Over the past few years, the search for reliable and affordable student loans has increased remarkably. This can be attributed to the expensive nature of college education. Most people cannot handle tuition, fee, living expenses and utility bills without the help of student loans. With all that being said, President Barack Obama proposed a new loan to help potential student borrowers. Many students and parents accepted the proposal with lots of excitement. And, in this article, you will get a comprehensive insight through the Obama Student Loan. The next few lines will answer some of your biggest and most common questions regarding the monetary opportunity.
What Does the Loan Offer?
The Obama student loan will help you if you have a federal loan in hand. The proposal is an extension of the current Pay As You Earn Program. Thus, you can repay your loan as you gain an income. According to recent stats, the loan caps on monthly payments that are equivalent to 10% the borrower’s income. After 20 years, the balance amount would be forgiven. This is an interesting feature that is unique to the Obama Student Loan. Experts believe that the loan’s low monthly payments would attract more borrowers into the program. Borrowers who qualified for federal loans in October 2007 are also eligible for The Obama Student Loan. Conversely, officials believe that nearly 5 million students would benefit from the amazing option.
Three Different Strategies
Through The Obama Student loan, you will have a chance to save a decent amount of money. Most Federal loan borrowers tend to apply for Income Based Reimbursement (IBR) plans. The Pay As You Earn is remarkably different from IBR. By default, IBR caps on a monthly interest are 15% of the borrower’s income. The balance would be forgiven after 25 years. Fresh graduates state that the 5% difference has a massive impact on their day to day life. For instance, if a student has to repay 55,000 USD at a monthly interest of 3.41%; he/she should make the following payments:
- Standard 10-Year Plan: The student must pay 541 USD every month and a total amount of 64,656 USD will be repaid.
- IBR – The borrower must pay 219 USD every month and a total of 75,956 USD in 17 years.
- Pay As You Earn – The special plan expects borrowers to repay 146 USD every month and 67,232 USD in total! Nearly, 18,644 USD would be forgiven for the borrower.
The Current Status
The Obama Student Loan supports refinancing too. Nevertheless, refinancing works in conjunction with the Students Emergency Loan Refinancing Act. This is a legit policy that lets private and federal borrowers to merge their loans together. As a result, borrowers must repay only a single rate of interest. Currently, the bill has passed the House and the Senate successfully.
The Big Day!
The Obama Student Loan is yet to be implemented. Market experts state that the loan will become live by December 2015. It is an amazing proposal, which owes to save several thousand dollars for prospective students.