The Student Loan Forgiveness Act of 2012 (aka: “Pay As You Earn Plan”) was inaugurated on March 8, 2012. The bill was introduced as an effort to help strengthen the economy and improve college education financing opportunities by President Obama.
What is Pay As You Earn?
This Forgiveness Act will implement a new 10/10 Loan Repayment Plan with additional options for student loan forgiveness. The Act will extend the opportunity and eligibility for every federal (and some private) student loan holder to be awarded some type of forgiveness program for student loans.
The following are some of the most beneficial features of the proposed loan forgiveness program:
• Borrower’s loans will be forgiven in 10 years after paying 10% of their income each year (or 120 payments).
• A 3.4% cap will be placed on interest rates for federal loans (half the amount of the current 6.8% cap for federal Stafford loans).
• The loan forgiveness program will also improve the forgiveness program for Public Service employees by reducing the 120 required monthly payments to 60.
• Some borrowers will be able to convert private student loans into new federal loans.
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