Obama speaks on new college debt forgiveness plan JEWEL SAMAD/AFP/Getty Images
Obama speaks on new college debt forgiveness plan JEWEL SAMAD/AFP/Getty Images

BY THOMAS MAKLED, Copy Editor

In response to a petition on Whitehouse.gov, the Obama administration will advance improvements to a debt mitigation plan proposed by the President and passed by Congress in 2010, according to a fact sheet on whitehouse.gov.

The current income-based repayment plan (IBR) allows borrowers of federal student loans to cap monthly repayment at 15 percent of discretionary income and forgives debt after 25 years, the fact sheet says. Discretionary income is income remaining after one’s essentials have been paid for – namely food, health insurance, transportation, and the like. The IBR is scheduled to reduce the current 15 percent limit to 10 percent and change the debt forgiveness standard to 20 years on July 1, 2014.

However, 2014 is not soon enough for many struggling students.

ABC news cited College Board’s “Trends in College Pricing 2011” report stating that in-state tuition prices have increased 8.3 percent since last year for public colleges, and 4.5 percent for private colleges. ABC also cited College Board in reporting that undergraduate borrowing has increased by 57 percent in the last 10 years. Add to that a New York Times report stating that state appropriations for students are 23 percent lower than they were a decade ago, and results such as 85% of the class of 2011 moving back home with an average debt of $27,200 for those who borrowed money become the norm, reported the Huffington Post.

In response to these realities, the government realizes that they “have to act now,” said Melody Barnes, director of the Domestic Policy Council, in a White House press briefing last Tuesday. President Obama announced last Wednesday that the IBR improvements scheduled to take place in 2014 will be made available to borrowers in 2012 instead. This means that those who have been borrowers as far back as 2008 and have at least one new loan originating in 2012 will be eligible to receive a monthly payment cap of 10 percent of discretionary income and can enter loan forgiveness after 20 years, rather than 25, according to the New York Times.

Currently, 450,000 people participate in IBR, and under the improvements 1.6 million students will be eligible to participate, but this number still falls short of the 36 million students currently in some form of repayment, the Times reported.

According to the White House fact sheet, the President’s plan also seeks to improve payment ease. Those who are paying separate bills for the now phased-out Federal Family Education Loans and for the current Federal Direct Loans can receive up to a half-percent interest reduction for consolidating their debt under the Direct Loan program.