President Obama on Wednesday is expected to announce a new plan that will help millions of student loan borrowers reduce their monthly payments.
Under his plan President Obama will reduce payments in two ways, first he will reduce the maximum repayment of student loans from 15 percent of discretionary income annually to 10 percent, a measure that will go into effect in 2012 instead of 2012. President Obama is also expected to announce that all student loans will be forgiven after 20 years instead of 25 years, a proposal that will affect nearly 1.6 million federal student loan borrowers.
The President is also expected to announce that borrowers will now to able to consolidate their Family Education Loan Program and direct loans into a single payment structure. Under the consolidation plan borrowers could save up to a half percentage point on their loans, a move that will affect 5.8 million borrowers.
According to Education Secretary Arne Duncan the plan could save some borrowers hundreds of dollars each month:
“These are real savings that will help these graduates get started in their careers and help them make ends meet.”
According to labor statistics there are currently 23 million borrowers in the United States who use Federal Family Education loans.
It will be interesting to see who is actually affected by the change in federal student loan policy. Will you end up saving money under President Obama’s plan?