Student Loan Forgiveness: Obama Proposes New Federal Student Loan Repayment Plan
Student loan debt nowadays is bringing down a lot of college graduates. If you check the records, it can be seen that student loan defaults are now in a whole new level. College loan borrower are seeking for debt relief. In order to help those who have loaned repay their college debts, President Obama proposed quicker government-backed loan consolidation and loan forgiveness plans, which also in turn surge the American economy.
It is believed that President Obama’s decision to further develop education loan forgiveness to more students can result to a much easier process of paying out the loans for college. Information regarding his new “Pay As You Earn” program, which details new rules for repayment, are still developing.
The main focus and objective of the plan is a loan consolidation at a lower interest rate. Looking at the plan, there are three key features that gives college graduates benefits in terms of their monthly educational loan payments.
The Interest Rate
There will be a fixed rate (not more than 8.25%) after applying the 0.25% interest rate drop to qualifying loans being combined. With a lesser interest rate, students are able to pay more of the monthly payment resulting to more decrease in the principal balance.
The second major feature is the repayment term.
As detailed in the plan, each loan that would be consolidated will be able to maintain the original repayment term that it follows.
The Electronic Debit Payment Benefit
If the applicant of the new consolidation plan pays through the Department of Education’s automatic debit system, he or she is qualified for a supplementary 0.25 percent interest rate reduction.
The government has indicated that they want those people holding both private and government student loans to be permitted to consolidate their debts at the moment into one new government loan. This action could cut their interest rates and let them save money along the way.
College graduates should take note though that they are still responsible in making payments on their loans, but those revised payments would be trumped at just 10 percent of their income.
The better news is that for those who loaned tens of thousands of dollars for their college education, their loan will be forgiven after 20 years.
It is still not clearly known how many students will the new plan be able to help but it may range from 450,000 to 6 million students.
The new law passed by the Congress took a while to become a reality. Fortunately, it has become a reality and the new terms has been effective since 2012.
Apparently, the low-income borrowers are the ones who can really get the most out of the plan.
Source: http://www.1clickeducation.com/guide/student-debt-understanding-your-options-13.shtml