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Obama Administration announces plan to reduce student loan debt

Thursday, October 27, 2011
As students conduct the college search, the thought of assuming considerable student loan debt following graduation has become a nagging concern. A recent announcement from the Obama Administration offers students and graduates some debt relief.

According to a White House press release, starting as early as 2012, students who borrow or have borrowed money through a federal student loan program to attend college will be able to reduce their monthly loan payments to 10 percent of their discretionary income.

Originally scheduled to begin in 2014, the "Pay As You Earn" repayment option allows approximately 1.6 million students to cap their loan payments at 10 percent of discretionary income. After 20 years of payments, the loan balance will be forgiven. The new proposal ties into President Barack Obama's efforts to strengthen the U.S. economy and put more Americans back to work.

"In a global economy, putting a college education within reach for every American has never been more important," Obama said.

The current income-based repayment plan allows borrowers to reduce their loan payments to 15 percent of their discretionary income, with all remaining debt forgiven after 25 years. However, according to a White House press release, the new repayment rate will make college even more affordable for current and future students and free up income for those currently repaying student loans.

"College graduates are entering one of the toughest job markets in recent memory, and we have a way to help them save money by consolidating their debt and capping their loan payments," said Arne Duncan, U.S. secretary of education. "And we can do it at no cost to the taxpayer."

In addition to the Pay As You Earn proposal, the administration announced additional measures that will better equip students with the financial information they need before enrolling in college. For instance, the Department of Education and the Consumer Financial Protection Bureau are creating a Financial Aid Shopping Sheet as a part of the Know Before You Owe project. While the project is currently in the development stage, it is anticipated that schools will be able to use this tool to assist students who are in the midst of their college search and are curious about their financial aid eligibility. This tool will also inform these individuals of the total costs and risks that accompany student loans.

Additionally, as a part of the White House's Startup America Initiative, the U.S. Small Business Administration has launched a new Web site for its Student Startup Plan, which is designed to help entrepreneurs lower their monthly student loan payments.  ADNFCR-16000756-ID-800628286-ADNFCR - helping you find colleges and universities that offer the accredited programs that most interest you.

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Obama Administration announces plan to reduce student loan debt
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