President Obama announced yesterday two new initiatives to help ease the burden of student loan debt. These initiatives could make student loan debt easier to pay for millions of borrowers and are important steps toward making a college degree more affordable.
The first part of the plan, dubbed “Pay As You Earn,” will move up the start date for improvements to the income-based repayment (IBR) of student loans, which currently caps payments at 15% of income and forgives the balance after 25 years. The improvements, which cap payments at 10% of income and forgives all loan debt after 20 years, would start in January 2012 instead of 2014. IBR makes it easier young people to afford their payments at a time when their incomes may be too low to afford a typical payment. To find out if you qualify for IBR, you can check out this website. The improvements would not be available for borrowers already in repayment, although those borrowers could still take advantage of the income-based repayment program.
The proposal will allow students to consolidate their different federal loans (Direct Loans and FFEL loans) into one payment. Consolidation could reduce the interest rate on student loans by half a percentage point and simplify the debt management, since there will be only one payment each month.
The Administration is also increasing awareness efforts around the income-based repayment program, which currently has about half a million enrollees but holds the potential to help millions more. For example, the U.S. Small Business Administration launched a new website to help young entrepreneurs take full advantage of the Income-Based Repayment program, freeing up more money to invest in their new ideas.
Student loan relief for young entrepreneurs has been a Young Invincibles priority. For more information, go to wwww.younthentrepreneurshipact.com.