COLUMBUS, GA (WTVM) - Paying off student loans may actually be in reach for millions of Americans soon. Tuesday night, President Obama held his very first Tumblr Q&A in an attempt to reach and interact with younger audience.
He mentioned even though a college education is expensive, it is still a good investment, and the President is working to help some borrowers with their loans.
The expanded Pay As You Earn plan will allow borrowers to cap their loan payments at 10 percent of their incomes. His original plan announced back in 2010 was available only for those who started borrowing after October of 2007. However, this updated plan will help anyone who has borrowed in the past, once it goes into effect on December of 2015.
"Those students who weren't previously eligible to participate are likely to see their monthly payments go down and then the duration of their payments to decrease," Tyler Townsend, the vice president of Townsend Wealth Management said.
The plan also forgives any outstanding loans after 20 years. Townsend explained that the Pay As You Earn plan will help students who have taken out direct federal loans.
"Direct federal loans are through the student loan process that most of us are familiar with," Townsend said. "Some students can choose to take out private loans, but those loans are not eligible for this program."
According to a recent White House report, there are more than 1.3 million borrowers in Georgia who owe about $40 billion in Federal Loans. That puts borrowers in Georgia ninth in the country in outstanding federal student loan debt.
"This program will help so many students who depend on federal loans to get their college education," Townsend said. "For those who qualify, this is going to be great news since they are going to have more money in their pockets. The economy will also benefit from having more people with more money in their pockets, because it's stimulus to the economic growth."
Townsend explained there are two important things all students can do to help themselves financially long term.
"The first step is to create a budget and a lifestyle that fits with their income," Townsend said. "The second step is to contribute to their retirement plan at least 10 percent of their incomes from their very first paycheck. The amount of money they put into their 401 K actually reduces their adjusted gross income which reduces the amount of loan payments they have to make."
To see if you are eligible for the plan and more, visit the website: https://studentaid.ed.gov/repay-loans/understand/plans/pay-as-you-earn.