New Federal Student Loan Repayment Plan Gives Borrowers Debt Relief
They may have received their diploma already but college graduates are still stuck because of crushing student loan debt. If you check the records, it can be seen that student loan defaults are now in a whole new level. With that being said, college loan borrowers are crying out for debt relief. This has lead the President of the United States, Barack Obama, to put forward faster government-backed loan consolidation and loan forgiveness plans in order to help borrowers pay back their college debts and even increase the economy of America.
The decision of President Obama to expand the education loan forgiveness to a bigger number of students could mean that loans you received to pay for college may get much easier to manage. Those who are interested to learn more about the details of Obama’s new “Pay As You Earn” program should stay updated as they are still currently emerging.
The new plan’s key objective is a loan consolidation that has a lower interest rate. For college students who are struggling to pay their monthly educational loan, here are three major features of the plan that offer benefits:
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. Lower interest rates is equal to bigger chance of the monthly payment to be paid off.
Second is the repayment term.
Each loan that gets to be consolidated can keep its initial repayment term.
The Electronic Debit Payment Benefit
Paying through the Department of Education’s automatic debit system can give applicants of the new consolidation plan an additional 0.25 percent interest rate reduction.
The government is looking into allowing people who both hold private and government students loans to consolidate their debts into one new government loan. By doing so, they will be able to receive a reduction at their interest rates and even save money in the process.
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.
But the highlight of the plan is that those who borrowed money to finance their college education will have their loans forgiven after 20 years.
Currently, it is not known how much the new law will aim to help but it is estimated to be at 450,000 to 6 million students.
When Congress submitted the Income-Based Repayment Plan (IBRP) in 2010, there was a long waiting time before it was approved. Fortunately, it has become a reality and the new terms has been effective since 2012.
Low-income borrowers receive more of the benefits.