The New Student Loan Forgiveness Act of 2012 for the Low-Income Borrowers

September 13, 2012 by  
Filed under Featured

Repaying the student loan is a tough ask for the college graduates and the list of the defaulters are really becoming longer day-by-day. The call for student loan forgiveness is getting louder and so President Obama has proposed to take quick actions on the new student loan forgiveness act of 2012 and loan consolidation plans to help the graduates repay back their loans and rejuvenate the economy of the United States of America.

President Obama has decided to operate the Student loan forgiveness program on a wider scale so that more and more students can enjoy the privilege of this plan. Now the loans borrowed for college education will be much easier to deal with as the students can now repay back their loans when they start earning. The present government is busy fabricating new rules for the “Pay As You Earn” program, which is emerging slowly. The main objective of this plan will be consolidation of the student loan at a low interest rate. This plan has three salient features, which are

The term of loan repayment

Each student loan that needs to be consolidates will retain back its original payment term that will allow the borrower to pay less interest during the term of the loan than what he or she would have paid if they were under the previous consolidation programs.

The rate of Interest

The rate of interest will be fixed that will not exceed 8.25% with a reduction of 0.25% applied. The lower interest rate will minimize the number of defaulters and will speed up the recovery of the principal amount much faster.

Benefit offered for using the Electronic Debit Payment

The students who are willing to utilize the new consolidation plan will be offered an extra 0.25% discounts if they use the Electronic debit payment system of the Education Department.

This new loan consolidation program is opened for a six months slot that is from Jan 2012 to June 2012. So the students who really need to get into this consolidation program better hurry. This consolidation program is open for people holding private or government loans. This is a good way to slash down the interest rate while the government is geared up for an income based loan repayment program that was scheduled to be launched in the year 2014.However, the borrowers will have to pay their loan installments though that would be only 10% of their income and most importantly the student loan would be forgiven after 20 years.

Though there is still an obscurity about the exact number of students this new loan plan is aiming to help but it is estimated that from 450,000 to 6 million students will be benefited from this program.

This loan would be a great help for borrowers who has low income. The monthly installment will be based on the amount that he or she earns above 150% of the poverty line and if he or she is unemployed or earn less than the current poverty threshold then they need not pay any installments at all..