Former students who sign up for income-based repayment currently pay 15% of any income in excess of 150% of the federal poverty line for their family size. That means that a single borrower without children pays 15% of whatever he makes above $16,245 per year.
Under the proposal the president is expected to unveil tonight, borrowers' payments would be reduced to 10% of their incomes above the levels already in place. For a single borrower with an adjusted gross income of $30,000 who owes $40,000 in student loans, the new plan would drop monthly payments from $170 under the current system down to $115 a month.
In contrast, paying off $40,000 in federal student loans over the standard 10-year period would require payments of $460 a month, assuming a fixed 6.8% interest rate.
The president is also expected to propose that the federal government forgive any balances that remain unpaid after 20 years. That period is down from 25 years under the current system. Read more at Forbes
Thursday, January 28, 2010
Obama's New Student Loan Repayment Proposal Explained
This is the best explanation I've seen yet. The Income-based repayment is already one of the better choices for school loan repayments. This new proposal would further ease the debt burden: