Dylan Scott is a GOVERNING staff writer.E-mail: firstname.lastname@example.org
The Obama administration is accelerating its plan to ease the burden of student loan debt on college graduates, the president announced Wednesday.
Initially, a new "Pay as You Earn" proposal was set to commence in 2014, allowing borrowers to set their payments at 10 percent of their discretionary income. But under the plan unveiled this week, about 1.6 million students could begin reducing their payments next year and their debts would be forgiven after 20 years.
“In a global economy, putting a college education within reach for every American has never been more important," Obama said in a statement. “But it’s also never been more expensive."
The new proposal also includes an initiative that would allow 6 million borrowers to consolidate their various federal loans into one payment and reduce their interest rates by 0.5 percent, according to an U.S. Education Department press release.
Under current law, graduates can cap their payments at 15 percent of their discretionary income, and loans are forgiven after 25 years.
In a conference call with reports, Education Secretary Arne Duncan explained that the proposal should be viewed as economic stimulus that will allow college graduates to keep more of what they earn. He estimated that, on average, individuals would save hundreds of dollars monthly.
"These are real savings that will help these graduates get started with in careers and help them make ends meet," Duncan said. "These are changes that will make a big difference in the lives of current college students and recent graduates who are entering one of the toughest job markets in recent memory."