Obama Administration to Lower Student Loan Payments for Millions of Borrowers


Last Updated: October 25, 2011
 

The Obama Administration is moving forward with a new "Pay As You Earn" proposal that will reduce monthly payments for more than one and a half million current college students and borrowers.

Starting in 2014, borrowers will be able to reduce their monthly student loan payments to 10 percent of their discretionary income. But President Obama realizes that many students need relief sooner than that. The new "Pay As You Earn" proposal will allow about 1.6 million students the ability to cap their loan payments at 10 percent starting next year, and the plan will forgive the balance of their debt after 20 years of payments. Additionally, starting this January an estimated 6 million students and recent college graduates will be able to consolidate their loans and reduce their interest rates.

"In a global economy, putting a college education within reach for every American has never been more important," President Obama said. "But it's also never been more expensive. That's why today we're taking steps to help nearly 1.6 million Americans lower their monthly student loan payments. Steps like these won't take the place of the bold action we need from Congress to boost our economy and create jobs, but they will make a difference. And until Congress does act, I will continue to do everything in my power to act on behalf of the American people."

"College graduates are entering one of the toughest job markets in recent memory, and we have a way to help them save money by consolidating their debt and capping their loan payments. And we can do it at no cost to the taxpayer," said U.S. Secretary of Education Arne Duncan.

Current law allows borrowers to limit their loan payments to 15 percent of their discretionary income and forgives all remaining debt after 25 years. However, few students know about this option. Students can find out if they are currently eligible for IBR at www.studentaid.ed.gov/ibr. Last year, the President proposed, and Congress enacted, a plan to further ease student loan debt payment by lowering the IBR loan payment to 10 percent of income, and the forgiveness timeline to 20 years. This change is set to go into effect for all new borrowers after 2014—mostly impacting future college students.

Read more at http://www.ed.gov/news/press-releases/we-cant-wait-obama-administration-lower-student-loan-payments-millions-borrowers.