President Obama is taking initiative to help struggling college graduates with student debt overcome the troubles of being able to afford their monthly payments. He announced a new policy that would change the amount graduates would have to pay back on a monthly basis. Obama’s new “Pay As You Earn” policy will cap a student’s total repayment at 10 percent of their income. If monthly payments are a challenge for you, this plan may help. The new policy only applies to government loans, not private.
To qualify, you must prove that you have partial financial hardship — which means the amount you are required to pay under a 10-year Standard Repayment Plan is higher than the monthly amount you would be required to repay under Pay As You Earn. If you are unsure whether you qualify, visit StudentLoans.gov and use their repayment estimator. Additionally, Obama backed Sen. Elizabeth Warren, D-Mass on her proposal to reduce the overall amount student borrowers pay throughout the life of their loans. The proposal would allow students to essentially refinance their student loans by obtaining private loans through the government at a lower interest rate.
Obama’s new policy can make a significant impact on my financial future
I graduated college from Humboldt State University in 2012 with debt. As a recent college graduate, I believe President Obama’s new policy can make a significant impact on my financial future. Currently, saving up for a home is a difficult task. My private and federal student loans are overwhelming, and I’m not alone — a survey conducted by Wells Fargo revealed that four out of every 10 Millennials are overwhelmed with debt. Today, college graduates are roughly $30,000 in debt once they obtain their degree. Massive student debt has made it nearly impossible for college graduates such as myself be able to to pay off credit, save, invest and spend money in order to enjoy what life has to offer. More breathing room on my monthly bills would definitely help me prioritize my savings and actually feel like they’re attainable.
Student debt is a major contributing factor on whether or not a recent graduate can afford to pay for a home, and according to the Census Bureau. Only 36 percent of Americans below the age of 35 own a home. Home lenders don’t want to lend money to someone who uses more than 30 percent of their paycheck towards bills. I’d be in a much better position to buy a home and succeed financially if only 10 percent of my total monthly wage earnings went to student loans. If I qualified for the Obama student loan policy, I’d probably save about $200 a month on my federal student loan bill. Having $200 more a month could help me save an additional $2,400 a year, which would allow me to reach my goal of saving $10,500 in about four years, to use as a down payment. Additionally, I could pay off my car loan and credit cards to reduce monthly bills to a total 15 to 20 percent of my monthly income, which would help qualify me for a home loan. Thanks to this policy, graduates who enter the workforce would be able to save for things like an IRA, CD, or other types of investments.