Trick or Treat: President Obama's Plan for Cutting Federal Student Loan Payments
October 26, 2011
Who: 1.6 million borrowers since 2008 with at least one loan in 2012 or later, generally borrowers whose total federal student loans exceeds their annual income
What: Reduces cap on monthly loan payments by a third, from 15% of discretionary income to 10%, and forgives the remaining debt in 20 years instead of 25
When: Starts in 2012 instead of waiting until 2014
Who Doesn’t Benefit: 36 million borrowers already in repayment, such as recent and older college graduates
Consolidation of Split Borrowers
Who: 5.8 million “split” borrowers who have loans in both the federally-guaranteed and direct student loan programs
What: Provides an interest rate reduction for split borrowers who transfer their federally-guaranteed student loans into the Direct Loan program by consolidating them
How: 0.25% interest rate reduction on the transferred federally-guaranteed student loans, plus a 0.25% interest rate reduction on all federal loans in the direct loan program for repaying the loans through auto-debit
When: Borrowers will be contacted by their services in early 2012 and must consolidate by June 30, 2012
Who Doesn’t Benefit: Borrowers who are already in the Direct Loan program, non-split borrowers who have only federally-guaranteed loans and borrowers who are in default on their federal student loans
Caveat: Borrowers who intend to accelerate repayment of their highest interest rate federal student loans might be better off keeping the loans separate instead of consolidating
Need money to pay for college?
Every semester, Fastweb helps thousands of students pay for school by matching them to scholarships, grants and awards for which they actually qualify. Sign up today to get started. You'll find scholarships like the Course Hero's $5,000 Scholarship, and easy to enter scholarships like Niche $1,000 Scholarship.