With today's economy squeezing families and tuition prices continuing to soar, the high cost of college remains a top concern for Americans. However, there is some good news for college students and their families – tomorrow, a new initiative will take effect making student loans more affordable by allowing borrowers to cap monthly loan payments based on how much income they earn.
The Income-Based Repayment (IBR) program caps borrowers' monthly loan payments at just 15 percent of their discretionary income and any current or future borrower whose loan payment exceeds 15 percent of their discretionary income is eligible. After 25 years in the program, borrowers' debts will be completely forgiven. Use the Department of Education’s calculator to estimate how you will benefit from the new initiative>>
Our nation's economic competitiveness depends on young Americans having access to the highest quality education available, regardless of financial need. That is why it is so significant that tomorrow we are launching a new initiative that will cap student loan payments in light of a borrower's income.
The Income-Based Repayment program will ensure that educational debt does not prevent our best and brightest students from pursuing their dreams. It also prioritizes national service by accelerating debt forgiveness for borrowers who devote themselves to public-interest careers. We need our college graduates to choose careers based on their talents and skills, rather than on the size of student loan payments.
I am proud that the 110th Congress passed the largest investment in student financial aid since the GI Bill in 1944, the College Cost Reduction and Access Act. In addition to creating the Income-Based Repayment program, that legislation increased the maximum amount for need-based Pell Grants and slashed interest rates on need-based federal student loans. We cannot let the rising cost of education prevent the next generation of American leaders and innovators from realizing their full potential. Congress will continue to work to make education more affordable for all Americans.
In addition to the IBR program going into effect, tomorrow also brings the second interest rate cut on subsidized federal student loans — decreasing from 6 percent to 5.6 percent. Over the next few years these rates will continue to decrease until they reach 3.4 percent.