In his October speech, President Obama outlined a new federal loan program that could mean big savings for students borrowing money to pay for college. Let’s look at how the law could affect your college choice.
1. Paying Back Based on Income. Under the new plan, borrowers repay their loans as a percentage of their income. This affects your college choice in a very meaningful way. Obama’s federal loan program only requires you to pay what you can afford so you won’t be crippled by debt.
2. 25 Year Forgiveness. The President’s plan also calls for loans to be completely forgiven after the 25-year mark. This shouldn’t be an excuse to rack up $150,000 in loan debt with no intention to repay, but it does affect your college choice by making school a bit lighter on the wallet.
3. Know Before You Owe. One of the more interesting elements of Obama’s new loan layout is a team effort between the Consumer Financial Protection Bureau (CFPB) and the Department of Education to help student’s make their college choice by comparing the actual cost of attending different schools. Often times, there are hidden costs associated with attending college that families are unaware of, so having an advocate that tells the “real” story is a major advantage for any student.
4. Debt Consolidation. Graduates know all-to-well that repaying college debt can be a real financial burden. Luckily, Obama’s federal loan program has a solution in that area as well. Instead of borrowers paying loans back to several different lenders, they’ll be able to consolidate all of their loans into one monthly payment. And, in many instances, folks will pay less in student loans each month. How does this affect your college choice? Well, it really impacts those looking to attend graduate school. Less money owed to repay your undergraduate education opens a door to potentially afford an advanced degree!
Yes, President Obama’s new rollout offers exciting new changes for current and future borrowers, but the most important lesson is this one: Make sure you can afford the school you are going to attend and don’t get buried under a mountain of debt. Be prepared before attending, because ultimately the financial burden rests upon you.