October 26, 2011
WASHINGTON—Millions of student loan borrowers will be eligible to lower their payments and consolidate their loans under a plan President Barack Obama intends to announce Wednesday, the White House said.
Obama will use his executive authority to provide student loan relief in two ways.
First, he will accelerate a measure passed by Congress that reduces the maximum repayment on student loans from 15 percent of discretionary income annually to 10 percent. The White House wants it to go 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. About 1.6 million borrowers could be affected.
Second, he will allow borrowers who have loans from both the Family Education Loan Program and a direct loan from the government to consolidate them into one loan. The consolidated loan would be up to a half percentage point less. This could affect 5.8 million more borrowers.
October 26, 2011
As the attached video shows, student loans are a giant problem that is not going away. For one thing they are no longer dischargeable in bankruptcy except for all but the most extreme situations. Really the only type of loan that is protected from bankruptcy. Students who pursued a higher education with an eye towards having a better life are instead trapped paying for the equivalent cost of a house. Except this is a house that they will never be able to live in.
Money that should be spent stimulating the economy by being a downpayment on an actual first home is instead more or less trapped in bank vaults. That does not mean that bankruptcy cannot help though. By getting rid of other debt the person with large student loans can devote more of his or her income to getting rid of this albatross. Some borrowers have taken advantage of Chapter 13 in paying back their loans while they are in the Chapter 13.
The main thing is to keep in touch with those in charge of your student loans. You should do so especially if you are between jobs. There are programs to delay payment for those in that situation. Sallie Mae,for one, the largest provider of government student loans has programs for forbearance of the loans for those in need.