The Obama administration is paying special attention towards students and in order to promote college education, new plans have been introduced to help college students. According to this plan, paying accumulated debt throughout college will be more affordable—including smaller payment requirements at a minimal interest rate.

The new administration realizes that more than 65 percent of college students are getting loans to pay for their higher education. Therefore in order to help them, it has been decided that they will be given the opportunity to repay loans at a rate dictated by income and family size.

Although students will have to wait until July 1, 2010, the good news is that there are potential plans that include canceling the remaining balance on the loan after 25 years and forgive loans for people who work in public service after 10 years.

But along with the good news, there is some bad too. Before students consider the smallest payment plan or switch majors to enter the public service industry, such forgiveness will result in accumulated interest and may draw attention from the Internal Revenue Service. Michigan students, in conjunction with peers nationwide, will not be exempted from the IRS as forgiven debts are generally considered taxable income.

The plan includes the changes in the Pell grants and there are changes for lenders too. The Pell grants will rise with inflation and will be based on the Consumer Price Index. The maximum grant in 2010-11 will increase from $4,731 to $5,550.

In case of the Lenders, whereas students typically receive loans from banks and designated providers, the administration’s proposal encourages students to borrow directly from the government. Students still will have the option to borrow from the banks, but loan rates will not be guaranteed like they would from the government program.

The Institutions that will be eligible for such change in payment programs will more than double i.e. from 1,800 to 4,000 and the total amount of available money will increase six percent i.e. from $1 billion to $6 billion.

Although more money will be available, the new loans, the Perkins loans, will accrue while a student is in college. This provides the government with the funding needed to pay for the Pell grants. If all goes as planned with Obama’s student loan plan, more Michigan students will have the opportunity to obtain a higher education with a loan payment plan catered toward their salary and profession.

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