First of all, although Obama endorses student loan forgiveness, I have not found any programs that would completely forgive any student loan immediately. The programs that Obama was talking about allows any remaining balance of your student loan to be forgiven after 20 years. If you are a public service worker, your remaining balance will be forgiven after 10 years. This seems a little bit unrealistic. Not everybody can work as a public service worker for 10 years to have their student loan forgiven after that.
If you are a teacher, there is a teacher loan forgiveness program for FFEL loans and Direct Loans. However, not all teachers are eligible. Those who qualify are full-time teachers who have been working as a teacher for 5 consecutive academic years in an elementary or secondary school which the US Department of Education designates as “low-income” schools.
If you are enlisted in the military with a degree, there is a program to have your student loans forgiven. This also applies to Coast Guard Reserves. More information here.
If the options above doesn’t suit you, another option is to look into the Income Based Repayment (IBR) program. Obama proposes to have student loans repayment plan capped at 10% of their income after living allowances. Currently it is capped at 15% of your income. You may not have your student loan forgiven right away but this will help you reduce your monthly payment.
However, this income-based repayment is only available for students with federal Stafford, Grad Plus, and Perkins loans. Private lenders such as Sallie Mae or Chase are not included in the plan. To read more about the Income Based Repayment program, click here. If you want to find out what your monthly payment would be under Obama’s new income based repayment plan, go here and use this calculator.
The income based repayment program is more effective for newer loans. Although it does not matter how long ago the loans were issued, choosing this repayment option will start the clock all over again. If you are a public service worker and have been working as one for 8 years, under the new Obama student loan forgiveness program, it will take you only 2 more years until the remaining balance will be forgiven. How ever, if you switch to income-based repayment now, the clock will be reset and start over again and you will have to wait for another 10 years as a public service worker to be able to be forgiven. elMost federal student loans are eligible for income-based repayment, no matter how long ago they were issued. The only exception to this rule is if you were previously in an income-contingent payment program.
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16 Responses
I think this is great of Obama in making education a vital part of the economy. However, I am seeking insight and information on continuing beyond the Masters degree when you have met the cap in federal student loans and cannot ascertain private funding on your own (without a co-signer). Especially, when trying to continue via online studies, work full-time, and raise a family. Help!
Posted on February 2nd, 2010 at 7:49 am
Yeah, not too sure how I feel about this either. Like what you said, it’s not realistic…Hopefully they can change some things around accordingly.
Posted on February 2nd, 2010 at 10:53 am
I am confused as to how anyone could view this plan negatively. Just a soft reminder that previous plans would require loanees to pay monthly until the loans were completely paid off. Those who are currently working in public service will be excused after 10 years. I don’t see it as “unrealistic” that our president is encouraging his people to go into public service. If this is not an option for you, your loans may be forgiven after 20 years. Once again, without this plan, loans will be paid until the balance has diminished.
Once again, I’m curious to find out the negative side of forgiven student loans at 10, 20, or even 40 years.
Posted on February 2nd, 2010 at 6:56 pm
[...] Obama Student Loan Forgiveness Program [...]
Posted on February 3rd, 2010 at 2:48 pm
Why is this proposal bad? Who do you geniuses think will pick up the tab for these people who get their loans forgiven? ….logic fail, eleanor. Nothings free
Posted on February 6th, 2010 at 6:15 pm
@ Andrew: Look man, if we don’t get our piece the same amount of money will just go to political appointments. Might as well get your stimulus!
Posted on March 1st, 2010 at 9:36 am
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Posted on March 4th, 2010 at 3:50 am
I like this idea but as a teacher, there is a loan forgiveness program but not all of your loan is forgiven. If you are a math, science or special ed teacher part of it goes away……any other teacher only 5000.00 is forgiven. Will there be any adjustments to this?
Posted on March 11th, 2010 at 8:26 pm
Frankly, I can’t say that I’ve found my federal loans to be the problem. I am having problems with my private Sallie Mae loans which are sucking the blood out of my family without any qualms or ethics. I WANT to pay my loans, but I can’t afford to pay a loan that is 1,200 a month. I just CAN’T! My HOUSE payment is lower than that! I am devastated that Obama hasn’t cracked down on the real preditory lenders like Sallie Mae…what are the millions like me supposed to do? Prostitution is not an option, though it was SUGGESTED as an option by the sadistic asshole that I spoke to at Sallie Mae! Very sad right now. very sad.
