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Obama Student Loan Forgiveness Overview

December 31, 2011

Obama Student Loan Forgiveness

Obama Student Loan Forgiveness

The Obama student loan forgivenss act was designed by the president himself, who knows all about student loan debt as he and Michelle Obama were once over $100,000 in debt from student loans. The Obama student loan forgiveness program is designated for those who have federal loans, like Stafford, Perkins and PLUS Loans as well as any form of Direct Loans, which Obama has ruled that after a 20 year timeframe of an individual paying off their student loans, if they still have a balance after the 20 years are up, then whatever is left on that balance is forgiven, or essentially wiped away. This is a significant step forward considering that student loan debt was forgiven after 25 years under the previous forgiveness plan. Now the Obama student loan forgiveness act only applies to federal lending, private lending is not currently applicable to receive forgiveness.

Other Aspects Of Obama Student Loan Forgiveness

Those paying off student loans can also take advantage of other forms of the Obama loan forgiveness program, which include:

  • Public Service – Public service jobs can qualify for a 10 year repayment program for the individual who is paying off their loans. During a 10 year timeframe, they will work the public service job which they will need to make 10 years of on time payments, which at the end of their service whatever is left on the loan debt will be forgiven.
  • Discretionary Income – The Obama forgiveness program has also state that all student loan repayment, staring some time in 2012 will be capped at 10 percent of ones “discretionary income”, verses what it used to be which was 15 percent. Discretionary income is essentially what amount of money is left after one has purchased all they need to live, like food and shelter. This aspect of the  Obama student loan forgiveness is known as the “Pay As You Earn” proposal which it is projected that over million and a half people will enjoy a significant drop in their monthly payment, with over a $100 less or more each month being very possible.
  • Consolidation – If one chooses to consolidate their FFEL Loans they will be able to enjoy a .25 percent deduction in their interest rate throughout the entire time of their repayment, if they enroll in the “auto debit” program, where monthly payments are deducted each month automatically.
  • Know Before You Owe – To be even better prepared for the future, encompassing the Obama forgiveness plan with be a sheet referred to as “Know Before You Owe” which will provide a self help sheet for those going into college in the form of being able to calculate what they will end up owing before they even start school. This “fact sheet” has the main goal of giving one a feel for what they will owe so that they can develop a plan of attack for paying off their loans long before they are in debt.

All in all the Obama student loan forgiveness program is set up to allow students to still be able to go to school without having the burden hanging over them of how they are going to pay off their debt. It will also avoid students from having to go into default on their loans as well as bankruptcy which will ultimately have short term and long term negative effects.