The William D. Ford Direct Loan Program is in place to help people who have student debt. The program has been nicknamed 'Obama student loan forgiveness' due to the fact that President Barack Obama made some significant changes to it. In fact, in 2010, President Obama made reforms to the Direct Loan program when he signed the Health Care and Education Reconciliation Act of 2010. Whatever you call the program isn't important, however. What is essential is that these are offered to people who have federal student loans. Unfortunately, if you have taken out a student loan through a private loan provider, then you won't be able to benefit from the program.

Changes to the Obama Student Loan Forgiveness Program:

President Obama made some important changes to the program. These include the fact that:

  • Federally backed loans provided by private lending institutions will no longer receive any subsidies.
  • For those who started their student loan in 2014, they will have to make payments that are calculated from just 10% of their discretionary income.
  • For those who are new borrowers, their student loan could be forgiven after making 20 years of payments. Previously, this was 25 years.
  • Any money recouped through repayments by student loan holders will go directly to funding the needs of minority and low income students, as well as to increasing college funding.

The Benefits of the Obama Student Loan Forgiveness Program:

For borrowers, the changes have brought about some significant benefits. One is that all federal student loans can be consolidated into a single one. They then have to choose which of the five now available repayment plans is the most appropriate and affordable to them. The five repayment options now available to students are:

1. The standard repayment, whereby the borrower pays a monthly fixed amount during the loan's lifespan. The monthly payment depends on how much you borrowed, what the interest rate is that is given to you, and what the terms of your loan were.

2. The graduated repayment, whereby borrowers make payments that are not as high as those of the standard plan, but the payments would rise every other year.

3. The income contingent repayment (ICR), whereby borrowers make repayments that are based on their interest rate, loan balance, family size, and income. It is possible for the repayments to be $0 per month.

4. The income based repayment (IBR), whereby borrowers make payments based solely on their family size and income. Neither the balance nor the interest rate is used in the calculation of the payment. Fifteen percent of the borrower's discretionary income must be paid towards his or her federal loan. Just like with the ICR, repayments can be $0 per month.

5. The Pay As You Earn repayment (PAYE), which is generally the plan with the lowest monthly rate. It is based on income, using 10% of discretionary income, lower than the 15% found with the IBR. It is, however, more difficult to qualify for PAYE. Payments can also be $0 per month, as with the ICR and the IBR.