On Oct. 25, 2011, the Obama administration announced two initiatives aimed at lowering monthly student loan payments for students struggling to repay their loans.
The White House, without Congressional approval, sought to implement a series of executive actions. This includes a plan of offering students with both Federal Family Education Loans (FFEL) and Direct Loans, an incentive in order to participate in a special consolidation into the Direct Loan program. Another part of this plan is more generous-income based repayment (IBR) terms that will become effective in 2012, as opposed to 2014.
As of now, nearly six million students have loans from both FFEL and DL services. If all students with split services move their loans over to DL, the Obama administration plans to offer repayment incentives. This means students will be able to receive up to a 0.5 percent reduction rate on some of their loans, and .25 percent reduction for those who use the Department’s automatic electronic debt system.
In 2010, Congress passed changes to the IBR programs to limit monthly payments to 10 percent of discretionary income, which is down from the current 15 percent. They also are forgiving debt now after 20 years, as opposed to the current 25 years. If a student does not qualify for loan forgiveness however, they could end up paying more. This is why it is important to be informed.
Another thing to be informed on is the current state of Pell Grants. The Federal Pell Grant Program provides need-based grants to low-income undergraduate students looking for a post-secondary education. Unlike loans, Pell Grants do not have to be paid back. With that being said, Congress is thinking of making cuts to the Pell Grant Program, and this is making students uneasy. It is uncertain whether these cuts will be made or not, but as Jerome Manz, the Director of Student Financial Aid and Employment Services at MATC’s downtown campus, says, “Watch for information from your loan provider. It is the only way to stay accurately educated on the future of our financial aid system.”
As students, it is important to know what’s going on in the educational system. Too often students are left in the dark because of their lack of proper knowledge regarding their schooling. This is a big problem. When it comes to your education, the more that you understand, the better. So go see your loan provider, pick up a newspaper, do some research. Staying informed is the best way to succeed.
