President Obama will pitch a plan today to help ease the burden of loans on college students, as a new report shows that higher education is becoming more expensive for many young Americans.
Starting next year, borrowers’ student loan payments will be capped at 10 percent of their discretionary income, and they could be eligible for forgiveness on the balance of their debt in 20 years. Under the current plan, loan payments are limited to 15 percent of a borrower’s discretionary income, and their balance is forgiven after 25 years.
The plan will also help provide an opportunity for reduced interest payments. Students will be able to consolidate their loans under the same terms and conditions in a move that proponents say will simplify the payment process and help nearly 6 million borrowers. The Department of Education will send out a letter this year to borrowers who qualify, and those who consolidate their payments will receive a one-time, half percent reduction on their interest rate for some of their loans.
The plan has the potential to cut hundreds of dollars from a borrower’s loan payment, the administration says, and it will help about 1.6 million students and alumni.