A few days ago, President Obama passed an executive order with the intentions to help assist 1.6 million of some borrower's repay their student loans (notice the word some). This executive order is being hyped as the student loan bailout as such was the case for financial institutions just a couple years ago during the financial crisis on Wall Street.

After having some time to read some reputable websites such as The White House, Wall Street Journal, StudentAid.Ed.Gov and U.S. Department of Education, my research and calculations led me down a tunnel with a little light and darkness.

The major aspect of the plan is the new "Pay As You Earn" proposal which will allow about 1.6 million students the ability to cap their loan payments at 10% (currently at 15%) starting next year, and the plan will forgive the balance of their debt after 20 years of payments STOP HERE...

1. Question 1 - Do your current student loans qualify for the Pay As You Earn plan? If you took out student loans under any Stafford program, PLUS and Consolidation Loans made under either the Direct Loan or FFEL Program than you are eligible for repayment under IBR, EXCEPT loans that are currently in default
2. If you answered Yes to the above statement up to the EXCEPT word, thenyour student loans do qualify for the Pay As You Earn Plan, then the next question to ask yourself is this, are you eligible? If you're federal student loan debt is high relative to your income and family size then you're eligible. (Xavier how do I know if my federal student loan debt is high relative to my income and family size...I figured you may be asking that so here's some examples)
   1. Unmarried with adjusted gross income of $30,000.00, $15,000.00 in federal student loans at a 5.00% ratewith only 1 person as your family size then NO YOU WOULDN'T QUALIFY (SORRY LET'S TRY AGAIN)
   2. Unmarried with adjusted gross income of $40,000.00, $30,000.00 in federal student loans at a 5.00% ratewith only 1 person as your family size then YES, YOU WOULD QUALIFY (Under the current plan your new monthly payments could be approximately $295)
   3. Unmarried with adjusted gross income of $60,000.00, $45,000.00 in federal student loans at a 5.00% ratewith only 1 person as your family size then NO YOU WOULDN'T QUALIFY (Hey, Xavier how about if I have a child and my income and student loans are close to the above assumption)
   4. Unmarried with adjusted gross income of $60,000.00, $45,000.00 in federal student loans at a 5.00% ratewith 2 persons as your family size then YES, YOU WOULD QUALIFY (Under the current plan your new monthly payments could be approximately $475)

***The above assumptions are a reference to the current program. For more detailed information about your personal situation in regards to the program, feel free to send me an email***

For those that can qualify under the current program you would potentially see more savings coming your way in 2012. For others that don't meet the requirements above, there's still a little light at the end of the tunnel in the executive order for you too. For borrowers that have both a Direct Loan (DL) and a Federal Family Education Loan (FFEL) that require separate payments could be allowed to consolidate both of the loans beginning January 2012 and when you do so, you will receive up to 0.5% (up to...) reduction in your interest rate. If you are eligible for this consolidation option, your current federal loan servicer will reach out to you early next year with information on how to consolidate.

At the max reduction of 0.05% for your current interest rate, on average you would see minimal impact to your current monthly amount unless you have $75,000 or more in student loans. Let's say the average balance of a loan is $29,000.00, then they would save approximately $9.00 per month and if your loans equaled up to $100,000, the monthly savings will be approximately $29.00 per month.

If you have any questions, shoot me an email