Going to college and getting a degree is a dream that many Americans share. No matter if you decide to go to college right after high school or later on in life, one of the biggest challenges of starting your career in higher education is the cost. College can be one of the biggest expenses that people ever have in their entire life, and it can be difficult to pay for. Most students find themselves taking out a large amount of student loans and paying them back after they graduate. Paying back student loans can be a very difficult task, and it can take a large number of years to pay them back. However, there are now quite a few options for student loan forgiveness thanks to President Obama’s Student Loan Forgiveness Program. This program provides many ways for students to pay back their loans, and even get a portion, if not all of their loans forgiven entirely. This makes paying back the large amount of loans easier on graduates, and aims to make paying loans back cheaper overall.
The Obama Student Loan Forgiveness Program is actually the name for a program that is called the William D. Ford Direct Loan Program, and it was reformed by President Obama in the Health Care and Education Reconciliation Act of 2010. There were a few major changes that came along with the plan. One of these changes includes that new borrowers will be eligible for student loan forgiveness after 20 years instead of 25 on qualifying payments. This is great news for people paying off loans because they will pay on them for a shorter amount of time. The plan would also use money to fund poor or minority students and increase funding for colleges. Although the name of the plan seems like it will only be about forgiving loans, the program also provides borrowers with responsible and easy to use payment plans that will help make paying back student loans easier.
There are five different repayment options that come along with the Obama Student Loan Forgiveness Program. The first is the Standard Repayment plan, where the borrower will pay a fixed amount each month for the entire life of the loan. The payment is determined by the borrowed amount, interest rate and the term of the loan. Along with the Standard Repayment Plan, a similar plan called the Graduated Repayment Plan is also available. With this type of repayment plan, the borrower would make payments that are lower than on the standard repayment plan, but they would gradually increase every two years.
The next options of repayment plans can be helpful by reducing your monthly payments based on a variety of factors. For example, the Income Contingent Repayment Plan, or ICR can help lower payments to $0 a month. This payment amount is based on income, family size, loan balance and interest rate. This plan helps you organize payments that are affordable based on the factors above. There is also the Income Based Repayment Plan, or IBR. The borrower’s payments will be based on their income and family size, and not their loan amount or interest rate. With this plan, the borrower will have to pay 15% of their discretionary income to their student loans.
The last type of payment plan is the Pay As You Earn Plan, or PAYE. This plan usually has a very low monthly payment, and it is also based on your income. It uses 10% of your discretionary income as a payment. Although this plan may seem like the best and cheapest, it is the most difficult to qualify for.
Many people wonder where the forgiveness part of Obama Student Loan Forgiveness Plan comes in. There are many ways that loans and portions of loans can be forgiven in this plan. For example, if you go into a job in public service after you graduate, you may qualify to get your loans forgiven after a shorter period of time. Under the Public Service Loan Forgiveness Program, if you enter a public service job, and you are a part of any of the payment plans listed above, you can have your loans forgiven after ten years of loan payments. This is wonderful, considering people often pay their loans over 20 years. This plan can help take out ten years of payments, and your money can stay with you.
If you are enrolled with the Income Contingent, Income Based, or Pay As You Earn plans, your loans could be forgiven at the end of the term if you still have a remaining balance. So, if you have an income that will most likely stay the same for the life of your loan, the plan you are enrolled in gives you a certain amount to pay each month. This amount is based on your income, family size, loan amount and interest rate, and you will pay that amount each month for the life of your loan. When the period of your loan is up and you still have a remaining balance, you can get that portion that is leftover completely forgiven because you enrolled in one of the plans listed above.
The Obama Student Loan Forgiveness Program aims to help students pay off their loans responsibly and in a way that is affordable. If offers great forgiveness programs for those who qualify, and provides many plans that can help graduates pay their loans back in the easiest and most inexpensive way possible.