New Payment Plan for College Loans

October 26, 2011 Updated Oct 26, 2011 at 6:54 PM EDT

By Ed Reilly

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October 26, 2011 Updated Oct 26, 2011 at 6:54 PM EDT

(Washington, D.C.) President Obama used his Executive Authority to make two major changes to the way college student loans are repaid.

The first change was authorized by Congress and was supposed to go into effect in 2014, but it will now be implemented in 2012.

It caps the maximum monthly payment for a federal school loan to be 10% of the student's discretionary income.

The second change allows students with older Federal Family Education Loans (FFEL) to consolidate them into a Federal Direct Loan.

The consolidation will save interest and give students up to 20 years to repay the loan, after which, the balance will be forgiven.