What Was the Obama Student Loan Forgiveness Act?
While President Obama is no longer in office, his legacy lives on in the form of many programs introduced during his administration, including the Obama Student Loan Forgiveness Program, or more officially the Obama Student Loan Forgiveness Act of 2016, which is a set of student loan law reforms introduced while he was president.
And while President Trump has rolled back all sorts of Obama-era programs and benefits, he has not yet destroyed President Obama’s student loan legacy, as all of the initiatives put in place by former President Obama remain not just legal, but also fully-funded, and widely-available to ordinary Americans.
The biggest component of the Obama Student Loan Forgiveness Act’s reforms was a significant expansion in the availability of Federal Student Loan Debt Forgiveness benefits, but there are three vital changes that this Act put into place, including:
- Offering complete loan forgiveness to ALL Federal borrowers after they’ve made 240 monthly payments (20 years worth of payments)
- Updating the Public Service Loan Forgiveness Program (PSLF), to offer loan forgiveness sooner than it was previously provided – after 120 monthly payments (10 years of payments) instead of the previous 180 payments (15 years of payments)
- Introducing two new Federal Student Loan Repayment Plans, called the Pay As You Earn Plan (PAYE), and the REPAYE Plan,
each of which remain the most popular, most powerful repayment plans available for Federal loans
Now, you may have seen links on Google suggesting that you should “steer clear” of the “Obama Loan Forgiveness Program”, but that’s foolish advice, because the changes introduced by President Obama’s Student Loan Forgiveness Act (which people just call “Obama Loan Forgiveness” because it’s easier to remember) are amazing, and should be taken advantage of.
In fact, if you have Federal student loan debt, then you DEFINITELY want to look into these programs and their specific benefits, because you couldn’t find a better way to get rid of your loans quickly, and cheaply, than the Obama-era programs.
This page covers President Obama’s Student Loan Forgiveness Act of 2016 in comprehensive detail, explaining how each component of the Obama loan forgiveness programs works, including detailing everything you need to know about the latest and greatest Federal loan forgiveness benefits, as well as how the excellent PAYE and REPAYE Repayment Plans work, and why you should use them to repay your loans.
I update this page on a regular basis, so be sure to check back often for the latest news and alerts. If you have any questions about the Obama-era reforms, please ask them in the Comments section below and I’ll get you a response as soon as possible.
Get Help With Your Loans!If you're truly struggling with student loan debt, then you should consider paying a Student Loan Debt Relief Agency for help. Why? Because the people working at these companies deal with student loans all day, every day, and they're your best chance at figuring out how to get your loans back under control.
For help with Federal Student Loans call the Student Loan Relief Helpline at 1-888-906-3065. They will review your case, evaluate your options for switching repayment plans, consolidating your loans, or pursuing forgiveness benefits, then set you up to get rid of the debt as quickly as possible.
For help with Private Student Loans call McCarthy Law PLC at 1-877-317-0455. McCarthy Law will negotiate with your lender to settle your private loans for much less than you currently owe (typically 40%), then get you a new loan for the lower, settled amount so you can pay off the old loan, repair your credit and reduce your monthly payments.
I've spent 10 years interviewing debt relief agencies, talking to all sorts of "experts", and these are the only two companies that I trust to help my readers. If you have a bad experience with either of them, please make sure to come back and let me know about it in the Comments!
How Does Obama Loan Forgiveness Work?
There’s a lot of components involved in President Obama’s loan forgiveness program, but the basic idea is that he changed the way that Federal student loan forgiveness works, making it easier for borrowers to receive total, comprehensive debt forgiveness benefits.
President Obama’s reforms to student loan debt have made it significantly easier to pay back college loans, no matter how much you owe, because there’s a light at the end of the tunnel, where before there was only darkness.
The new forviveness program allows you to get all of your debt forgiven (no matter how much is left over), once you’ve made a certain number of monthly payments: 240 monthly payments if you are on the regular plan (PAYE or REPAYE), and just 120 monthly payments if you can qualify for Public Service Loan Forgiveness benefits.
Complete Forgiveness After 240 Payments (20 Years)
It means that you can get your debt erased after you’ve made the equivalent of 20 years worth of payments, or, if you qualify for the PSLF program, you can get your debt erased after making just 10 years worth of payments!
