College students are receiving good news thanks to the Obama administration: Plans to pay accumulated debt throughout college will be more affordable—including smaller payment requirements at a minimal interest rate. With more than 65 percent of college students receiving loans to pay for higher education, Michigan students will have the opportunity to repay loans at a rate dictated by income and family size. Although students will have to wait until July 1, 2010, potential plans include canceling the remaining balance on the loan after 25 years and forgive loans for people who work in public service after 10 years (mlive.com).
Before students contemplate the smallest payment plan or switch majors to enter the public service industry, such forgiveness will result in accumulated interest and may draw attention from the Internal Revenue Service. Michigan students, in conjunction with peers nationwide, will not be exempt from the IRS as “forgiven debts are generally considered taxable income” (milive.com)..
The plan includes the following changes:
· Pell grants: such grants will rise with inflation and will be based on the Consumer Price Index. The maximum grant in 2010-11 will increase from $4,731 to $5,550
· Lenders: whereas students typically receive loans from banks and designated providers, the administration’s proposal encourages students to borrow directly from the government. Students still will have the option to borrow from the banks, but loan rates will not be guaranteed like they would from the government program.
(Information courtesy of The New York Times)
Institutions eligible for such change in payment programs will more than double (4,000 up from 1,800) and the total amount of available money will increase six percent ($6 billion from $1 billion). Although more money will be available, the new loans—Perkins loans—will accrue while a student is in college. This provides the government with the funding needed to pay for the Pell grants (New York Times). If all goes as planned with Obama’s student loan plan, more Michigan students will have the opportunity to obtain a higher education with a loan payment plan catered toward their salary and profession.
http://www.mlive.com/news/jackson/index.ssf/2009/07/federal_government_changes_rul.html Federal Government Changes how long it takes to repay student loans
http://www.nytimes.com/2009/03/11/your-money/student-loans/loanprimer.html About the bill as proposed back from March
http://www.cnn.com/2009/US/07/01/student.loans/index.html?iref=24hours Most Current update from July 1