Posted on April 7th, 2010 at 3:22 pm
What is negative is that if you work in a public service type job you don’t make enough to pay the student loan and live…unless you still live with your parents…And Sara is right on, those of us who graduated 5+ years ago got suckered into consolidating right out of school locked at ridiculous rates of 7.75% with private banks and didn’t realize that we would miss out on opportunities in the future…We are screwed..and we should be forgiven because we are the ones who went to school to earn a better living and the government is expecting our income to be spent in the “marketplace” to stimulate the economy but we are spending all our money on school loans and mortgages…It would truly be a stimulus to the economy of school loans were forgiven…it wouldn’t cost the tax payers, or the schools or the banks…they already made their money on the interest from the loans at upwards of $20/day. It is outrageous to go to school, get a job and make more than 50/60/70 grand per year and after you pay your school loans and living expenses have barely any money for luxuries like clothing, care repairs, or a new dryer…. and be killed in taxes, lucky if we don’t owe…when those who didn’t go to school make less than 40grand get more than 10,000 back on taxes each year for big screen TVs and phat vacations…the middle class from $50,000 to $100,000 are barely making ends meet….forget about bailing out the automobile industry…bail out your hard working American families in debt to our eye balls..it would be cheaper for the government and be more effective…
Posted on May 18th, 2010 at 7:38 pm
My best advise to everyone heading to college… Start saving your money… forget the Ipod, cell phones, lap tops, and every other expensive thing until you have saved the money you need for school… next stop using credit cards… if you can’t afford it… don’t buy it… The biggest problem in our country is The use of Credit… Do you all realize that if kids can’t afford to go to college… the colleges would be forced to lower their prices… that is the how the market works… When demand is high… Prices go up… When demand is low… Prices go down… This loan forgiveness program isn’t going to help anyone here and now… and IF it were to be a ‘real’ program in the future… it won’t matter because there will have been several elections before then… NEVER follow the carrot that is dangled in front of your face unless you can physically reach it today!!! Shame on Obama for another trick with smoke and mirrors… Wait until the reality of the Obamacare comes about!!!
Posted on May 23rd, 2010 at 11:29 am
There is no FREE LUNCH you subhuman piece of refuse. If you borrowed loans, you whitebred hipster faggot, you must pay them back, with much much interest. You, sir, are my food. GITT IN MA BELLY!
Posted on June 6th, 2010 at 12:08 pm
The fault with the program is that nothing is free. If your loan is forgiven, who pays your balance? If you borrow money, you should be expected to pay it back. You where not required to buy a house that would overextend your budget. When you borrowed the money for college, you should have understood that someday you would have to pay it back. When in times of need I have been forced to take on 2 and even once 3 jobs to make my payments. I understand that events happen that cause your income to change that is beyond your control but We need to take responsibility for our promises. People are upset when a business is unable to fulfill its promises, but when it is us we expect to be forgiven.
Posted on July 14th, 2010 at 6:14 pm
Does anybody know how this loan forgiveness program works. My daughter would like to go back to school but is beind in her loans. Is there help for her?
Posted on August 16th, 2010 at 10:01 pm
First of all, this is NOT an ‘Obama plan’ – the legislation for this program was set in motion long before Obama ever came to office. He just announced it while most banks and lending institutions hide it because it would take business away from them.
If your loan is forgiven, who pays it back? Considering that you have to reconsolidate with Direct Loans through the DOE, and are therefore paying interest into the pot, my guess is that it is a combination of invested interest and perhaps some tax subsidy that pays for the excess. It does not matter if youhave already consolidated under another lender – this consolidation is open to anyone (although I think PERS loans are not included).
In addition, the 20 year forgiveness without public service comes with a hefty taxable income statement – as you are essentially taxed on the balance of your loans for that year as income – so there is no free lunch there. Depending on the size of the outstanding loan, you could easily be looking at a payment plan to manage your tax debt.
The 10 year forgiveness status comes only after ten years of payments through the plan – which amounts to, for example, 16 years of public sector work for myself – earning an income that is 60% of what I could be making doing what I do in the private sector. When loans are forgiven under that circumstance, the remainder is not taxable. At the same time, the IBR repayment option really only provides assistance to folks who earn less in a year than what their total student loan indebtedness is. So for example, it benefits someone who makes $45k a year when they have $70k in loans after getting a Master’s degree.
Otherwise, if you can make a payment that typically would enable you to pay off your loans in 10 years, YOU MUST DO THAT. The IBR adjusts every year by taking into account your tax returns and other information about your sources of income.
So when you ask who pays for it – in the end, I do, but at least I am able to work for an agency that is not profit-driven and has closer alignment to my personal mission and why I got into my present career in the first place. I pay for it by not selling out to private corporate interests because my loans force me into the meat grinder. I get less monetary income, but I can sleep at night and not default on my loans.
Posted on August 30th, 2010 at 8:10 am
What Sara and Thea said. The student loan industry is legalized theft. I am paying on collection charges for a loan that was initiated in 1984. They have gotten their money plus interest long ago. They move the account from one Sallie Mae owned collection agency to another. Every time a new agency gets the account they add another collection fee. They have no conscience at all. They are blood suckers and will continue to be until we vote the incumbents out of office and get the laws changed. The current representatives will do nothing at all for their constituents. Congress is owned by corporate America and corporate America is no longer American. There was a time when fraud was illegal anywhere. It’s now legal in the United States.
It might work, but I doubt it, if on one or two days every student with a loan wrote, called or e-mailed their representatives. One voice at a time does nothing. Thousands of messages complaining about this nonsense might, just might, get their attention.
Even the web sites purporting to be in opposition to this scam give nothing more than lip service to the issue.
Everyone is frightened by government. What they fail to realize is that we are the government. We need to stand up for our rights under God and the Constitution.
Sallie Mae takes money from my Social Security benefit every month with an “administrative garnishment”. It is an unconstitutional method of collecting fictitious debts.
We must do something to stop this fraud!
Posted on August 30th, 2010 at 9:01 am
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