On October 26, President Barack Obama made an announcement that could help students pay off their student loans.
Speaking at the University of Colorado, he detailed a "pay as you earn" program, which will cap federal student loan repayments at 10 percent of discretionary income – compared to the current 15 percent – starting in January 2012. The revised cap – passed by Congress last year – would have gone into effect in 2014, but the date was moved up.
During a conference call earlier in the week, Arne Duncan, secretary of the Department of Education, said the program could potentially help more than 1.5 million borrowers reduce their payments by several hundred dollars per month.
"These are real savings that will help graduates get started in their careers," said Duncan. "These changes could make a big difference in the lives of current college students and recent graduates as they enter one of toughest job markets in recent memory."
By making monthly payments smaller, the program may help borrowers make their payments on time, which will help keep their credit scores in healthy territory.