Some details on the Obama Student Loan relief program have been released prior to the President’s speech on Wednesday in Denver. The new program expedites changes that were not to take effect until 2014. It adds a few more provisions including the ability to consolidate loans into the direct government plan.
The plan also would accelerate imposition of a cap on payments at 10 percent of income for some people with federal education loans by having it take effect next year rather than in 2014, Melody Barnes, White House domestic policy adviser, told reporters.
For some workers burdened by student loans the changes “could reduce their payments by hundreds of dollars every single month,” Barnes said.
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Under the loan proposal, people who have student loans through both the direct government loan program and the Federal Family Education Loan program would be able to consolidate what they owe into a single government loan with lower monthly payments and interest rates, Barnes said.
That could reduce by as much as 0.5 percent the interest paid by 5.8 million people, saving borrowers hundreds of dollars, she said.
The acceleration of the 10 percent income cap would affect an estimated 1.6 million borrowers whose type of loan and whose debt in proportion to income and family size makes them eligible for the federal student loan Income-Based Repayment Plan, according to a fact sheet released by the White House.
This program is aimed at reducing the number of defaulting loans that have now reached highs not seen since 1997. Student loan debt has just reached 1 trillion dollars and rivals the level of credit card debt.
