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Obama Enhances Student Loan Modification Program

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On October 27th, modifications to the Pay As You Earn program became law. Previously, this program was for students who took out federal loans after October 2007. Now, students with loans older than 2007 are able to take part in the program, plus much more.

"This program is the most-generous income-based repayment program to date," according to The Wall Street Journal. The program allows borrowers to lower their monthly payments by hundreds of dollars as well as have the possibility to have their debt forgiven after 20 or 25 years.

Pay as You Earn:

Pros:

1. Monthly payments are capped at 10% of borrower's discretionary income

2. Undergraduate Loan Borrowers make payments for 20 years then remaining balances are forgiven

3. Graduate Loan Borrowers make payments for 25 years then remaining balances are forgiven

Cons:

1. Does not cover interest and can lead to more debt

2. Costs taxpayers $15.3 billion within 10 years

The modifications to the program were thought up after receiving some startling numbers. According to the Federal Reserve Bank of New York, "Student debt has doubled since 2007 to $1.2 trillion." This surge has caused nearly 1 in 3 Americans to be behind on payments and 7 million of those borrowers are behind by a year or more," based on the figures released by the Education Department.

Obama and the administration is approaching the accumulation of student debt one step at a time starting with modifications to the Pay as You Earn Program. Only time will tell if this process will be enough.

We at Timothy J. Sierra Attorney at Law would like to state that our blog posts and links, on our web page or any other social media outlet, to any other web pages are not intended for legal advice. We are not responsible for third party website information. If one is in need of legal advice please contact an attorney directly.

Source: The Wall Street Journal | Student Loans

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