American Osteopathic Association

Advancing the distinctive philosophy and practice of osteopathic medicine

Help Americans Manage Student Loan Debt

On Oct. 26, 2011, President Obama introduced the Help Americans Manage Student Loan Debt program as part of his "We Can't Wait for Congress" Initiative.  This program is aimed to help nearly 1.6 million Americans lower their monthly student loan payments.  This is a two part student debt initiative that lowers caps on student loans and consolidates loans.

Caps on Student Loan Repayment

Currently through the Income-Based Repayment (IBR) program, student loan borrowers are able to cap repayments of federal loans at 15% of discretionary income and receive debt forgiveness after 25 years. Last year, Congress approved legislation that would reduce the cap to 10% in 2014. The president is advancing this legislation by two years through executive order. Beginning in January 2012, federal student loan repayments will be capped at 10% of discretionary income and all remaining debt will be forgiven after 20 years.

Consolidating Loans

The Health Care and Education Reconciliation Act stated that new federal student loans have to be Direct Loans (DL).  Despite this new law there are approximately 6 million borrowers that have both Direct Loans (DL) and Federal Family Education Loan (FFEL) that are currently paid separately. Beginning in January 2012, borrowers will be eligible to consolidate their FFEL into their DL. This will allow borrowers to make one monthly payment and pay one interest rate. Borrowers would receive a 0.5 percent reduction in their interest rate.

Eligible Federal Student Loans: All Stafford, PLUS, and Consolidation Loans made under either the Direct Loan or FFEL Program are eligible for repayment. The loans can be new or old, and for any type of education (undergraduate, graduate, professional, job training).