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President Obama announced a student’s loan plan to reduce the burden of students repaying the loan. College students and recent graduates face the problem of rising tuition fees and saddling student loan debt. ''

Total outstanding student debt has crossed $1 trillion. The College Board said that the average tuition and college expenses at four year public colleges increase about 8% than last year.  The board added that 56% of bachelor degree holders at public schools have debt around $22,000. 65% of graduates from private nonprofit universities face debt about $28,000. The Education Department said that the rate of student loan default had increased to 8.8%.

Obama’s student loan plan reduces the maximum amount to be paid on student loans from 15% to 10% for eligible borrowers. The Obama Student loan forgiveness program is devised to help individuals to avoid ending up breaking, as they chose to continue their education. The student loan would be forgiven after 20 years. 

Individuals who spent 10 years in public service positions would have their loans forgiven and they need not wait for full twenty years. Therefore, the debt is forgiven in half of the time and their debt is minimized. Military personnel can also get loan forgiveness, if they have a degree. Loan forgiveness program works for members of all branches of service, including Reserves and Coast Guard.

Obama’s plan would allow students to consolidate the loan amount borrowed from the Federal Family Education Loan program and a direct loan from the Government. Having multiple loans requires the students and graduates to submit separate monthly payments and put them at a risk of default.

Consolidating education loan and direct loan from the Government can help them make one monthly payment and they are less likely to default. Consolidating loans can also help them reduce the interest rate of up to half percentage. However, it is not possible to consolidate a private loan and Federal Family education loan.

Recently, President Obama called on Congress to stop increasing interest rates on student loans in July. The federal loans like unsubsidized Stafford student loans are available to all students. The interest rates on such loans are fixed at 6.8%.

The interest rate for a subset of federal loan is 3.4 percent. From this year, lower income students will be provided with subsidized Stafford loans. The rate on the subset of student loan will be the same as for unsubsidized loan for the academic year 2012-13. Therefore, it is expected that the interest rates will be doubled after July 1, 2012.

President Obama announced a series of measures to alleviate the burden of debt on students experiencing the burden of repaying their federal college loans. Student debt has surpassed credit card debt in America.  The number of students defaulting loan is on the rise.

Over the past thirty years, the cost of higher education has tripled. This forces students to take out more loans and accumulate more debt. Obama’s new student loan plan will benefits around 1.6 million lower income Americans.