But the best news is yet to come, because the biggest trick to Obama’s college loan forgiveness benefit is that the entire program hinges on the amount of money you’re actually making.
To qualify for the forgiveness benefit, you MUST BE ENROLLED in one of the qualifying income-based Federal student loan repayment plans. For the purposes of this post, I’m going to assume that you’ll pick either the Pay As You Earn Repayment Plan (PAYE), or the REPAYE Repayment Plan (REPAYE), as these are the best options for something like 99% of people looking to receive debt forgiveness.
Keep in mind though that the old Income-Based Repayment Plan and Income-Contingent Repayment Plans are both also eligible repayment plans for Obama loan forgiveness benefits. Both of these plans offer the same debt forgiveness benefit as the new PAYE and REPAYE plans – total, comprehensive debt forgiveness after 240 payments have been made (or 120 if you qualify for PSLF).
Complete Forgiveness After 120 Payments (10 Years)
I’ll go into this component of the President’s reforms in detail further down on the page (skip to the section about the Public Service Loan Forgiveness Program if you want to full run-down), but for the purposes of introducing the idea, it is possible to receive total Federal student loan forgiveness at the 10 year mark, if you qualify for PSLF.
What is PSLF? Officially titled the Public Service Loan Forgiveness Program, it’s an incentive benefit to encourage people to work in positions that offer a tangible public good – some sort of value to society at large.
Qualifying for PSLF requires working for a qualifying organization or institution, like the a Government Organization (Federal, State, or Local) or a Non-Profit Organization, also known as a tax-exempt 501(c)(3).
Jobs like military service, emergency management services, public safety or law enforcement, public health services, public education or library services, public interest law services, early childhood education, public service for individuals with diabilities and public service for the elderly are all possible options for qualifying for the PSLF benefit.
For additional details on some specific careers that qualify for PSLF benefits, please see the following pages of this site:
- The Public Service Loan Forgiveness Program
- Nursing Student Loan Forgiveness
- Military Student Loan Forgiveness
- Teacher Student Loan Forgiveness
- Government Employee Student Loan Forgiveness
- Non-Profit Student Loan Forgiveness
Keep in mind though that even if I haven’t listed your job above, you still might be able to qualify for PSLF forgiveness benefits. It all depends on what your career is, what your specific position is, what your actual job duties are, and whether or not you can convince the people who service your loan that you should qualify for the benefit.
There is SOME leeway in qualifying for PSLF benefits, so it’s worth researching and exploring in detail because the potential payoff (total debt forgiveness) can be massive!
Obama Forgiveness Benefits & Taxable Income
Before you start jumping for joy about getting your loans forgiven, you do need to keep in mind that whatever amount of money you end up being able to write-off, will have to be written into your annual IRS tax filings the year you receive the forgiveness benefit.
This only applies to people who get their forgiveness at the 20 year mark (240 payments), however, as anyone who qualifies for the early forgiveness benefit under the PSLF plan (at 120 payments), will not be taxed on the forgiven money.
Here’s an example to demonstrate how it works: let’s say you made your 240 qualifying payments, then got $10,000 in student loan debt forgiven via the Obama forgiveness plan.
That year, you will have to add $10,000 to your taxable income amount on your IRS tax return paperwork, and the IRS is going to charge you taxes on the $10,000. If you are paying a 25% tax rate, you’ll then owe them $2,500.
So in reality, you’re not getting a full $10,000 in loan forgiveness. You’re getting $7,500.
The more you get written off, the more you’ll end up having to pay in taxes, and the higher your income tax rate, the more you’ll owe on whatever you have to pay.
If you’d like to get the full story on how taxes and forgiveness benefits work, please visit my page about Student Loan Forgiveness Benefits and Taxable Income Laws.
The Student Loan Forgiveness Taxpocalypse
I’m terrified of how IRS tax regulations are going to impact student loan borrowers that get forgiveness benefits, because I think it’s going to saddle people with an even worse debt than student loans: IRS Debt.
First off, the IRS doesn’t let you automatically divide what you owe them into small, monthly payments, that you can issue over a period of several years (they make you apply for that benefit… and they charge you extra for paying taxes back that way).
