President Obama announced a plan allowing college graduates to cap federal student loan repayments at 10 percent of discretionary income starting in January, two years before the cap was due to take effect under federal law according to the Washington Post.
The Post further reported the accelerated “pay as you earn” program could benefit up to 1.6 million borrowers and reduce their payments by as much as a couple hundred dollars a month, administration officials said. All remaining debt on the federal loans would be forgiven after 20 years — five years earlier than under current law.
In addition, some borrowers who have more than one federal student loan will be allowed to consolidate their debt, in some cases reducing their interest rates by up to half a percentage point, officials said.
“These are real savings that will help graduates get started in their careers,” Education Secretary Arne Duncan said in a conference call with reporters on Tuesday. “These changes could make a big difference in the lives of current college students and recent graduates as they enter one of toughest job markets in recent memory.”
Yet it remains unclear how many people will take advantage of the offer. Since 2007, borrowers have been allowed to cap federal student loan repayments at 15 percent of discretionary income. But White House officials acknowledged that just 450,000 of the nation’s 36 million student loan borrowers are participating in the income-based repayment program.
Have you been deducting student loan interest on your tax return. CAN you deduct it on your particular tax return? Contact dmiller@edanielmillercpa.com.
Image: photostock / FreeDigitalPhotos.net