President Obama turned the student loan world upside down with his announced changes yesterday for the Pay As You Earn plan. Though we covered this Sunday, here are some of the highlights according to the White House press release:
-Limits payment to 10% of income above basic living expenses. This is done the same way the PAYE is currently calculated only it will be extended to all new borrowers or those who choose to opt in.
-According to the above linked press release, the payment will be reduced by more than $110 per month for a single borrower who earns $30,000 a year and owes $20,000 in college loans, based on 2009 figures. (whitehouse.gov, 2014)
-Forgive any debt after 20 years (rather than IBR 25 years) What it hasn’t specified is if this is straight forgiveness as the language implies or still a cancellation (if it is forgiven no taxes will be owed whereas if it is cancelled it will be taxable income)
-It will be fully funded by eliminating student loan subsidies given to financial institutions that make guaranteed federal student loans
While this information is fairly widely reported by simply using your favorite search engine, here is what I can shed light on that many are unable to–how is your servicer dealing with this?
A couple of great notes from an email we received today talking about the changes:
-Since they will not be taking place till late 2015 (currently December) there will be no changes able to be made to your account. However you can see if your loans qualify for the current Income-Driven plans that exist
-Also if you want to opt out of your current Income-Driven plan you will have to follow the same exit process that is already in place.
-Any questions you have, we will be sending you back to the articles such as the one that I linked to above from the White House. We will not be versing ourselves of the changes until closer to the date since so much can change. Plus we do not like to speculate, once everything becomes fact we will be glad to discuss it with you.
As more changes arise we will be sure to cover them, in the mean time keep your eye on the news as this seems to be an evolving story that will be landmark in how student loans repayment is collected