Obama On Student Loan Forgiveness

William D. Ford Loan Forgiveness Program

Student loan debt has reached an overwhelming all time high. Now ranking higher than even mortgages and auto loans, repayment of student loans has become the financial crises of our time. With many borrowers facing continuously surmounting debt, the Federal Government has sought, and secured, several options to facilitate feasible repayment solutions. These programs are often referred to as the “Obama Student Loan Forgiveness Programs,” due to former President Obama reforming part of the congressional “Direct Loan Programs” in 2010.

By signing both the Health Care and Education Reconciliation Acts; Student Loan Forgiveness Programs were designed to relieve past Federal Student Loan borrowers by offering qualifying loan recipients several affordable ways to make payments.

There are now five plans to choose from

Standard:  all payments are a monthly fixed rate based on borrowed amount, interest rate, and term in repayment.

Graduated: payments are lowered from the standard rate, but consist of a rate increase every two years.

Income Based Repayment (IBR):  annual income and family size are the sole determinants of monthly payments. Payments are generally locked for 12 month, qualifying periods. It is no longer necessary to fear a monthly payment amount that is calculated by loan amount and interest rate. Payments constitute 15 of the household discretionary income. Payments are often even as low as $0 per month.

Paye As You Earn(Paye):  generally offering the lowest rates because , monthly payments are based only on 10 of the household discretionary income. Payments are often as low as $0 per month.

Revised Pay As You Earn (Repaye):  a revised version of the Paye plan, Repaye was introduced in 2010 during the Obama Administration. This plan give the benefits of the paye plan to far more borrowers.

Income Contingent Repayment (ICR):  payments on this plan are based on loan balance, interest rate, family size, and annual gross income.

The benefits of these programs can have major impact on both the way in which borrower repays their debt, and the amount of the debt that is actually repaid.  The five repayment programs are available to Direct Loans only. There is direct consolidation offered for FFEL and Federal Perkins Loans. A Direct Loan that includes a Parent Plus Loan (PPlus), will not be eligible.

Some of the changes that former President Barack Obama made to support the widespread efficiency of these programs are:

Subsidies are no longer offered to private lenders for federally funded loans

Loans originating in or after 2014 are qualified for payments based on 10 of the household income

New borrowers; making qualifying payment, no longer have to remain in the loan for a 25 year period. In this case, a borrower may qualify for forgiveness after only 20 years.

Resources are now reserved for increased college funding and to assist borrowers under the federal poverty limit or minority groups.

Interest Forgiveness

IBR and Repaye payments avoid accrued interest on the subsidized portion of all Direct or Direct Consolidated Loans for the first three years if payments are less than what is usually due in interest.

Forgiveness At The End Of The Term

If a balance remains at the end of the repayment term in the IBR, Repaye, or ICR programs, it will be forgiven. These plans constitute terms of 20-25 years depending on the originating loan date and program of choice. Amount of forgiveness is determined by original loan amount, annual gross income (AGI), and any change in income during the repayment term.

Public Service Loan Forgiveness

This program was intended to award employees of the public sector. Once enrolled in the IBR, Repaye, or ICR; borrowers may make 120 qualifying payments to be forgiven the balance of their Federal Student Loans.

Teacher Loan Forgiveness

Disability Discharge