Obama Student Loan Consolidation
It was recently disclosed that student loans have taken on a crisis mode and have hit an all-time record high of $1 trillion. Due to this dire situation, the revised decision of immediately initiating President Obama’s student loan debt relief plan is welcome. Originally, the plan was to go into effect in Jan. 2014, but, of course, extreme situations call for extreme measures. Here are some of the basic points of the Student Loan Forgiveness Act of 2012, which for most students, is turning out to be a very beneficial. The act has been split into two basic measures:
Prior to this act, former students were expected to pay 15% of their overall income in repayments of their student loans and after 25 years of doing so, they could have the reminder of their student loan forgiven or written-off. However, the Student Loan Forgiveness Act now ensures that students pay just 10% of their total income towards repayment of their student loans and that the remaining amount can be written off after 20 years of doing so. As a result, the student’s monthly payment is reduced and so is their period of repayment.
Student loan consolidation
The second measure is Obama Student Loan Consolidation, which encourages students who are struggling with repayments of more than one federal loan to consolidate all their federal loans to make repayment easier. How does this work? Well, when numerous federal loans are consolidated, the interest is lowered by up to 0.5%, resulting in lower monthly payments and saving hundreds of dollars in interest as well. However, it is good to remember that only federal loans can be consolidated together and that this forgiveness act applies to federal financing only. Private student loans cannot be consolidated with federal loans.
According to the Obama administration, 1.6 million low-income families across America will benefit from the lower monthly payments, with more than 6 million benefitting from loan consolidation measures.