It looks like the Obama Administration has been listening all along to the demands of the Occupy Wall Street Movement . At least those demands which the younger 99% were pushing for — Total Student Loan Forgiveness. Because, Wednesday, October 25, the White House released details of a loan forgiveness plan. Read the Press Release.
Total Elimination of Student Loans
Now, the Occupy movement and other groups have been noisily pushing for total student loan forgiveness, saying that this could be a way to stimulate the ailing US economy.
They claim that after the government helps these young borrowers pay off their loans, a massive amount of money would be retained in the wallets of younger people who constitute a rising percentage of Americans trying desperately to land jobs, pay rent, car loans and mortgages and buy gas, food, clothing and other basics needs.
This all looks too easy but no one is sure about the exact details on how a total loan forgiveness plan would actually and directly benefit the economy. It will nevetheless be a welcome relief for college graduates who have yet to find decent work and small businesses which they would patronize. And of course most of the 99% benefits with more people passing more money and with the money actually passing more hands every month.
Graduates: Pay As You Earn
Although, the President’s plan is not really total forgiveness, but he announced that their intentions were obviously to help students have an easier time repaying their Federal Student Loans. To do that, the Obama Administration is proposing a modified “Pay As You Earn” method which will improve on the current income-based repayment plan and to make it available as early as next year.
Under this plan, the Press Release from the Office of the Press Secretary explained it this way, Example: “a teacher earning $30,000 a year and has $25,000 in Federal student loans. Under the standard repayment plan, this borrower’s monthly repayment amount is $287. The currently available Income-based Repayment Plan would reduce this borrower’s payment to $171. Under the improved ‘Pay As You Earn’ plan, his monthly payment amount would be even more manageable at only $114. And, if this borrower is to remain employed as a teacher or in a public service occupation, he would be eligible for forgiveness under the Public Service Loan Forgiveness Program after only 10 years of payments.”
This will give the current administration brownie points especially among the young who may have started to give up on President Obama.
Loan Consolidation
And aside from capping the maximum monthly loan payments, the plan also provides for a special consolidation initiative so that borrowers would only have to make a single monthly payment (as opposed to two or more payments per month).
For a limited-time, borrowers can take advantage of a special consolidation option which would allow for up to a 0.5 % reduction on their loan’s interest rate (0.25 % interest rate reduction on their consolidated FFEL loans and 0.25 % interest rate reduction on the entire consolidated FFEL and DL balance.
Know Before You Owe
Lastly, this New Obama Plan initiated a new “Know Before You Owe” project which allows for a Disclosure Form which colleges and universities would use to guide students in understanding what kind of aid they are qualified and for which they would be applying for.
The plan is for students to be better informed and to fully understand what they are getting into. This would also help them compare aid packages offered them by different institutions. In the end, the aim is to provide students with the necessarily information to make better decisions and look ahead, especially on what future debt burden they may be saddled with.