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. It cannot be denied that the student loan default today are mounting toward new accounts. Because of this situation, several college loan borrowers are seeking for debt relief. Fortunately, President Barack Obama has respond to the need by proposing faster government-back loan consolidation and loan forgiveness plans.
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. As of now, the details of the President’s new “Pay As You Earn” program, which lists down the new rules for repayment, are still being developed.
The main focus and objective of the plan is a loan consolidation at 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.
The Repayment Term
Each loan that gets to be consolidated can keep its initial repayment term.
The third is 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 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. By doing so, they will be able to receive a reduction at their interest rates and even save money in the process.
College graduates must remember though that they are still responsible at making payments on their loans, however, those revised payments would be bound at just 10 percent of their earnings.
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.
As of now, it is not yet fully determined how many students the new law will be able to help but it is estimated to reach at least 450,000 up to 6 million.
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.
It’s notable that low-income borrowers would benefit the most with the plan.