You may have heard of the Obama Student Loan Forgiveness program online or maybe even through a television commercial. If you are wondering what it is, you have come to right place. The Obama Student Loan Forgiveness program is just another name for the program called the William D. Ford Direct Loan program. While many people know the actual name of the program, many refer to it by its popular name, Obama Student Loan Forgiveness. It became known by its nickname because President Obama reformed sections of the William D. Ford Direct Loan in 2010 when he signed the Health Care and Education Reconciliation Act of 2010. The reformed sections of the Act included some new benefits that borrowers with federal loans can take advantage and use to help them manage their student loans.
Some of the changes that went into effect when President Obama signed the Health Care and Education Reconciliation Act of 2010 are:
The federal government ended subsidies given to private lending institutions for federally backed loans.
In 2014, new loans will qualify to make payments based on 10% of borrowers discretionary
New borrowers would be eligible for loan forgiveness in 20 years instead of 25 years with qualifying payments.
The money will be used to increase college funding and to fund poor and minority students.
The direct loan programs offer five different repayment options that borrowers can choose and enjoy.
Standard repayment: The borrower pays a fixed amount each month throughout the duration of the The loan balance, the interest rate, and the duration of the loan determine the payment amount.
Graduated Repayment: Graduates students can make lower payments, less than the payments under the standard repayment plan. However, the monthly payments will increase every two years.
Income contingent (ICR): borrowers make payment based on the factors of
o Family size
o Loan balance
o Interest rate.
Some borrowers may pay a monthly payment of $0.00 per month.
Income-Based (IBR): The plan considers different factors such as a borrower’s income and family size. The balance of the loan and its interest rate will not count. Borrowers would be responsible for paying for 15% of their discretionary income on their federal student loans.
Pay as You Earn (PAYE): This plan is considered to have the lowest monthly payment. It is based on your income and it uses 10% of your discretionary income to pay your loans instead of 15%. However, it is more difficult to qualify for this repayment option.
Learn more about the Obama Student Loan Forgiveness with Student Debt Doctor. If you have any questions, don’t hesitate to contact us. Learn the different ways you can take charge of your student loans today.