Many of you probably heard President Barack Obama speak in regards to the student loan plan and for those that have student loans might have actually stopped and listened to his announcement. President Obama has now announced a plan to help ease the burden for college graduates and is aiming to cap federal student loan repayments at 10% and has also added that after 20 years of good standing of repaying your loan your debt will be forgiven versus the current 15% and 25 yr rule. He will also allow borrowers who have a loan from the Federal Family Education Loan Program and a direct loan from the government to consolidate them into one. This is all suppose to be implemented starting in 2012.
Now what does this all mean? Nothing really to those of us who have been paying our student loans diligently. The only thing that our President did was tweak the Income Based Repayment (IBR) which dates back to 2009 by 5% and decreased the forgiveness policy by 5 years versus the initial 25 years of repayments in good standing; the student will receive debt forgiveness. Honestly your loan may be paid off by then anyway. The speech did not offer anything significant in regards to paying back loans. I am sure a lot of people truly appreciate and realize that a decrease is good but it’s almost as bad as receiving the basic 3% yearly raise!
The original IBR plan is only 3 years old so the only thing that makes since is that there may have been a need for adjustments within the initial plan. This plan was presented by the President to the people as if they have a lack of knowledge about what exist or should I say it primarily targets one set of people, “university students”.
The “new” loan plan that has been conveyed around the US is not targeted to us seasoned loan payers. It is aimed at the university students of today and tomorrow. “President Obama is helping me and I will VOTE for him,” I bet they all cheered as they heard him speak. Bottom line people; It’s all about the votes.
The IBR Plan does have rules to qualify. Yes, there are some “buts” within this plan:
You may qualify for the IBR plan if:
- Your federal education debt is high enough in relation to your income to qualify for a reduced payment.
Bottom line you make” too much” according to them you will not get a reduction in your payment.
- You have Stafford, Grad PLUS, or federal consolidation loans that do not include Parent PLUS loans.
Keep in mind that Parent Plus, Private (or “alternative”) student loans, state loans, and other loans not guaranteed by the federal government are not eligible for this plan.
- You are seeking a long term plan for repayment.
If you choose to go this route be sure to note that you must apply every 12 months to be on the reduced payment plan.
I thank President Obama for enlightening the public with information on the IBR Plan and the adjustments that he would like to see implemented to the current plan. The presentation of the plan was misleading and unfortunately, it makes it hard to separate the fact that this is part of his campaigning. The speech really did not say much of anything. All it did was sound nice and put a warm and fuzzy feeling for those that have not done their research or are new to the world of borrowing.