As college costs continue to skyrocket, more and more students are being forced to seek student loans to pay for them. In fact, during a recent speech to graduate students, President Barack Obama pointed out the cost of college has tripled in the last 30 years and the average student now graduates from a university owing more than $24,000 in student loans. Obama’s student debt relief plan can help graduates focus on their lives sooner rather than spending all their money repaying debt.
A mountain of debt after graduation prevents a student from being able to focus on their own lives. They are not able to save as much as they might want, they may delay starting families and hold off buying a new house. The president’s plan enables students to get out from under the student loans quicker. The main features of the plan are outlined here:
*Income based aid – In an effort to help students with low income, the relief plan will lower the amount of the minimum payment as well as shrinking the amount of time in which they will be eligible for debt forgiveness. Before the plan, students had to dedicate 15 percent of their monthly income to repaying the loan. Now, that has been lowered to 10 percent. Previously, the loan could not be forgiven in less than 25 years, but the new plan allows it in 20 years. Both of these measures will result in lower monthly payments for students.
*Consolidation – Another important aspect of the plan is to allow students who have more than one federal loan to consolidate them. The consolidated loan would then have a reduced interest rate. It is expected this could save graduates hundreds of dollars in interest costs. In addition, certain borrowers may be eligible to transfer higher interest private loans to the low-interest federal loans.
*Public service forgiveness – For those students who go into the public service sector, which can be relatively low paying, the plan would allow for debt forgiveness to be possible after 60 monthly payments rather than the normal 120.
Student loan debt surpassed credit card debt in 2010 and is set to exceed $1 trillion in the near future. The debt amassed by graduating students due to the increasingly high costs of college tuition has become an impediment to the economy. Repayment of these loans prevents some students from starting businesses, buying homes and investing. President Obama’s student loan relief plan allows graduates to lower their monthly payments toward the loans as well as become eligible sooner for debt forgiveness. Though it doesn’t address the problem of skyrocketing tuition costs, the plan does allow students to begin living their lives sooner rather than being slaves to the repayment of student loans.
About the Author
Jennifer Lewis writes for a site that has details on scholarships for college women and offers advice on financial help for female students.