Obama Student Loan Forgiveness Program
What’s come to be known as Obama Student Loan Forgiveness is really the William D. Ford Direct Loan program, formed as part of the Health Care and Education Reconciliation Act of 2010. It applies to only federal student loans. People with private student loans do not qualify for any of the benefits under this program.
Some of the changes that have been made during the Obama administration include:
- No more federal subsidies to private lending institutions
- Payments are limited to 10% of the borrowers discretionary income
- People getting new federal student loans would qualify for student loan forgiveness after 20 years instead of 25 years.
Benefits of The Obama Student Loan Forgiveness Program
In this program, a borrower can take advantage of many benefits. Borrowers can consolidate all their federal student loans into one single direct loan and choose a repayment plan that is more affordable and with more flexible payment terms.
Bear in mind that these benefits are only applicable to federal student loans.
Once the loans have been consolidated into a direct loan, a borrower can chose from five different repayment plans:
- Standard Repayment – Under this plan, your monthly payments are a fixed amount of at least $50 each month and made for a period of between 10 and 30 years for Direct Consolidation Loans and FFEL Consolidation Loans.
- Graduated Repayment – Under this plan, your monthly payments start out low and increase every two years, are made for up to 10 years for all loan types except Direct Consolidation Loans and FFEL Consolidation Loans. The payments will never be less than the amount of interest that accrues between your payments, and won’t be more than three times greater than any other payment
- Income Contingent(ICR) – Under this plan, the payments are based on the borrowers living circumstances. Meaning the borrower’s income, dependents claimed and loan balance. Outstanding balance forgiveness at the end f the term is also a feature of this plan. This plan is the only available income-driven repayment option for parent PLUS loan borrowers. Although PLUS loans made to parents can’t be repaid under any of the income-driven repayment plans (including the ICR Plan), parent borrowers may consolidate their Direct PLUS Loans or Federal PLUS Loans into a Direct Consolidation Loan and then repay the new consolidation loan under the ICR Plan (though not under any other income-driven plan).
Borrowers in the ICR program can qualify for monthly payments as low as $0.00 with forgiveness of any outstanding balance once they have met the program term
- Income Based(IBR) – Under this plan, payments are generally 10 percent of your discretionary income if you’re a new borrower on or after July 1, 2014*, Or 15 percent of your discretionary income if you’re not a new borrower on or after July 1, 2014.For the IBR Plan, you’re considered a new borrower on or after July 1, 2014, if you had no outstanding balance on aWilliam D. Ford Federal Direct Loan (Direct Loan) Program loan or Federal Family Education Loan (FFEL) Program loan when you received a Direct Loan on or after July 1, 2014.
Borrowers in the IBR can have a payment as low as $0.00 per month
- Pay As You Earn(PAYE) – Under this plan, payments are 10 percent of your discretionary income. To qualify for the PAYE Plan you must be a new borrower as of Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011. You’re a new borrower if you had no outstanding balance on a Direct Loan or FFEL Program loan when you received a Direct Loan or FFEL Program loan on or after Oct. 1, 2007.
As with any of the income driven repayment plans, payments are recalculated each year and are based on your updated income and family size.
Depending on your income and family size, you may have no monthly payment at all or $0.00 with forgiveness of any outstanding balance once they have met the program term
See How Low Your Payment Could Be
Other Benefits of the Obama Student Loan Forgiveness Program and The Forgiveness Plans are:
For the first three years, interest in the Income Based plan does not accrue based on a Direct Loan’s subsidized part. This can result in thousands of dollars in savings.
End of The Term Forgiveness
Loan balances are forgiven at the end of the term, regardless if there’s still a balance remaining. Original loan amounts, income, and fluctuation of earnings during the term affect how much is forgiven. This applies to Income Based, Income Contingent, and Pay As You Earn plans.
Public Service Loan Forgiveness
The Public Service Forgiveness Program (PSLF) Program is intended to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance of their Direct Loans after they have made 120 qualifying payments on those loans while employed full time by certain public service employers.
What must I do to have any remaining balances on my Direct Loans forgiven under the PSLF Program?
- You must make 120 on-time, full, scheduled, monthly payments on your Direct Loans. Only loans taken after October 1, 2007 qualify.
- You must make those payments under a qualifying repayment plan.
- When you make each of those payments, you must be working full-time at a qualifying public service organization.
See If You Qualify For Public Service Forgiveness
Teacher & Disability Forgiveness
The Teacher Loan Forgiveness Program is intended to encourage individuals to enter and continue in the teaching profession by offering a reduction on their loan balances and early balance forgiveness on the repayment of their loans.
The Total Disability Forgiveness offers a compete discharge of your federal student loans if you meet the required criteria.
Get more information on these programs by visiting theTeacher Loan Forgiveness page, or the Total and Permanent Disability Discharge page.