Helping Americans Pay for College

Statement

This week, President Obama announced two plans designed to help Americans manage their college loans.

The first repayment plan called "Pay As You Earn," would limit the monthly student loan payment for individuals who meet certain income requirements up to 10 percent of their discretionary income. If after 20 years of repayment under this particular plan, the individual has not fully paid off their student loan, the remainder of their student loan would be forgiven. This student loan repayment plan would be available as of January 2012 and is estimated to help 1.6 million people.

The Obama Administration will also offer an additional student loan repayment plan that would allow individuals who have both a Direct Loan (DL) and a Federal Family Education Loan (FFEL) to consolidate both loans into one loan, with a single lender and would only require a single payment every month. Borrowers who take advantage of this consolidation plan, which will become available in January 2012, would also receive up to a .05 percent reduction in their interest rate on some of their loans, which means lower monthly payments that would save hundreds of dollars. Today, 5.8 million Americans have both a Direct and a Federal Family Education Loan.

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