Two out of three college students graduate with student loans averaging $23,000.00. The Healthcare and Education Reconciliation Act gives STUDENT LOAN shutterstock_198598100student-borrowers new options in loan repayment. The Act expands the income-based repayment plan for Federal student loans.

Under this new law, students enrolling in college in 2014 or after have the following student loan options:

  1. Borrowers choosing income-based repayment will pay no more than 10 percent of their income above a basic living allowance. This is a reduction from 15 percent under current law. The allowance is currently $16,500.00 for a single person and $33,000.00 for a family of four.
  2. Student loans will be forgiven after 20 years or after 10 years for those in public service such as teachers, nurses, and military personnel. Borrowers must make monthly payments during the initial loan period.
  3. Effective July 1, 2015, all new loans will be direct loans by private companies under contracts with the Department of Education.

In addition, the Obama Administration is studying new bankruptcy options for student loan borrowers. Under current law, most student loans cannot be discharged in bankruptcy.

While students and their parents generally favor the above loan options, there is also much criticism of the plan which does not address the cost of education, the miss-use of student loans, and the burden on the taxpayer, government, and financial institutions resulting from non-payment of student loans.