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Student debtors now have option to cap their monthly loan payments

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Posted at 4:52 PM, Jul 26, 2016
and last updated 2016-07-26 19:53:43-04
A new White House report on student loans shared there is $1.3 trillion, and growing, in outstanding student loan debt in the United States.
 
The new thing is how loans are getting paid back. According to the new report, the share of borrowers enrolled in affordable payment plans has quadrupled in just four years. It's up to 20 percent in 2016.
 
Previously, student loan repayment was similar to a mortgage. Standard repayment took around 10 years, while extended plans could reach up to 25 years. Falling more than 90 days behind on a payment meant "delinquency", and nine months usually meant "default".
 
 
Now, anyone with a federally subsidized direct loan has the right to cap their monthly payments at 10 percent of discretionary income. "Discretionary" is calculated as your full income minus 150 percent of the poverty level for your household size.
 
In addition, people who work for the government or for nonprofits may be eligible for "Public Service Loan Forgiveness", which not only limits monthly payments but forgives the outstanding balance after 10 years.
 
For more information, read NPR's in-depth article on student loan forgiveness.