I think the average student loan borrower is going to be in a world of hurt when their huge forgiveness tax bills come due, and they’re scrambling to come up with the money to pay the IRS off, so I’ve gone ahead and created a new website, called Forget Tax Debt, where I go through all sorts of tax-related problems in extreme detail (just like I do on this site for student loans).
If you ever run into trouble with the IRS, and need help navigating complicated tax-related problems, then make sure to visit Forget Tax Debt, where I’ll teach you how to do things like signing up for the IRS Fresh Start Program, Negotiate a Tax Settlement with the IRS, Hire a Legitimate Tax Resolution Service and Avoid IRS Phone Call Scams.
Will Obama Forgiveness Survive President Trump?
With Donald Trump taking the reigns as President in January, 2017, things could end up changing with the Obama loan forgiveness program. In fact, if President Trump has his way, and he writes into law what he’s promised to do, then there’s a very good chance that President Obama’s program is scrapped entirely.
President Trump has promised to replace many of the things President Obama did, and unfortunately, the Obama student loan forgiveness program is definitely on the chopping block.
Donald Trump’s plan calls for getting rid of the complicated, tiered system currently in place under President Obama, and the creation of a single plan that everyone with Federal student loan debt would automatically qualify for.
The downside to President Trump’s Student Loan Forgiveness Plan is that it would negatively impact anyone who currently qualifies for the 10 year relief via Obama loan forgiveness (technically via Public Service Loan Forgiveness).
The upside to President Trump’s Student Loan Forgiveness Program is that literally everyone else (anyone who does not qualify for PSLF) will be in a better spot than they are now, because they’ll have access to forgiveness benefits after making just 15 years worth of payments.
What will President Trump actually do, and what will happen to the Obama loan forgiveness program in 2017? No one really knows, and we won’t until President Trump puts his own plan in action. I have a feeling that this will not be one of his top priorities, and that it may be until 2018, or even later, until we find out anything official.
Now – with that said… if President Trump does decide to change Federal student loan forgiveness laws, and he does repeal Obama loan forgiveness, I would think that the new program would allow anyone who already has student loan debt to be “grandfathered” into Obama loan forgiveness, and still qualify for the PSLF benefit (forgiveness at just 10 years).
We’ll see though. If Trump has proven anything thus far, it’s that no one really knows what to expect from him until it happens. Keep checking back regularly for updates, as I’ll be updating this page, and my page on Donald Trump’s forgiveness program, any time new information is released.
Can I Qualify for Complete Forgiveness Paying $0?
Under Obama’s new loan forgiveness program, is it possible to earn complete forgiveness making $0 worth of payments?
Could you borrow $100,000 in student loans, pay literally $0 of it back, but still qualify for the forgiveness benefit?
Yes. In Barak Obama’s own words: “Yes, we can.”
And while it’s not easy to accomplish, it is technically possible to qualify for complete Federal student loan forgiveness after paying literally $0 back on your student loan debt, no matter how much you originally borrowed!
How could that be possible? Rememebr – to qualify for the forgiveness benefit introduced by President Obama’s student debt reforms, you must be enrolled in one of the eligible Income-Based Federal Student Loan Repayment Plans.
And because those repayment plans calculate your monthly payments based on your income, and offer the possibility of having payments set at $0 per month, you may be able to issue all 240 (or 120 for PSLF) payments at the $0 amount, and still qualify for the benefit.
For example, if your income is $0, or it’s so low that the Income-Based plan you’re enrolled in calculates your payment to be $0 per month, then each time you make that $0 monthly payment, it’ll still count toward your required 240 (or 120) threshold.
And that, my friends, is not just one of the best deals I’ve EVER heard of, but one that you should definitely attempt to qualify for!
What is the Pay As You Earn Student Loan Repayment Plan?
Pay As You Earn (often abbreviated “PAYE”) is one of the newest Federal Student Loan Repayment Plans, originally introduced in the announcement of the Obama loan forgiveness program.
PAYE is an income-based student loan repayment plan, meaning that it calculates your monthly payments based on the amount of money you’re currently earning.
