With the increasing concerns about student loan debts in the country, President Obama has introduced a plan that aims to help students who are incapable of completing their loan payments, as well as those who have paid a significant percentage of their loan balance for several years.
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This plan is called the Obama Student Loan Forgiveness, which clears all remaining debts of individuals who have made regular and prompt payments on their existing federal student loans for at least a period of twenty years. Additionally, those who work in government departments such as the military service may have all their debts cleared earlier than the minimum year based on the student loan forgiveness plan.
Important Elements of the Obama Student Loan Forgiveness
Pay-As-You-Earn or Student Loan Forgiveness is a program that calculates the loan payments made by borrowers with consideration to their family size and income. Since the basis of this program is not your loan payments, it is possible for borrowers with low income and massive loan balances to complete their payments.
Those who are eligible for this program can have their monthly loan payments capped at about 10 percent of their income. For instance, individuals who earn $50,000 annually and have an existing loan debt of $40,000 at 6.8 percent APR are usually required to pay at least $460 per month on the standard repayment scheme.
However, they may only settle a monthly payment of $277 if they are eligible for the Pay-As-You-Earn plan. Thus, borrowers can benefit from low payments, unlike with other repayment plans for federal student loans.
It is also important to note that not all borrowers may qualify for this student loan forgiveness plan. In fact, only those who are new borrowers with an existing federal direct loan may be eligible, or individuals who have taken out a loan on or after October 1, 2007.
Moreover, you must have obtained your direct loan after October 1, 2011, so it is essential to know the exact date when you have taken out your loan to determine your eligibility. Pay-As-You-Earn is also not available to borrowers with default student loans, so you need to consult your loan servicer for the best solution regarding this concern.
In addition, you should understand that the loan is likely to take longer before it could be paid off because of lower monthly payments. Hence, the accumulated interest involved in the Pay-As-You-Earn plan is much higher than when you opt for the standard repayment scheme.
Further Details about the Obama Student Loan Forgiveness Program
The plan only applies to individuals who currently have federal loans such as the Stafford or Perkins loan. Although those who have an existing private loan can use a student loan forgiveness plan offered by private institutions and employers, these are not covered by the federal program by President Obama.
Furthermore, there are some employers in private companies and institutions who will agree to repay the full amount or remaining debt if you comply with their conditions. For instance, you may be required to work for the company for a period of time stipulated in the agreement. Although this plan typically applies to those who work in healthcare companies or other specialized industries, several private firms have different policies when it comes to student loan forgiveness plans.
The main goal of the loan forgiveness program by President Obama is to alleviate and reduce financial burdens among college students and graduates. After all, a college degree is almost useless when a person who holds it faces massive loan debt balances that he or she can never pay off.
Moreover, the primary objective of the program is to assist students by making them free from debts as quickly as possible. With financial assistance and a better repayment scheme, it is possible for students to focus more on getting a degree instead of paying off their debts for decades.
The Pay-As-You-Earn program by President Obama enables borrowers who experience financial difficulties a chance to obtain a more reasonable loan repayment option. However, there are certain requirements that borrowers should meet before they can qualify for the program. Hence, it is best for students to consider all possible payment schemes that will be applicable to their situation. By doing so, they can determine the most suitable option that works for them.
Are You Eligible? - Verify Eligibility Here
(Help Is Available to Confirm Eligibility - Click Here)