What Are The Benefits of This “Obama Student Loan Forgiveness Program”, One might ask?
In this program, the borrower can take advantage of everything from overall payment relief – 100% Discharge depending on circumstances. The borrower also has the ability to consolidate all their federal student loans into one new loan. With a new consolidated loan, the borrower is able to choose a lower income driven repayment plan. One that is normally more affordable as well. Unfortunately, only Federal student loan debt can be eligible for the relief. Private loan borrowers are not able to benefit from these programs and should contact their servicer directly.
The direct loan program offers five different income driven repayment plans:
Standard Repayment – The borrower will pay a fixed amount each month for the life of the loan. The payment would be determined by your borrowed amount, interest rate, and term of the loan.
Graduated Repayment – The borrower would make payments lower than the standard repayment plan, but would gradually increase every two years.
Income Contingent(ICR) – In this plan, the borrower would make payments based on their income, family size, loan balance, and interest rate.Borrowers in the ICR can have a payment as low as $0.00/mo
Income Based(IBR) – This plan bases the borrower’s payment strictly on their income and family size. The balance of the loan and interest rate are not used in calculating the monthly payment. The borrower would be responsible to pay 15% of their discretionary income on their federal student loans. Borrowers in the IBR can have a payment as low as $0.00/mo
Pay As You Earn(PAYE) – This plan usually has the lowest monthly payment, and is also based on your income but uses 10% of your discretionary income as a payment instead of the 15% used in IBR. Qualifying for the PAYE repayment plan is more difficult than the others. Borrowers in the PAYE can have a payment as low as $0.00/mo.
In the Obama Student Loan Forgiveness program, interest in the IBR does not capitalize on the subsidized portion of your Direct Loan. This applies only for the first three years of your IBR payment, and only if your IBR payment is less than what is normally due in interest. This can amount to many thousands of dollars depending on your loan balance and what type of payment you currently qualify for. For more information on these programs, Feel free to Contact Us!
Public Service Loan Forgiveness
Payments made in the Direct Loan program in an IBR, ICR, or PAYE repayment count as qualifying payments for those who work in the public sector and would like to apply for public service loan forgiveness. In the public service loan forgiveness program, you may qualify for forgiveness after 10 years or 120 payments instead of the standard 20-25 year forgiveness. Unfortunately, many people are not aware that they must be in the Direct Loan program and in one of the correct repayment plans to qualify for this forgiveness. For more information on these programs, Feel free to Contact Us!
Teacher & Disability Forgiveness
There are other programs that offer student loan forgiveness as well, but they are not part of the Obama Student Loan Forgiveness (Direct Loan) program. These are separate programs that exist specifically to help teachers by offering a principal reduction, or the disabled teachers by offering a principal reduction, or the disabled by offering a complete discharge on your federal student loans. For more information on these programs, Feel free to Contact Us!