And when I say “currently”, I don’t mean “right this second”, but based on an average of whatever income you claimed in your last IRS filing.
Here’s the way the calculation works… whatever you told the IRS you made when you filed your taxes last year, the Federal Government will insert into their student loan repayment calculator, and come up with an amount that you’re supposed to pay them back each month.
This plan works almost identically to the older Income-Based Repayment Plan and Income-Contingent Repayment Plan, which have both been around for a long time now, so it’s not really a new idea, just a slightly different option.
With the Pay As You Earn Plan, your loan term is scheduled to last a period of up to 20 years (did you catch that?), and your payments end up being relatively flexible, rather than fixed (as they would be on the Standard Repayment Plan, or the Graduated Repayment Plan, for example).
The PAYE plan is a great option for people who don’t have steady employment positions, because they aren’t paid a set salary, or who are planning on changing jobs often (especially if income is predicted to decrease over time), since it allows significantly more flexibility in terms of how much you’ll actually be charged each month for your Federal student loans.
How Does The Pay As You Earn Plan Work?
The Pay As You Earn plan sets your monthly Federal student loan payments at an amount based on your discretionary income.
Previously, federal student loan law capped monthly student loan repayments at 15% of discretionary income, which crippled some graduates, and was especially troublesome for people with high debt to income ratios.
One of the biggest benefits to the introduction of President Obama’s Pay As You Earn plan is that it lowered the cap on monthly Federal student loan payments from 15% of discretionary income to just 10% of discretionary income.
And while that 5% difference may not seem like much to you (it won’t if you aren’t struggling financially), it can make a major difference to those people with big financial problems, even serving as the deciding factor between going to be hungry, or falling asleep with a belly full of food.
What is the REPAYE Student Loan Repayment Plan?
The REPAYE Student Loan Repayment Plan, again, could be considered to be like an Obama Loan Forgiveness 2.0.
REPAYE was introduced with the announcement that President Obama’s Department of Education would be allowing anyone with Federal student loan debt to qualify for the same benefits offered to PAYE Plan enrollees, beginning in December, 2015.
This was a change put in place to help everyone who DID NOT qualify for the PAYE plan (those with loans older than October, 2007) to qualify for the same benefits. Why the Federal Government couldn’t just open PAYE up to everyone? We’ll never know… the importnat thing is that REPAYE was put in place to make sure that anybody with Federal Student Loan Debt could qualify for the same Obama loan forgiveness benefits.
And unlike the typical promise made by Government employees, the Federal Governemnt didn’t just stick to it’s word about getting PAYE put in place by December of 2015, they officially opened REPAYE for business EARLY on October 27th, 2015!
How Do PAYE and REPAYE Determine Monthly Payments?
Now that you know that PAYE (and REPAYE) set your monthly payments at 10% of your discretionary income, what is discretionary income, and how does the plan determine what your total income would be?
First, “Discretionary Income” is supposed to measure the amount of money left over after you’ve been paid, and covered all of your necessary expenses. Think of your necessary expenses being the things you need to survive, like food, rent, healthcar, etc.
Obviously, necessary expenses are different in different areas, because rent is really expensive in San Francisco and New York City, but not that bad in the rural Kansas, so the Government should take those factors into calculation when determining your discretionary income… but, they don’t.
The way they determine discretionary income is to calculate it is to calculate an amount using three factors:
- Your Gross Income
- 150% of the Federal Poverty Level
- The Number of People in Your Household
It sounds complicated, but it’s a simple calculation, and one that gets adjusted every year.
How To Calculate Your Discretionary Income
The Federal Government will calculate your discretionary income by including every dollar you make over 150% of the poverty level for your household size, within the region where you live.
That’s not an easy thing to write, or read, and understand, so here’s a handy table showing exactly how it works:
2016 150% of the Federal Poverty Level
|People in Household||Continental U.S.||Alaska||Hawaii|
|Each Additional Person||$6,240||$7,800||$7,170|
What this table shows is that if you live in one of the 48 contiguous states (let’s say California), and you have a family household of 3 people, your discretionary income would be whatever is left over after substracting $30,240 from your total gross income (whatever you made before taxes were taken out).
That means if you made $50,000 last year, your discretionary income would be $19,760 ($50,000 – $30,240).
