Story By: Hannah Montgomery

Attending college is an expensive part of life, if one chooses to go.

College is supposed to help change your life by furthering your education, and afterwards, find a career. So what about all the debt that you’ll be swimming in for years to come?

On average, a college student will graduate with about $30,000 in debt. If they pay a minimum of $200 payments each month, it will take about 12 and a half years to pay that debt off. That sounds like a nightmare.

Recently, there has been quite a bit of talk about President Barack Obama’s new program, the “Obama Student Loan Relief.” Though this has been in the making for a few years, it is finally going into effect for students. The program isn’t what it sounds like, though.

On social media, there has been quite an upset about this new program from students who claim that thy worked hard to receive a scholarship and they don’t believe that just anyone should be able to have their loans forgiven. These students are under the impression that this program will wipe their debt away and they won’t have anything to pack back. They’re wrong.

The repayment program, also known as “Revised Pay as You Earn,” or REPAYE, cuts borrower’s monthly bills to 10 percent of their income. It also forgives the debt after 20 years of payment. Until now, those terms were only offered to people with very low income relative to their debt and who took out loans after 2007. The Obama administration now offers the program to anyone with what’s know as a Direct Federal Loan, regardless of income or when they borrowed. (Douglas-Gabriel, 2015)

All direct federal loans, if they are not in default, are eligible for the new plan. In 2010, the government decided to only lend directly to borrowers, rather than backing loans originated by banks and other financial firms. During that time, the government had a small direct lending portfolio that has tripled in size.

Students that have a bank-based loan or a Perkins loan can consolidate that debt into a direct loan to take advantage of the REPAYE program. However, Parent Plus loans aren’t eligible for this program.

Here is how this program works with monthly payments. The calculation will be based a person’s discretionary income, or whatever that person earns above 150 percent of the federal poverty line ($17,655 for a single person).

For example, if someone makes $30,000, the discretionary income would be $12,345. This means the monthly loan payments would initially be cut to $102.88. If that person’s income is very long, they many not have to pay anything until their paycheck increases. (Douglas-Gabriel, 2015)

This program will not completely take your debt away, but it will help make your payments much more reasonable to help you along the way. To sign up for the program, there are two options. You may apply online at www.studentloans.gov, where you may be able to electronically upload your tax return information. Or, you can ask the student loan adviser for a paper application. (Douglas-Gabriel, 2015)

 

Works Cited

Douglas-Gabriel, D. (2015, December 18). What you need to know about Obama’s latest student loan plan before enrolling. Retrieved March 20, 2016, from The Washington Post: https://www.washingtonpost.com/news/grade-point/wp/2015/12/18/what-you-need-to-know-about-obamas-latest-student-loan-plan-before-enrolling/