President Obama toured the country promoting a multi-tiered plan to improve college affordability, including helping students better manage their loan debt.
Although creating a new ranking system to measure college performance has gotten much publicity, another aspect of the president’s plan has gotten little notice. But it could save thousands of dollars for over-indebted graduates.
Only 2.5 million — out of 37 million — federal student loan borrowers are taking advantage of repayment plans tied to their income level.
Obama’s plan would allow all student loan borrowers to cap payments at 10 percent of their monthly income.
And the plan would strengthen promotion of these repayment options to help more struggling borrowers.
The problem is that few graduates saddled with hard-to-repay loans know about the so-called Income-Based Repayment (IBR) plan. This option was revised with more favorable terms by the Obama Administration, effective January 2012.
IBR plans can reduce monthly payments to assist Americans in making student loan debt more manageable. However, you must have a partial financial hardship to qualify for IBR.
Here’s a quick preview of the rest of Obama’s plan to make college more affordable:
Pay Colleges and Students for Performance
- Develop a new college rating system that compares value among schools, and tie federal aid to those rankings.
- Challenge states to fund public colleges based on the performance rankings.
- Hold students and colleges receiving student aid responsible for making progress toward a degree.
Promote Innovation that Cuts Costs and Improves Quality
- Challenge colleges to offer students a greater range of affordable, high-quality options than they do now.
- Encourage schools to award credits based on learning, not seat time, and promote dual enrollment.
- Challenge colleges to use technology to redesign courses and provide student services.