Zeroing out a student loan balance can seemingly take a lifetime, and not all borrowers will see their timelines—or costs—shortened by President Barack Obama's executive action on student debt relief.
The White House announced that the president is expected to sign an order Monday to expand eligibility for income-based repayment plans. Under current federal law, many borrowers are able to cap the payments on their federal loans at 10 percent of their monthly income, with any remaining debt forgiven after 20 years in repayment. This order would expand that program in December 2015 to include borrowers whose loans predate October 2007 and those who stopped borrowing by October 2011.
By the administration's estimates, the expansion will aid more than 5 million borrowers through the Pay As You Earn program, available since 2012 to select borrowers. Another 1.2 million borrowers are currently expected to qualify under the Health Care and Education Reconciliation Act's income-based repayment program, which takes effect for new loans on July 1. Single borrowers earning $30,000 per year and carrying a student loan burden of $20,000, it said, would see their monthly payments lowered by $110 in that program.
Most graduates owe far more. The class of 2012 graduated with an average $29,400 loan balance, according to the Project on Student Loan Debt.
"I'm sure this will come as welcome relief," said Joseph Hurley, a certified public accountant and chief executive of Savingforcollege.com. "Certainly graduates who go into lower-paying occupations, public service—they are still struggling with that debt."