Obama Administration Seeks to Reduce Millions of Student Loans
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UPDATED: Nov 7, 2011
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President Obama recently announced his proposal to reduce the sometimes excruciatingly high monthly payments current students and recent graduates owe on the loans used to pay for their education.
Recognizing the importance of education in a global economy, president Obama said in a news release, “until Congress does act, I will continue to do everything in my power to act on behalf of the American people.”
The administration hopes to live up to this promise by revising the current “Pay as You Earn” student loan payback program. Beginning next year, current students will have the ability to cap their monthly student loan payments at 10 percent of their discretionary income.
However, it is not only current students that are struggling with their student loan payments. Recent graduates, those who are trying to break into the extremely competitive recessionary job market, are finding themselves without any means to payback their student loans.
To tackle this problem, the administration seeks to grant graduates the ability to consolidate student loans at reduced interest rates and to forgive the balance graduates owe after 20 years of making payments on their student loans. This measure will offer a strong helping hand to graduates who have taken on lower-paying jobs.
By consolidating and reducing graduates’ monthly payments, these improvements to the “Pay as You Earn” plan are meant to work in tandem with the Public Service Loan Forgiveness Program, which forgives all student loan debt for public service workers after just 10 years of payment.
Finally, for borrowers who have both a Federal Direct Loan and a Federal Family Education Loan, the Administration will grant an option to consolidate these loans into a single payment. If borrowers accept the offer to consolidate these federal student loans, they will receive up to a 0.5 percent reduction on the interest rate these loans bear.