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President Obama has signed an executive order that could help ease the student loan burden of nearly 5 million borrowers.
The order extends eligibility for the Pay as You Earn program — which caps repayment at 10 percent of monthly discretionary income — to federal direct student loan borrowers who took out loans before October 2007 or haven’t borrowed since October 2011. They were previously excluded from the 10 percent limit but could qualify for a 15 percent cap.
“Any remaining balance is forgiven after 20 years of payments, or 10 years for those in public service jobs,” a White House statement says.
However, the adjustment won’t be available until December 2015.
Students graduate with an average of about $29,400 in student loan debt. Under the amended regulations, a 2009 college graduate with $26,500 in student loan debt and a $39,000 salary would experience a $1,500 reduction in annual loan payments, the White House said.
According to The Washington Post, Obama said the cost of college tuition and the rising burden of student debt are suffocating middle-class families. “We are here today because we believe that in America, no hardworking young person should be priced out of a higher education,” Obama said.
Unfortunately, not everyone who needs help will get it. Wrote Liz Weston for Reuters:
Some of the most burdened borrowers, however, will get little if any relief, financial aid experts said.
Private student loans and parent PLUS loans are not eligible for income-based options, and borrowers with huge debt loads can be shut out if their incomes are too high.
What do you think of the executive action taken by the president? Could you benefit from the changes? Share your comments below or on our Facebook page.