The bad news: to date, President Obama will not be able to offer any type of bailout relief for student loans unless he wins the 2012 election. Why? Any worth while legislation to save the middle class has been and will be denied by Congress.
However, there is a glimmer of good news: All student loan borrowers must thank President Obama for the “Pay As You Earn” proposal that will reduce student loans repayments for 1.6 million people! In short, his proposal will cut student loan payments from 15 percent to 10 percent of their discretionary income starting (hopefully) in 2012.
The “Pay As You Earn” proposal includes an “Income Based Repayment” (IBR) plan that will currently reduce your standard repayments to 15% of your discretionary income. The amount you pay is based on your previous year’s Federal Tax Return.
According to Whitehouse.gov, “the program lowers monthly payments for borrowers who have high loan debt and modest incomes, but it may increase the length of the loan repayment period, accruing more interest over the life of the loan.”
The Whitehouse provided an example Standard Repayment plan vs. the Income Based Repayment (IBR) plan.
“…take for example a nurse who is earning $45,000 and has $60,000 in federal student loans. Under the standard repayment plan, her monthly repayment amount is $690. The currently available IBR plan would reduce her payment by $332, to $358. President Obama’s improved “Pay As You Earn” plan -- reducing the cap from 15 percent to 10 percent -- will reduce her payment by an additional $119, to a more manageable $239 -- a total reduction of $451 a month.”
Another example:
“A teacher who is earning $30,000 a year and has $25,000 in Federal student loans. Under the standard repayment plan, this borrower’s monthly repayment amount is $287 . The currently available IBR plan would reduce this borrower’s payment by $116, to $171. Under the improved ‘P ay As You Earn’ plan, his monthly payment amount would be even more manageable at only $114. And, if this borrower remained a teacher or was employed in another public service occupation, he would be eligible for forgiveness under the Public Service Loan Forgiveness Program after 10 years of payments.”
This plan is not a student loan bailout plan but it is an excellent plan. If student loan borrowers are not able to catch up on their student loan repayments with this plan, they simply just don’t want to repay.
For more information to determine if the Income-Based Repayment plan is right for you visit: http://studentaid.ed.gov/ibr
Live Positive!
Joveline
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