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New Federal Student Loan Repayment Plan Gives Borrowers Debt Relief

Student loan debt nowadays is bringing down a lot of college graduates. If you check the records, it can be seen that student loan defaults are now in a whole new level. With that being said, college loan borrowers are crying out for debt relief. In order to help those who have loaned repay their college debts, President Obama proposed quicker government-backed loan consolidation and loan forgiveness plans, which also in turn surge the American economy.

It is believed that President Obama’s decision to further develop education loan forgiveness to more students can result to a much easier process of paying out the loans for college. As of now, the details of the President’s new “Pay As You Earn” program, which lists down the new rules for repayment, are still being developed.

The main focus and objective of the plan is a loan consolidation at a lower interest rate. There are three major features of the plan that will benefit college graduates who are striving to pay their monthly education loan payment:

First is the interest rate.

There will be a fixed rate (not more than 8.25%) after applying the 0.25% interest rate drop to qualifying loans being combined. With a lesser interest rate, students are able to pay more of the monthly payment resulting to more decrease in the principal balance.

The Repayment Term

For every loan that is consolidated, original repayment term is retained.

The Electronic Debit Payment Benefit

For those who will apply for the new consolidation plan is entitled to an additional 0.25 percent interest rate reduction if their loan is repaid via the Department of Education’s automatic debit system.

The government has indicated that they want those people holding both private and government student loans to be permitted to consolidate their debts at the moment into one new government loan. The implementation of such action helps in reducing their interest rates.
The thing is that college graduates would still be responsible in making sure that they are paying their loans, but those revised payment would be capped at just 10 percent of their salary.

The best thing is that for those who borrowed money for college education will have their loans forgiven after 20 years.

As of now, it is not yet fully determined how many students the new law will be able to help but it is estimated to reach at least 450,000 up to 6 million.

The new law passed by the Congress took a while to become a reality. Fortunately, it has become a reality and the new terms has been effective since 2012.

Apparently, the low-income borrowers are the ones who can really get the most out of the plan.