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White House wants to scale back student loan aid programs

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CNY/NNY/S. Tier: White House wants to scale back student loan aid programs
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WASHINGTON -- As student loan debt continues to rise, the Obama administration has promoted programs that help Americans pay for higher education by limiting loan payments, but enrollment in those programs has skyrocketed, and the White House now wants to scale them back.

Most people with student loan debt simply want to get rid of it. The federal government has three programs that help Americans do just that.

One offers debt forgiveness for people who take certain public sector jobs. Another allows borrowers to repay student loans based on how much money they make.

"So not what you borrowed, not based on the interest rate, but based on your income, and then, after 10 or 20 years, you can have the remaining balance forgiven," said Jason Delisle, director of the New America Foundation Federal Education Budget Project.

It's no surprise that enrollment in those programs has surged, reportedly by nearly 40 percent in just six months. Government officials want to rein in the programs for fear that the debt forgiveness will drive schools to charge more and students to borrow more money.

Graduate student debt accounts for the most dramatic increase in student borrowing in the last decade.

"Most people would be surprised to learn that in 2006, Congress passed a law that eliminated the borrowing caps on federal student loans for graduate students so that any graduate student, any graduate program can borrow in federal dollars whatever the program charges, including all of their costs of living," Delisle said.

When you compare the amount of grad school debt, adjusted for inflation, the typical borrower in a law program took on a little more than $128,000 in debt in 2012, compared to nearly $77,000 of debt in 2004.

For a graduate with a Master of Arts, the debt load in 2012 is a little north of $43,000, compared to nearly $28,000 in 2004.

The Obama administration has proposed caps for the debt forgiveness, but changes to the loan programs would have to be approved by Congress, and that's not likely to happen this year.

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