- A report released Tuesday by the New America Foundation claims that changes by the Obama administration to the income-based repayment program for federal student loans will benefit graduates with higher incomes and higher debts most, while offering only marginal benefits to low-income borrowers.
- Current income-based repayment rules stipulate that borrowers pay at least 15% of their discretionary income, with loan forgiveness after 25 years, but under the Obama plan (approved in 2010 and set to take effect in 2014 or sooner), borrowers would pay only 10% of discretionary income and receive forgiveness at 20 years.
- The analysis says that low-income borrowers (those with salaries of $25,000 or less) will ultimately see their payments shrink by $5 to $20, while high-income borrowers with high salary jobs may see up to hundreds of thousands of dollars of their debt forgiven after 20 years.
From the article:
The Obama administration's changes in the income-based repayment program for federal student loans will offer only marginal benefits to low-income borrowers but will be a boon for high-income borrowers who have big debts, according to an analysis released on Tuesday by the New America Foundation. The program allows borrowers of federal loans to cap their monthly payments at a percentage of their annual discretionary income and have the loans forgiven after making payments for a certain period of time. ...