Currently, the total outstanding amount of student-held debt is well past $1 trillion. This surpasses the nation’s debt in credit cards and is still on the rising tide. Tuition and fees (in-state) rose about 8% this year and it now costs over $8,000 for a full credit load.
“The board said about 56 percent of bachelor's degree recipients at public schools graduated with debt averaging about $22,000. From private nonprofit universities, 65 percent graduated with debt averaging about $28,000.”
The default rate for these loans has risen to 8.8 percent…and this was in 2009. But, Obama has a plan.
Obama’s Plan: Lower the maximum required payment on the loan from 15% of discretionary income to 10%; and the remaining debt would be forgiven after only 20 years. This first solution will go into effect next year. His second solution is to allow consolidation of Federal Family Education Loan Programs and direct loans (from gov’t). These can be consolidated at an interest rate of up to a ½% less.
This has the potential to save some borrowers up to a few hundred dollars a month on loan payments. However: To be eligible for the consolidated loan component, a borrower must have both a direct loan from the government and a loan from the Federal Family Education Loan Program. The accelerated component of the income-based repayment plan only applies to borrowers who take out a loan in 2012 or later and who also took out a loan sometime between 2008 and 2012, according to the Education Department.
