Published December 2012. Financial aid and student loan rules change often, so some details may be out of date. Ask us about your situation.
College graduates across the nation may be getting an early Christmas present from Uncle Sam this year. It was announced on December 7 in the Federal Register, the official daily journal of U.S. government, that the implementation of a modified income-based loan repayment program will happen before the end of the month.
The Department of Education (DOE) ruled last Friday that the William D. Ford Federal Direct Loan Program will begin helping former students on December 21, 2012 instead of the 2014 start date previously approved by Congress.
President Barack Obama, who had spearheaded student loan repayment throughout his successful reelection campaign, took regulatory measures to bring about the changes faster than lawmakers had originally planned.
The new initiative will affect the "Pay As You Earn" program currently offered to qualified graduates through the DOE. One of the biggest changes will include lowering the cap on monthly payments from 15 percent of a graduate's discretionary income to 10 percent.
As it stands, postgrads who previously qualified for the loan program would enjoy complete loan forgiveness after 25 years. Come December 21, that number will be reduced to 20 years, with forgiveness after 10 years for college grads who participate in public service.
To qualify for the program, students need to have taken out a federal loan after October 2007 and received a disbursement after October 2011. The DOE estimates that the revamped initiative could help more than 1.6 million college grads.
If you aren't currently making enough money to support your monthly loan payments, a government program such as this may be the perfect way to make paying for college more affordable. The financial aid counselors at College Financing Group can help families create student loan repayment plans that work for them.