The Obama Student Loan Forgiveness Program is beneficial to those who owe money for student loans. There are many stipulations to this program so it is important to know if and how you may qualify for the program.
Income Based and Pay as You Earn
While these two new policies sound much the same, in fact there are differences. With IBR the plan bases the borrower’s payment to his or her own income and the size of this individual’s family. With IBR the balance of the loan and the interest aren’t used in calculating a monthly payment plan. Instead the borrower will be responsible for 15% of their discretionary income toward their federal student loans.
Some might have no payment at all until their income changes. IBR interest doesn’t capitalize on the subsidized portion of the loan. Unlike a typical deferment the amount due will not increase dramatically due to interest for the first three years of the IBR. The Pay As You Earn plan is also based on income, but uses 10% of the borrower’s discretionary income toward payment. Qualifying for PAYE is, however, harder than for the IBR. Both of these plans help those who can’t find higher paying jobs after college. The unpaid balance and interest is still owed, and new payment arrangements will need to be made when income levels change.
Income Contingent—Loan and Income Balance
With this plan you can arrange to make a payment on student loans based on your income size, family size without having to calculate this against the balance of the loan, or the interest rate. The payment through this plan can go down to a zero amount per month. It’s important to remember, however, that when the individual enters a new income level he or she will still owe the amount of the loan that’s still unpaid.
Standard Repayments Haven’t Changed
For those who have the income level the fixed rate amount is still viable. The payment is determined by amount, interest rate and the number of years of the loan. The benefit here is the loan will be paid quickly, instead of having it waiting for you the second you take a new job, or start to earn more money.
This is possibly the best of both worlds for those who have to pay back student loans while in entry level jobs. This repayment plan starts out with lower payments. These payments will gradually increase over two years. This allows for some breathing room as the borrower can still afford to make professional and lifestyle choices without so much concern over a higher monthly payment for student loans.
Public Service Loan Forgiveness
For those working in public service, it’s possible to qualify for forgiveness of student loan debt after 10 years or 120 payments. This payment forgiveness is also available for teachers and for those with total and permanent disability.
If you need help with student loans call SM Law Group today for a free consultation.