College student loan debt has quickly become one of the largest contributors to personal bankruptcy filings over the last few years. Graduates are finding the job market less than fruitful and, without adequate income, their large student loan debts have become unbearable. Luckily, the crisis has not gone unnoticed.
“Pay As You Earn” Program
President Obama will announce his plans today to authorize a “pay as you earn” program aimed at helping student loan borrowers find relief from their debt payments. The program is designed to cap student loan repayments at 10 percent of income, which has the potential to reduce payments by hundreds of dollars each month. Some borrowers may even qualify for a loan consolidation program that could further reduce their payments, by reducing the interest rates by up to a half a percentage point.
The program will allow for debts to be forgiven after 20 years, five years earlier than before. The “pay as you earn” program could also start as early as January, nearly two years before the cap was originally set to take effect under federal law. This news couldn’t come sooner to doubtful young Americans who struggle each day to make it in the poor job market.