Repost: Student Loans: Repayment based on income under new plan available July….some payments totally waived…after 25 years debt erased
REPOST: To learn if you qualify for Income Based Repayment or Public Service Loan Forgiveness programs, visit the following Web sites: ibrinfo.org and StudentAid.ed.gov run by the U.S. Department of Education.
…Starting July 1, borrowers will have a new option: a repayment program that caps monthly payments based on income. It targets borrowers who would have a hard time paying basic living expenses if they had to make standard monthly payments on their loans, says Lauren Asher, acting president for the Project on Student Debt.
Under the income-based repayment program, such borrowers will never have to spend more than 15% of their discretionary income — an amount based on federal poverty guidelines — on student loan payments.
Most who qualify for the program won’t spend more than 10% of their income on student loans. Those whose income falls below 150% of the poverty level (see box) won’t be required to make any payments, Asher says…
From a savvy commenter and we thank them!!!! It is NOT the total private lending being affected, that apparently continues with its insane lack of caps on interest rates unabated, it is only FFEL a federally guaranteed partially subsidized through fees program being hurt, that seems counterproductive ? But then again the entire Obama Budget plan sounds counterproductive to me!
The excessively high interest rates you refer to are not part of the FFEL program. Those private loans would not be impacted by the budget proposal, and are free-market products. The FFEL loans have capped interests rates that fluctuate from one budget year to the other, as set by Congress, but have been in the single digits for several years.
The savings by eliminating FFEL are direct subsidies to lenders who risk financial loss by defaulted loans due to the narrow profit margins mandated by the interest rates capped by Congress.
There are those who argue that FFEL is actually cheaper for the taxpayer than direct lending because of the borrower-education and default aversion programs that that FFEL participants provide that is practically non-existent in direct lending, resulting in fewer loans going bad. Depends on whose numbers you are looking at.
HUGE GINORMOUS CHANGES TO STUDENT LOANS IN THE BUDGET!!
The $3.55 trillion budget request, which was summarized in a 134-page overview released yesterday, would also phase out the Federal Family Education Loan program and require all new student loans to be originated by the Department of Education and financed with Treasury borrowing. That action would effectively kill the market for federally guaranteed student loans, municipal market participants said.