Obama’s Plan for Student Loan Debt Relief: Lower Repayment Amounts, Forgive Debt Sooner, Allow Borrowers to Consolidate Federal LoansPosted by erik devaney
With student loan debt approaching the $1 trillion mark, President Obama has announced a plan for easing the burden on college grads; many of who are struggling to keep up with payments.
While Obama’s plan does not call for the forgiveness of all student loan debt, it does promise to benefit upwards of 1.6 million borrowers across the country.
The proposed student loan debt relief plan has three primary parts.
First, it will accelerate a new federal law that lowers the federal student loan repayment cap from 15 percent to 10 percent of annual discretionary income. Instead of going into effect in 2014, as previously planned, the new cap will go into effect this January. As a result of the cap, borrowers could see their monthly payments reduced by as much as $200 per month, according to White House officials.
Second, for borrowers adhering to the new 10 percent repayment cap, the plan will forgive any remaining student loan debt following a period of 20 years. Under current law, remaining debt is not forgiven until 25 years.
Third, President Obama’s plan will allow borrowers with Federal Family Education Loan Program loans and direct government loans to consolidate them into a single loan. The new consolidated loan would carry an interest rate that is up to a half percentage point lower than a borrower’s prior rate.
“What we’re trying to do is help on the back end, to reduce those monthly payments on those loans,” said U.S. Secretary of Education Arne Duncan on MSNBC’s Morning Joe.
Duncan continued, “Basically we want people to have more disposable income. We want to reduce those monthly payments, and this can reduce those monthly payments by up to a couple of hundred dollars, so this is very significant both for recent college graduates as well as those currently in school.”
Supporters of Obama’s new student loan debt relief plan have been expressing their excitement on Twitter. However, as you will see, not everyone is happy about the President’s plan.
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- Mission Accomplished: New England Post Finds an Economist* who Supports Forgiving Student Loan Debt
- Forgiving Student Loan Debt as an Economic Stimulus; What Does a Local Economist Think?
- The Latest on Student Loan Debt Forgiveness: Exploring Opportunity Cost and Higher Ed Financing Reform
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