Obama Announcing Initiative to Ease Student Loan Burden
Jan 25th, 2010 @ 3:08 PM by Debbie Dragon
With the economy in shambles and unemployment all over the country at an all-time high, college grads, especially recent ones, are struggling to pay back their student loans. For those struggling, there is some good news. Help may be on the way.
Obama is expected to announce at the State of the Union Address new initiatives to help the struggling middle class. College graduates who have student loans would be one of the benefactors of his plan.
Currently, recent graduates spend 15 percent of their disposable income just to pay their federal student loans each month. Payments on some loans can stretch as long as 25 years. Obama’s proposal is to drop student loan payments, allowing loan holders to have a monthly payment of just 10 percent of their income. If however, the loan holder earns less than 150 percent of the poverty level then they would not have to make any monthly payments on their loan.
The plan also calls for a new cap in the number of years loan holders will have to pay on the loan. If the loan holder is a government worker including public health workers, public school teachers or a law enforcement officer after ten years the remainder of the loan would be forgiven. For all other workers, after 20 years of payments any remaining balance would be forgiven.
Many college students and recent grads support the initiative and say that this relief could not come at a better time. This relief does come with a hefty price tag, however. Mark Kantrowitz, student loan expert and publisher of Fin Aid points out that the new policy would cost the federal government as much as one billion dollars over just five years.
It is also important to point out that the initiative is only for federal loan holders and private student loan holders will not be eligible.
While many student loan holders are hopeful for the relief, it is not yet a done deal. The initiative is expected to be in Obama’s budget plan which will need to be approved by Congress.
Debbie Dragon is a full time freelance writer and the co-owner of ReliableWriters.com.