A Quick Overlook of Funds – Your Cheatsheet

Essential Information on the Obama Student Loan Forgiveness Program

When President Obama changed part of the Direct Loan program in 2010 as he signed the Health Care and Education Reconciliation Act of 2010, the Obama Student Loan Forgiveness program was born. It’s important to remember that all the programs only cover federal and not private student loan borrowers.

These are some of the changes that have been implemented under President Obama:

> No more subsidies to private lenders for federally backed loans

> 10{44042d386e85e60e79f7aad81e314d11e32e435125091899ade43fffd341c811} of borrowers’ discretionary income to pay off loans that started in 2014

> Student loan forgiveness eligibility period reduced from 25 years to 20 years on qualifying payments

> Money to be used to increase college funding and subsidize poor and minority students
Repayment Plans

Borrowers are given the following repayment options under the Student Loan Forgiveness Obama program:

1. Standard Repayment

Every month, the borrower pays a fixed amount for the whole life of the loan. The payment will depend on the amount borrowed, interest rate, and the loan term.

2. Graduated Repayment

While the borrower can pay lower than the standard repayment plan, the total amount to be paid off will increase every two years.

3. Income Contingent(ICR)

Under this Student Loan Forgiveness Obama plan option, the borrower will be able to pay based on the size of their income and family, their loan balance, and the interest rate.

4. Income Based(IBR)

The borrower’s income and family size are the only two bases for payment under this Student Loan Forgiveness Obama plan, which means loan balance and interest rate have no bearing. The borrower must pay 15{44042d386e85e60e79f7aad81e314d11e32e435125091899ade43fffd341c811} of their discretionary income to their federal student loans.

5. Pay As You Earn(PAYE)

This Student Loan Forgiveness Obama plan often has the least monthly payment, and is based as well on income; however 10{44042d386e85e60e79f7aad81e314d11e32e435125091899ade43fffd341c811} of the borrower’s discretionary income will be paid instead of 15{44042d386e85e60e79f7aad81e314d11e32e435125091899ade43fffd341c811} in IBR. The catch is, qualifying rules for this plan are stricter than the others.

Interest Forgiveness

Based on the Student Loan Forgiveness Obama program, interest in the IBR will be fully independent from the direct loan’s subsidized portion. However, this rule only covers the first three years of the borrower’s IBR payment, and only if such payment is lower than what is typically due in interest. This amount can be as much thousands of dollars in total, depending on the loan balance and the type of payment the borrower is qualify for at present.

End-of-Term Student Loan Forgiveness

If a borrower has a remaining balance by the end of the term under the Pay As You Earn, Income Contingent or Income Based plan, it will be automatically forgiven. The loan’s term would range from 20 to 25 years, depending on the repayment plan chosen and the original date of the loans. How much would be forgiven depends on the amount of the loan, as well as the borrower’s present income, and the variations in the borrower’s income within the repayment period.