"Pay As You Earn" Executive Order Could Benefit Small Business Owners and Entrepreneurs
On Wednesday, November 2, 2011, President Obama announced an executive order to accelerate the "Pay As You Earn" student loan program in 2012. The program was originally supposed to begin in 2014. According to an article in the TimesDaily.com, graduates face tremendous difficulty when it comes time to repay their student debt. Approximately nine percent of graduates were unable to repay their loans in 2009, up from seven percent in 2008. Because of this financial hardship on recent grads, the current state of the economy and a general reluctance to fund higher education, the "Pay As You Earn" student loan program was accelerated to begin in 2012. Under the program, banks are eliminated as the "middle man," in student loan repayments, which will ultimately result in saving money.
Benefits of the Program:
- Monthly payments will be capped at 10% (present law caps payments at 15%)
- Loan forgiveness will be offered after 20 years (present law forgives outstanding loans after 25 years)
- Students will be allowed to consolidate federally backed loans in order to reduce interest rates.
Why is this important to small business owners and entrepreneurs? As graduates have faced increasing difficulty in securing employment in the current job market many have turned to starting their own businesses. The ability to reduce student loan payments will directly impact these new business owners and entrepreneurs as they seek investment capital, acquire inventory and secure lines of credit for their new venture.
If you are considering starting up a new business contact Wood, Atter & Wolf, P.A. for questions, concerns and legal guidance in your endeavor.
Referenced articles:
- "Paying for Education," - TimesDaily.com.
- "Obama's student loan proposal has benefits, drawbacks," - The Exponent Online.
