By Matthew Harang

Many students will be singing the praises of the Obama administration for enacting a law that will effectively reduce student loan repayments for millions of people in debt.The new policy, which will take effect in January, reduces the maximum percentage of one’s income for loan repayment to 10 percent. Current legislation stipulates a 15 percent maximum repayment. This change will affect 1.6 million current students. Those students will also be eligible for loan forgiveness in 20 years instead of the current 25 years.

Furthermore, the bill will open the doors for at least 6 million others who have multiple federal student loans to consolidate them into one more-manageable payment, while at the same time reducing the interest rate by .5 percent. This option combines two methods that could equal substantial savings over time.

Congress had similar bills on the agenda, but they were not to take effect until 2014. This bold move shows that President Barack Obama is seeking new ways to help alleviate the economic hardships that millions of Americans are facing every day. He will make a formal announcement about the legislation on Wednesday.

This income-based repayment is currently only an option for those with federal student loans, such as Stafford, Grad PLUS and consolidated loans. However, many former and current students who are eligible for these current programs are unaware of them, and are paying far more than their federally mandated 15 percent maximum.

Though the new student loan policies do not solve the problems of every struggling student and graduate, they definitely represent a step in the right direction. However, many are still pushing a petition for complete student loan forgiveness, a policy that is economically infeasible. Policymakers and economists must continue working on solutions that will have a genuine positive effect on the nation and the economy.

(Photo credit: Ethan Miller/Getty Images)