President Obama announced a plan Wednesday that would cut monthly student loan repayment by 5 percent and cut the life of student loans by 5 years, starting in 2012.
While speaking at the University of Colorado, Obama said he would sign an executive order mandating the plan’s implementation next year rather than in 2014, as it was approved in Congress.
The plan would also give people an opportunity to consolidate their student loans and allow students who are unemployed to defer their payments or pay interest only. Their loans, however, will continue to accrue interest.
Currently, when repaying loans, students must pay up to 15 percent of their discretionary income annually. With the new measure, the minimum repayment amount for a borrower will be 10 percent.
Remaining debt on loans will also be forgiven in 20 years instead of 25, according to White House officials.
This 5 percent drop will save borrowers hundreds of dollars a month, Obama said, and the L.A. Times reported that this plan will allow at least 6 million people to consolidate different types of federal student loans, reducing their interest by a half percent.
The plan will also allow borrowers, who have loans from both the Family Education Loan Program and a direct loan from the government, to consolidate them into one loan.
CSULB students responded favorably to Obama’s plan.
“No one can complain about saving money,” said Jose Alamo, a junior business administration major. “This will help me make my car payments and pay for rent once I graduate from college and move out on my own. Every little help counts.”
And others think it will encourage people to go to college.
“This is a good idea,” freshman Elizabeth Godoy said. “The plan will help students get back on their feet. This might also encourage high school students to reconsider attending college. They won’t have to worry about the high fees.”
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