Hillary Clinton's Plan Against Ballooning Student Debt with $16 a month

Hillary Clinton's "debt-free college plan" include the imposition of a 3 months moratorium on federal student loan payments through executive action.

"With dedicated assistance from the Department of Education during this moratorium, borrowers will be able to consolidate their loans, sign up quickly and easily for income-based repayment plans, and take direct advantage of opportunities to reduce monthly interest payments and fees," she said.

Implied though not plainly expressed in those "opportunities" are other elements of her college plan, that will cover the ability for borrowers to refinance their student loans at current rates and interest-free loan deferrals for aspiring entrepreneurs. Borrowers who are behind on debt would also get help during the hiatus to rehabilitate their loans.

Financial planner Evelyn Zohlen president of Inspired Financial in Huntington Beach, California said that the 3-month moratorium has a better possibility of coming into fruition than the "tuition-free education at in-state public colleges for families earning as much as $125,000 or less" because it does not need the cooperation of Congress or a major funding initiative.

"It's allowing people to take advantage of programs already in place. The only people quote, unquote hurt are lenders, who may not see as much profit if people refinance to lower rates."

People who are unable to pay their student loan are growing more than 33% of the borrowers have been late on a payment at least once in the past year, and 25% were late more than once based on the report of the Financial Industry Regulatory Authority Investor Education Foundation's 2015 Financial Capability in the United States.

Even though they are struggling to pay, a lot of millennials don't care about their loan management options. Based on a survey released by Citizens Bank, millennials do not have an idea on what they owe on their student loans, the interest rate they are paying, when will they be able pay it or whether college was worth it. On average, graduates owed about $41,000 in student loans.  A shocking 60% millennials of the surveyed said they have no idea when their loans will be paid off and more than a third don't even know the interest rate they are paying, the report said.

Mark Kantrowitz, vice president of strategy for Cappex.com said that "You don't need Clinton's 3 months moratorium to switch repayment plans into income-based repayment. It takes just a few minutes."

Troubled borrowers may be entitled for one or more of the 7 alternative repayment options:

1. Standard Repayment Plan - it requires that you make fixed monthly payments of at least $50 for up to 10 years.
2. Graduated Repayment Plan - Your payments start low, and increase every two years. It will still be paid off within 10 years.
3. Extended Repayment Plan - repayment window for this plan is up to 25 years. You have the option of setting fixed monthly payments, like with the Standard Plan, or increasing them over time.
4. Income-Based Repayment (IBR) - Monthly payments are capped at 15% of your discretionary income, and readjusted each year based on your income and family size for up to 25 years.
5. Pay As You Earn Repayment (PAYE) -      Monthly payments are capped at 10% of your discretionary income, and readjusted each year based on your income and family size.
6. Income-Contingent Repayment Plan - Payments, made for up to 25 years, are based on your adjusted gross income, family size and the amount of your loans. Your payments change as your income changes.
7. Income-Sensitive Repayment Plan - Your monthly payments are based on your annual income.
  
Each of the plan has pros and cons. Just remember a longer repayment term not only lengthens your payment commitment, it also means you'll pay more overall. If you refinance your federal student loans into a new, private loan. I will come at the price of losing federal protections to postpone payments in times of financial hardship.

Also if you cut your loan rate it may not lessen your monthly payment that much. In Clinton's proposal, for instance, estimates that borrowers refinancing into new loans at current rates would save the typical borrower $2,000 over the life of their loan.

"Divided by 120 payments, and that's $16 a month," Kantrowitz said. So She's proposing puny "A free pizza a month."