CINCINNATI, OH (FOX19) - President Obama announced new executive actions to lower student loan payments on Wednesday.
Obama's plan will accelerate a measure passed by Congress that reduces the maximum required payment on student loans from 15% of discretionary income annually to 10%. He will put it into effect in 2012, instead of 2014.
In addition, the White House says the remaining debt would be forgiven after 20 years, instead of 25. He will also allow borrowers who have a loan from the Federal Family Education Loan Program and a direct loan from the government to consolidate them into one. The consolidated loan would carry an interest rate of up to a half percentage point less than before.
FOX19 heard from several students, who said as excited as they are about getting a degree in their chosen fields, the prospect of repaying the loans often necessary to earn the degree is a very daunting one, especially given the current economic conditions, and unemployment rate.
FOX19 Financial Expert, Nathan Bachrach, says student loan debt is second only to mortgages as the greatest amount of debt Americans owe, "36 million people have incurred a trillion dollars worth of debt and certainly with unemployment and the job situation the way it is, it's tougher than ever to repay those loans."
Bachrach says the President's plan will help some students, but not all. And that it is more important than ever to consider the likely salary you will earn upon graduation when considering how much debt to take on. For example, if you will graduate and earn $40,000 per year, your student loan debts should not exceed $40,000. Bachrach admits, that's not advice some students will want to hear, as it might mean making tough decisions such as living at home instead of going away to school, and considering smaller, community colleges as an alternative to traditional 4 year colleges.
Current law allows borrowers to limit their loan payments to 15% of their discretionary income and forgives any remaining debt after 25 years. For more information, and to find out if you are eligible,