Is Obama’s Student Loan Forgiveness Real?
Although the term âObama student loan forgivenessâ has been used in articles and advertisements for the past several years, no such program was created under the Obama administration. What âObama’s student loan forgivenessâ typically refers to as an income-based repayment plan that Obama implemented in 2012.
Even though this term is often misused, you can still take advantage of the genuine student loan forgiveness programs available. Here’s where the term comes from and what to look for instead.
Is Obama’s Student Loan Forgiveness Real?
While former President Obama has made strides in helping student loan borrowers, he has not offered full or total loan forgiveness. There were rumors that he would write off any student loan debt during his tenure, but that never happened.
During Obama’s presidency, crooks began using the term âObama’s student loan forgiveness programâ to target people seeking student debt relief. Businesses can still use this misleading wording, charging people thousands of dollars just to fill out the paperwork needed to apply for federal reimbursement programs. These apps alone do not charge any fees.
If you’ve heard of Obama’s student loan cancellation, you might be looking instead for Pay As You Earn, an income-based repayment plan that forgives your remaining federal student loan balances – but only after. have made 20 years of payments. .
Student loan forgiveness options
Even though Obama hasn’t implemented sweeping student loan cancellation measures, there are still ways to clear some of your balance after you meet certain criteria. Here are some of the most popular student loan forgiveness programs available today.
Pay as you earn (PAYE)
Pay As You Earn (PAYE) is an income-based repayment plan implemented by former President Obama in 2012. In this plan, payments are calculated at 10% of your discretionary income. The repayment term is 20 years, after which the remaining balance is canceled. Borrowers must have received their first student loan on or after October 1, 2007, and they must have taken out a direct loan or direct consolidation loan on or after October 1, 2011.
PAYE is designed for students with financial needs. To qualify, the amount you would pay on PAYE must be less than what you would pay on the standard 10-year repayment plan.
Pay Review As You Earn (REPAYE)
The revised Pay As You Earn (REFUND) plan is similar to the PAYE plan. As with PAYE, monthly payments under the REPAYE plan represent 10 percent of your discretionary income. However, the repayment term is 20 years if you only have undergraduate loans and 25 years if you include graduate loans. After this period, any remaining balance is forgiven.
Unlike PAYE, the only REIMBURSEMENT requirement is that you have qualifying loans. Direct and student PLUS loans are eligible for REFUND. Parent PLUS loans and direct consolidation loans that previously contained parent loans are not eligible.
Public Service Loan Forgiveness (PSLF)
The Public Service Loan Forgiveness (PSLF) is one of the most popular federal loan forgiveness programs. It is available for borrowers who work full time or 30 hours per week for a nonprofit business or qualifying government organization. Working two part-time jobs at qualifying establishments will also count, as long as the total number of hours equals one full-time job.
Borrowers seeking PSLF must make payments on an income-based repayment plan for 10 years, after which they can get their student loan balance canceled. Only payments made while working for an eligible organization will count towards the 120 payment requirement, so it is important to submit an employer certification form once a year or whenever you change jobs, depending on the first possibility. The Department of Education will use the information on this form to verify that your loan type and employer are both eligible for the PSLF.
Direct loans are automatically eligible for the PSLF. FFEL and Perkins loans are not eligible, but they can become eligible if you consolidate them into a direct consolidation loan.
Teacher loan forgiveness
The federal teacher loan forgiveness program will release federal student loans after five consecutive years of working for a low-income school or educational services agency (ESA). Teachers do not have to work for the same school for five years in a row and can work for more than one school, but each school or ESA must meet the requirements of the program.
Math, science or special education teachers can have up to $ 17,500 in canceled loans. All other teachers can have up to $ 5,000 in canceled loans.
Cancellation of the Perkins loan
Borrowers with Perkins loans may have their loan balance canceled after four to seven years of working in an eligible field. The duration varies depending on the job.
The following types of occupations may be eligible for the Perkins loan remission:
- Law enforcement.
- Military in active service.
- Nurse or medical technicians.
- Public defenders.
- AmeriCorps VISTA or Peace Corps volunteers.
What are Biden’s student loan forgiveness proposals?
President Biden has made it clear that student loan debt is on his priority list. During his first few months as president, he enacted the American Rescue Plan Act, which included a provision making all types of loan forgiveness tax-exempt until December 31, 2025. This will primarily help borrowers whose the loans are written off through their income determined repayment plans, which normally consider the remaining balance as taxable income.
It also changed existing avenues for the cancellation of federal student loans, with the Department of Education easing the red tape and granting a pardon to those who qualify under the Full and Permanent Disability Relief and Defense. from the borrower to repayment.
During his campaign, Biden also proposed changing the PSLF and canceling $ 10,000 in federal student loans for current borrowers, although these measures have been absent from recent legislation.
The bottom line
While âObama’s Student Loan Forgivenessâ has never been a real agenda, there are still ways to have your student loans canceled. In addition to programs like PAYE and PSLF, which both cancel balances after a number of years of payments, broader student loan reform may be underway from the Biden administration.