Today, Congressman Henry Cuellar (TX-28) praised a plan that allows Americans to start reducing their student loan debt, helping millions of college students and recent graduates. The Administration's announcement today alters payments on student loans to ease financial struggles and increase college affordability with no cost to the taxpayer.
The new "Pay as you Earn" proposal is a series of steps released today by the White House that would allow student loan monthly payment consolidation and interest rate reduction. It also creates a project to ensure potential students make informed decisions during the student loan application process.
"A steady economic recovery must be complemented with a helping hand to our future generations who aspire to receive higher education. Many Americans are deterred from attending college due to rising costs, but now recent graduates will be able to purse joining the nation's workforce, instead of being bogged down in debt." said Congressman Cuellar. "We constantly encourage our younger generations to go to college because it is essential to a successful future. Now we are taking that encouragement one step further by helping ease loan payments for students and graduates and therefore making college payments accessible and affordable."
An advocate for higher education, Congressman Cuellar authored the Towards EXcellence Access Success (TEXAS) grant when he served in the Texas State Legislature. The TEXAS grant provides need-based financial aid to Texas students pursuing a college degree.
Pay as You Earn:
The "Pay as you Earn" proposal will reduce monthly payments for more than 1.5 million college students and borrowers. Starting in 2012, borrowers will be able to reduce their monthly student loan payments to 10 percent of their income, instead of the 15 percent currently mandated by law. The plan also allows students to cap their loan payments at 10 percent next year and forgive their balance of debt after 20 years of payments, instead of the 25 years currently mandated by law. Congress initiated this cap program that would have allowed borrowers in 2014 access to reduced payments, but this new proposal will have the program start sooner by next year.
In addition, starting in 2012, recent college graduates will be able to consolidate their loans and reduce their interest rates, helping nearly 6 million students and graduates. This would allow borrowers who have a combination of direct federal loans and loans under the old Federal Family Education Loan Program to merge their loans at lower interest rate.
The plan also establishes a useful "Know before You Owe" financial aid shopping sheet for colleges and universities to help students better understand the costs and risks of student loans before college enrollment.
Last month, the U.S. Department of Education issued a report of federal student-loan borrowers. Defaults in fiscal year 2009 rose to 8.8 percent, compared to 7 percent in 2008.