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(EstateNewsWire.com, October 22, 2012 ) San Francisco, CA- A recent study has shown that the well-off will have the most to gain from the recent changes to student debt relief plan, according to the New America Foundation.
A report released Tuesday by the nonpartisan institute says that the plan will marginally aid low-income borrowers. As one would expect, the low-income individuals who take out loans are the most likely to default on the plans.
The change will benefit middle and high-income borrows more extensively. Those who are seeking graduate degrees will be particularly aided by the changes, the authors noted. According to the report, at least one financial group is telling law students that the changes could mean the ability to write off $100,000 in student debts.
“If left unchanged, the program is set to provide huge financial windfalls to people who, far from being in need, are among the most financially well-off graduates in today’s job market,” the report says.
Justin Hamilton, a spokesperson for the Education Department, stated that income-based repayment “Isn’t necessarily right for everyone, but it can be an incredibly helpful resource for people struggling to manage their student loan debt.”
Borrowers with lower incomes pay nothing each month and remain current on their loans, thanks to the payments being on a percentage of income scale.
Under current rules, borrowers pay 15% of what is considered discretionary income, which in turn is based upon a formula excluding money that is to be spent on necessities. Remaining balance of accrued interest after a quarter-decade is forgiven.
The program looks to change the plan so that the 15% will be reduced to 10% and forgive outstanding balances after 20 years of payments, instead of 25 years.
Certain individuals will have reduced minimum payments as well as a 20-year repayment term, with the remainder eligible in 2014.
The New American Foundation does state there is some benefit for any participants; however, the primary beneficiaries are high-income students with high debt who can conceivably make small payments over the next 20 years and then have large portions of their debt forgiven.
The institution cites financial planners from Advantage Group of California.
“Stop wasting your money on student loan payments,” says the Advantage Group Web site. The firm notes that an average graduate from California Western School of Law owes more than $145,000 in student loans, amounting to monthly payments of more than $1,690.
Mark Kantrowitz, founder of FinAid.org put it bluntly by stating: “The design of the plan has the potential to misdirect some of the subsidies towards people who will be earning fairly substantial incomes,” he said. “The improvements don’t benefit the low-income students as much as the high-income students.”
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Source: EmailWire.Com 
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