car. That mediocre car is still going to get you to the same place.”

Congresswoman Lois Capps, California’s 23rd district representative, said that student debt is one of her primary concerns. In the last session of Congress, Capps helped to “cut out profit making loaners” in order to help make financing an education more practical.

She said while she understands that loans should be a business, she thinks it is unfair for companies to make significant profits from a student’s educational fees.

“You can have it be a business, but it shouldn’t be a huge profit business,” she said. “When it becomes so lucrative at the expense of the college student, then to me, we’ve lost sight of the goal.”

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