President Obama made an announcement on the major changes of Federal Student Loan Program in late 2011 that take effective in 2012. The new rules are aimed to help students who are struggling with student loan debt by consolidating their student debt with a more affordable loan payment.
These big changes are:
1. Consolidate students loans at lower interest rates
All new students who are approved under Federal Student Loan Programs will be lending under the Direct Loan Program, which carries much lower interest rate than the old Federal Family Education Loans. For students who hold and owe Federal Family Education Loans will be given an incentive to consolidate the student debts into a loan under Direct Loan Program so that they can enjoy lower interest rate and reduce their debt burden.
2. Reduce the student debt repayment to 10% of your income
In this hard economy situation, paying a large loan with a low-paying job can be difficult to many people who still suffer from student loan debts. Before the implementation of new Federal Student Loan's rules, graduates who face hardship to repayment their student loans are allowed to apply the loan repayment be reduced to 15% of their monthly income. With the Obama announcement of new changes, the payment cap is reduced to 10% in 2012. Graduates who are struggling for debt repayment can now minimize their debt burden with a smaller monthly loan repayment.
3. Get student loan forgiveness in 10 or 20 years
Starting in 2012, most federal student loans will be forgiven in 20 years, instead of 25 years as before the new rules implementation. The people who service in public service sectors like teachers, nurse, etc will receive student loan forgiveness in just 10 years. So, before you apply for a federal student loan, check it out with your financial aid counselor for further information about student loan forgiveness and see if it applies to your loan.
4. Learn before you apply for loan
Many students sign up a loan agreement without fully understand the terms and conditions apply to them. They will get surprised when they see the expected monthly payment they have to make after the graduation. Therefore, the government is putting together educational information to educate the students and get them understand all terms and commitments that have to make when they apply for a federal student loan. This information will be helpful to guide students choose the best college's financial option.
Monday, January 30, 2012
4 Big Changes to Federal Student Loans in 2012
