Today, President Barack Obama announced expansion of a program that helps student loan borrowers manage their debt. The new plan extends 2010’s “Pay as You Earn” program, that tied student loan payments to their monthly income, and expands the number of Americans whose student loan payments will be capped at 10% of their monthly incomes; before, monthly payments had to be at least 15%.
This alternative repayment program allows an additional five million borrowers to qualify, and will begin in December 2015. It expands the program eligibility to include those who took out loans before October 2007, or stopped borrowing by October 2011.
“I’ve heard from too many young people who are frustrated that they’ve done everything they were suppose to do — and now they’re paying the price,” Obama said yesterday in his weekly address.
The new rules also change the “forgiveness” of student loans for those who work in public service jobs, and for low-income borrowers who pay on time. For example, teachers can have their balance canceled after 10 years; and for those with a small amount of money coming in can have their balance cut-off after 20 years of on-time payments. And those individuals who do not qualify to be “forgiven” under the new law but still use repayment programs will find their monthly payments reduced and spread over a longer period of time. Which, if you think about it, will actually increase the payments, seeing as there is additional time for interest to accumulate. But to each, their own, right?
This change marks one of the latest endeavors by the Obama administration to charge forward with policies that have been rejected by Capitol Hill. Along with the help of many cabinet heads, the president has made many small (but actually very big and important) changes to several policies that would give Democrats a one-up in the upcoming elections.
However, it is true that student loans have become the center of many conversations, as the debt has skyrocketed in the past three years, taking second to home-mortgage debt, according to the Consumer Financial Protection Bureau. So, whatever policy it is that President Obama is “altering,” we can say that this one is definitely making some grads and undergrads very happy.