Obama Administration To Lower Student Loan Payments

For many students about to get caught in the "debt trap" this news will be welcomed with joy.

The Obama Administration announced it is taking steps to increase college affordability by making it easier to manage student loan debt. The announcement is part of a series of executive actions to put Americans back to work and strengthen the economy.

In a global economy, putting a college education within reach for every American has never been more important, but it’s also never been more expensive. That’s why today we’re taking steps to help nearly 1.6 million Americans lower their monthly student loan payments.

The Administration is moving forward with a new “Pay As You Earn” proposal that will reduce monthly payments for more than one and a half million current college students and borrowers. Starting in 2014, borrowers will be able to reduce their monthly student loan payments to 10 percent of their discretionary income.

But President Obama realizes that many students need relief sooner than that. The new “Pay As You Earn” proposal will allow about 1.6 million students the ability to cap their loan payments at 10 percent starting next year, and the plan will forgive the balance of their debt after 20 years of payments.  Additionally, starting this January an estimated 6 million students and recent college graduates will be able to consolidate their loans and reduce their interest rates.

An interesting take on this subject can be found in this article by Mike Konczal: Student Loans: The Debt You Carry for Life

According to the Project on Student Debt, the average debt load for graduating seniors in 1996, when this law was passed, was $12,750. Now it is over $23,200. 

When it comes to collecting on student loans, the government can take funds from your Social Security check. There are rules to the offset: the first $750 a month can’t be touched, and only 15 percent of benefits above that can be taken to pay back student loans.

Garnishing Social Security to pay off student debt ensures that the economic crisis will haunt today’s graduates well into their retirement.

Investigate Loan Forgiveness Programs

Your college career may have come to an end, but now your real work will begin.

I don't mean your job in your chosen career field, I mean repaying your student loans. Sixty days from college completion you have to start repayment.

The average student earning a bachelors degree owes $20,000 in student loans. Vocational students owe $10,000. Students in professional programs requiring a masters degree or higher owe an average of $100,000. This all comes at a time when you are beginning to be thinking of developing a relationship and settling down.

Be smart. Investigate the loan forgiveness programs that will reduce part or all of your student loans if you choose to work in areas that are underserved.

Teachers who are willing to work in a low income public school, or teach math and science classes in areas where there are not enough teachers, or with disabled children can greatly reduce or eliminate student loans.

Nurses willing to work in inner city hospitals or low income neighborhood clinics can eliminate their debt.

Lawyers and doctors who agree to work a certain number of years with disadvantaged people can also wipe out their debt while they are gaining professional experience.