In this program, there are many benefits that a borrower can take advantage of. The borrower has the ability to consolidate all their federal student loans into one new loan, and in that consolidated loan the borrower is able to choose a repayment plan that is affordable.
The direct loan program offers five different Student Loan Repayment Programs:
- Standard Repayment – The borrower will pay a fix 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 borrowers 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 to 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
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Situation Specific Programs
The Student Loan Repayment Programs, 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.
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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. The public service loan forgiveness program is also quite often confused with the term Obama Student Loan Forgiveness. For more information on these programs, Feel free to Contact Us
Teacher & Disability Discharge/Forgiveness
There are other programs that offer student loan forgiveness as well, but they are not part of the Obama Student Loan Repayment (Direct Loan) Programs. These are separate programs that exist specifically to help teachers by offering a principal reduction, or people who are disabled by offering a complete discharge ofor the federal student loan debt. For more information on any of these programs, Feel free to Contact Us
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