Obama acts to ease burden of student loans. Wants to cap payments.

[FarLeftFist]

President Barack Obama is taking steps to ease the burden of student loans, the White House said on Tuesday, potentially helping millions of cash-strapped college graduates in a tough economy. Obama plans to accelerate a plan to cap student loan payments at 10 percent of income, bringing it forward to start in 2012 instead of 2014.

"Steps like these won't take the place of the bold action we need from Congress to boost our economy and create jobs, but they will make a difference," he said in a statement.
The loans initiative will be the third such move by Obama in as many days, following action to aid homeowners and boost hiring of military veterans. The White House wants to show he is an activist president battling a "do-nothing" Congress.

-snip-

Obama will announce the student loan measure in Denver on Wednesday as he wraps up a swing through western states that will be vital to his re-election campaign in 2012.
The White House estimates the loan changes could cut monthly payments for 1.6 million graduates.
Student debt will also be forgiven after 20 years, compared with 25 years under current law.

Link: http://news.yahoo.com/obama-acts-ease-burden-student-loans-001017820.html

[enlightenment]

1. Hmm - I'd like to see more details.

It sounds nice . . .

but does 10% of income mean total income? Discretionary income? After taxes? Before? Monthly? Annually?

It appears that this also will not benefit current loanees - only new ones. It would have been nice to see something aimed at the current debtor's, also.

The lower caps of the new program were scheduled to go into effect for new borrowers in 2014, but, Ms. Barnes said, “because we know the frustration of crushing loan burdens, we have to act now.”

http://www.nytimes.com/2011/10/26/education/26debt.html

Oh, well. My student loan debt is the only constant in my life - 'til death do us part. Literally. :eyes:

[evlbstrd]

2. Damn!

I got all excited for my daughter and all of the recent, up-to-their-necks-in-debt recent grads. I read of a plan some time back that would base your loan payments on your income as well as terminate it before you die.

[Davis_X_Machina]

3. Discretionary...

...as per AP via Boston Globe

[enlightenment]

6. That would be a very big change, then.

At the moment they use AGI, which is hardly indicative of what someone has available after paying rent, food, etc. I've had good experiences in my dealings with the feds, but no one has ever asked me how much of my income goes toward keeping a roof over my head and food on my table.

Doesn't really matter for me, anyway, as far as I can tell. My options won't change that much . . . so it'll just continue to be me and my massive, looming shadow, forever and always.

[smoochpooch]

5. This would save me about 200 per month.

Needless to say, it would be incredibly helpful not only in easing the monthly financial burden but psychologically as well. It's tough to see a positive future sometimes when you have the amount of debt I've got (and millions of other Americans too.)

[Tx4obama]

8. See link in comment #7. n/t

[enlightenment]

9. Thank you.

Slightly more information in that press release.

[defendandprotect]

4. Student debt will also be forgiven after 20 years, compared with 25 years under current law.

Didn't even know there was a 25 year limit -- !!

Used to be 6 years!!

20 year cap could help a lot of people -- !!

But should be much less!

[enlightenment]

10. What they don't mention is that you're still on the hook for

taxes on the forgiven balance, in the year the loan is forgiven. If your loan is fairly small (in relative terms), that might be reasonable - if, on the other hand, you're like some folks and have a large loan and little hope of repaying any but a small portion of it, that tax bite could be a very big deal.

I wish they would allow loans to be forgiven when you hit SS age, even if it is less than 20 or 25 years - I don't think they should be able to garnish that income.

[defendandprotect]

11. Agree re seniors - but let's face it, it 's all gimmicked --

We should have free college tuition -- and most of them used to be excellent schools

competing with private colleges -- which kept rates lower --

Now every college/university has been corporatized --

But re the TAX ... you're saying that if you are forgiven for $25,000 of loans they would

make you take that as windfall income and you'd pay taxes on it in one year?

[enlightenment]

13. Yes, at least for some of the payment plans (ICR for sure).

The maximum repayment period is 25 years. If you haven't fully repaid your loans after 25 years (time spent in deferment or forbearance does not count) under this plan, the unpaid portion will be discharged. You may, however, have to pay taxes on the amount that is discharged.

http://studentaid.ed.gov/PORTALSWebApp/students/english/OtherFormsOfRepay.jsp

It doesn't seem to be that way for IBR - but it doesn't say it isn't. I'm always a little leery of information that isn't there when it comes to the Fed. The factsheet for IBR says:

25-YEAR CANCELLATION — If you repay under the IBR plan for 25 years and meet certain other requirements, any remaining balance will be canceled.

http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jsp

I'd like to believe that, but they also don't explain what 'certain other requirements' are, so we're definitely dealing with an omission of information. Probably not nefarious - just not there!

[Tx4obama]

7. Statement from the White House with more info ...

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=433x806033

[gulliver]

12. Kick for major benefit to young people. n/t