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Grad Students Could Win Big as Obama Slashes Debt Payments


Jun. 9, 2014 Bloomberg Businessweek

President Obama is set to address growing concerns over student debt and, according to multiple news organizations’ reports, he’s about to roll out a plan to help borrowers lower their monthly payments. The effort would see Obama use his executive authority to make more people eligible for an existing program that caps student loan bills at 10 percent of an individual’s monthly discretionary income. If those details hold true, the changes could be helpful to millions of borrowers—but far more for some than others.

All borrowers with federal student loans are already eligible for a program called Income Based Repayment, which reduces a monthly bill to 15 percent of discretionary income. The executive order would extend eligibility in a similar program, known as Pay as You Earn, to further reduce monthly payments to 10 percent of income. In its current form, PAYE is available only for borrowers who took out their first loans after 2007 and borrowed as recently as October 2011. The executive order on the table would get rid of those exclusions.

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