The new proposal (carried out by Executive Order, which means it will really happen) caps loan payments at 10% of discretionary income rather than the current 15%. Congress had already passed a law which lowered the cap from 15% to 10% in 2014. Obama’s plan just moves up the date.
The real beauty of this plan comes from the loan forgiveness programs attached or already in existence. Obama appears to have moved the loan forgiveness from 25 year to 20 years under his Executive Order. Others, such as myself, will be able to take advantage of the public service loan forgiveness program and get the balance of my loans forgiven after 10 years.
(Only 7 years left)!
Yeah, turns out this doesn’t help me and probably doesn’t help you either. While the income based repayment plan does help me (and possibly you too), this new plan applies only to loans taken out from 2008 or later AND for people who take out loans in 2012. In other words, it only helps current students. Moreover, it only applies to students who will be in repayment between 2012 and 2014 (when the law passed by Congress would take effect). So, that means unless you graduate in 2012 or 2013 AND have high enough loans and low enough income to take advantage of IBR, this doesn’t help you.
SO, this was nothing more than a publicity stunt as it helps virtually no one.
