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Student Loan Forgiveness: Obama Proposes New Federal Student Loan Repayment Plan

Student loan debt nowadays is bringing down a lot of college graduates. The record of student loan defaults nowadays are soaring toward new levels. 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. 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. There are three major features of the plan that will benefit college graduates who are striving to pay their monthly education loan payment:

First is the interest rate.

In terms of the interest rate, there will be a fixed rate in the plan and it will not go higher than 8.25 percent. Lower interest rates is equal to bigger chance of the monthly payment to be paid off.

The Repayment Term

As detailed in the plan, each loan that would be consolidated will be able to maintain the original repayment term that it follows.

The Electronic Debit Payment Benefit

For those who will apply for the new consolidation plan is entitled to an additional 0.25 percent interest rate reduction if their loan is repaid via the Department of Education’s automatic debit system.

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 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 best thing is that for those who borrowed money for college education will have their loans 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. The new terms has been effective since January 2012.

Apparently, the low-income borrowers are the ones who can really get the most out of the plan.

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