According to a press release Thursday from the Committee on Education and Labor, Congress will vote on upcoming healthcare legislation to include measures to make college more affordable and create more jobs.
Congress has decided to help students and their families with this bill, by redirecting funding and helping make college more affordable. More Americans will have access to higher education and the skills needed to be successful in our economy.
Senator Tom Harkin unveiled the provisions, and said, “Education is the key to success in this country. It has the ability to transform a young person’s life and give them opportunities above and beyond the generations before them. But as millions of Americans struggle to afford the costs of higher education, multi-billion-dollar, taxpayer financed subsidies continue to flow to private banks.
The legislation would originate all federal student loans directly through the government, and eliminate wasteful subsidies to banks. The change would generate $61 billion in savings over a 10 year period, which would be used to boost Pell Grant scholarships, strengthen community colleges, and make student loan payments more manageable for students.
Other highlights of the legislation:
- Investing $36 million into the Pell Grant program over 10 years – including $22.6 million to increase the maximum Pell Grant award to keep up with inflation.
- Investing $2.55 billion in Historically Black Colleges and Universities and Minority-Serving Institutions. These establishments play an important role in education our nation’s low income and minority students.
- Making federal student loans more manageable to repay by lowering the monthly cap from 15 to 10 percent of their discretionary income for new borrowers after 2014.
- Preparing students and workers for competitive jobs by investing $2 billion in a competitive grant program for community colleges to develop and improve education or career training programs
Tags: student loan
An Income Based Repayment (IBR) is one repayment plan option for student loans, under the William D. Ford Federal Direct Loan (Direct Loan) Program, or the Federal Family Education Loan (FFEL) Program.
Any Stafford, Grad PLUS, or Consolidation loan made under the Direct Loan or FFEL program is eligible for repayment under the Income Based Repayment Plan – except loans that are currently in default, parent PLUS Loans, or consolidation loans that paid for a parent PLUS loan. Income Based Repayment Plans can pay for new or old loans from your undergraduate, graduate, or professional education or job training.
If you qualify for a IBR Plan, your required monthly payment is capped at an amount that is intended to be affordable based on your income and family size. It will be less than what you would have to pay under a 10-year Standard Repayment Plan.
President Obama’s new student loan proposal states that the cap on federal student loan payments will be lowered from 15 to 10 percent of income, and will forgive any remaining debt after 20 years of payments, rather than the current 25 years.
Benefits of the Income Based Repayment Plan:
- The IBR Plans makes your monthly student loans payments more affordable.
- If your IBR payment amount doesn’t cover the interest that accumulates on your loans each month, the government will pay for any unpaid accrued interest on your loan for up to 3 consecutive years (from the date you begin repaying your loans under the IBR Plan).
- If you repay your loan under an IBR Plan, and meet certain other requirements, any remaining loan balance you owe will be canceled after 20 years.
- Loan payments made under a IBR Plan count towards the 120 payments required for the Direct Loan Public Service Loan Forgiveness (PSLF) Program.
For more information, and to see if you qualify for a Income Based Repayment Plan, please visit the StudentAid.ED.gov website.
Tags: income based repayment plan
, student loans
President Barack Obama unveiled some new ideas meant to help our country’s struggling middle-class pay their bills and care for their families. This week, he proposed expanding a popular program that puts a cap on monthly student loan payments for college graduates with low or moderate incomes in an effort to ease the debt burden for many young adults. The details of the president’s proposal are slim right now, but Nick Anderson of the Washington Post offers this insight:
Under the proposal, monthly payments on federal loans would be limited to 10% of discretionary income — above a “basic living allowance” — for qualified borrowers. That would be lower than the current cap of 15% in the income-based repayment program that began last summer. In addition, the administration said, certain borrowers could be eligible for loan forgiveness after 10 years in public service or 20 years in other fields of work.
There are many questions that are still left unanswered about this proposal: Does this include both private and federal education loans? What is a “basic living allowance”? Can we look forward to capped interest rates? Will everyone, regardless of industry, be allowed to stop making payments after 20 years? Does this include grad school?
In the meantime, we can make some approximations. Say you make $30,000 a year but owe $20,000 in student loans – your monthly student loan payment would be $115 a month under this proposal, rather than the $228 a month it would be under a standard 10-year repayment plan.
Millions of students are suffering increasing debt levels. About two-thirds of graduates took out loans to pay for college over the past three decades, and their average student debt is over $23,000! To calculate what your monthly payments would be under President Obama’s proposal, visit Forbes’ student loan calculator, located halfway down the page. Note that this calculator is for a single filer without children.
The additional flexibility in repaying student loans will complement the Administration’s agenda to make higher education more affordable. Other proposals have included increasing Pell grants, reforming the student loan program, making permanent the new $2,500 American Opportunity Tax Credit for college costs, expanding low-cost Perkins loans, strengthening community colleges and increasing graduation rates at both two- and four-year institutions.