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Beleaguered students across the nation have called upon the current administration for student loan forgiveness. Some young Americans graduate from higher education institutions saddled with debt. Many face unemployment. Now, a new plan has been implemented aimed at helping students with loan consolidation.
The new plan also lowers monthly payments under the income repayment plan.
How exactly will these new programs work?
Under the present system, students' monthly loan payments are limited to 15% of their income above a certain threshold if they are on the income repayment plan. The current threshold is $16,335 for single borrowers and $33,525 for a family of four. Any unpaid principal and interest after 25 years is forgiven.
The new income-based repayment plan will reduce the monthly loan payments from 15% to 10%. It will also change the loan forgiveness from 25 years to 20 years.
But not everybody will be eligible for this new income repayment plan, which will be available starting in 2012, reports The New York Times. The plan will be available to borrowers that have at least one loan originating in 2012 or later. But it will not be available to those who have any loans from 2007 or earlier. Many recent graduates will be out of luck.
The new plan will primarily help students consolidate their loans if they borrowed money from both the Federal Family Education Loan Program and the Direct Loan Program, according to Inside Higher Ed.
Borrowers can consolidate these two loans into one direct loan. In exchange for consolidating, they will receive a 0.25% reduction in their interest rate. Borrowers can also receive an additional 0.25% if they set up to automatic payments directly from their bank. Those who qualify for student loan consolidation will be notified in 2012.
These new plans may not completely encapsulate many recent graduates' dreams of complete student loan forgiveness, but it's a start. At least it is for those that are actually eligible under the new student loan consolidation and income repayment plans.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.