This is the calculation process that the Federal Government and whoever services your loan uses to determine your discretionary income, and thus your monthly Federal student loan payments.
But remember, once you’re enrolled in the PAYE plan (or the REPAYE plan for that matter), your monthly payment cannot be set at more than 10% of your discretionary income.
And that means that you can figure out what your monthly payment will be (in advance), by calculating 10% of your discretionary income, because whoever services your loan is highly unlikely to offer you a monthly payment that’s lower than the maximum 10%.
Eligibility Restrictions for PAYE
There are some restrictions on eligibility for the “Pay As You Earn” repayment plan, which I alluded to above, and which apply to two different things: the borrower and their loans.
You’re only going to be eligible for PAYE if you are a certain type of borrower, with a certain type of loans.
Read on to find out exactly what types of loans and borrowers are eligible for PAYE.
What Types of Loans are Eligible for PAYE?
First off, ONLY Federal student loans are eligible for President Obama’s student loan forgiveness benefits (read: the PAYE plan). If you have private student loan debt, then please visit my page about Private Student Loan Debt Relief, or Private Student Loan Debt Forgiveness benefits.
Secondly, even if you have Federal stuedent loans, you still may not be eligible for PAYE, because only certain TYPES of Federal student loans are allowed to to be repaid via PAYE, including:
- Direct Subsidized and Unsubsidized Loans
- Direct PLUS loans made to students
- Direct Consolidation Loans, except for Direct or FEEL PLUS loans issued to parents of students
That means if you’ve taken out Federal student loans from some other program, like a PLUS Loan issued to parents of a college student, then you won’t qualify for PAYE, and won’t get any assistance out of Obama’s original loan forgiveness package.
Fortunately, the introduction of the REPAYE plan has opened up these same benefits to everybody else! Keep reading for details on what REPAYE is, and how it works.
What Types of Borrowers are Eligible for PAYE?
President Obama’s student loan forgiveness program (technically the PAYE plan) was originally only available to a small set of borrowers, because it was introduced with several important eligibility restrictions, including:
- Borrowers must have taken out their federal student loans after October 1st, 2007
- Borrowers with exclusively private student loans do not qualify
- Borrowers must have a “Partial Financial Hardship” (basically, they must meet salary-to-debt ratio conditions as determined by the Government’s IBR calculator
- Borrowers must not have loans in default
- Borrowers loans that were already in repayment when the plan was introduced were not eligible for the benefit
Now, here’s the good news.
Since October of 2015 (which marks the official introduction of the REPAYE Repayment Plan), and which you can think of as Obama Loan Forgiveness 2.0, EVERYONE is eligible for the same benefits, regardless of when their loans were taken out, and whether or not they face a Partial Financial Hardship.
Anyone with a loan newer than October, 2017, and a Partial Financial Hardship can enroll in the PAYE plan, while those with older loans and/or no partial financial hardship can enroll in REPAYE.
The other conditions outlind above for PAYE, however, still apply to restrictions on eligibility for REPAYE. You do have to have a Federal student loan, and you can’t have any loans in default. For REPAYE, borrowers COULD have loans already in repayment when REPAYE was officialy launched, as that was the entire point of the program (to provide benefits to people who didn’t qualify under the PAYE plan).
What Types of Loans are Eligible for REPAYE?
Again, it’s only for Federal student loans (private loans will not qualify), and like PAYE, only the following TYPES of Federal loans are eligible as well:
- Direct Subsidized and Unsubsidized Loans
- Direct PLUS loans made to students
- Direct Consolidation Loans, except for Direct or FEEL PLUS loans issued to parents of students
What Types of Borrowers are Eligible for REPAYE?
The eligibility rules are quite similar to the PAYE plan, but three important restrictions are lifted for REPAYE, making it available to significantly more people. To qualify for the REPAYE plan, you need to satisfy each of these conditions:
- Borrowers could have taken out their federal student loans AT ANY TIME (before or after October 1st, 2007)
- Borrowers with exclusively private student loans do not qualify
- Borrowers DO NOT NEED to have a “Partial Financial Hardship”
- Borrowers must not have loans in default
- Borrowers loans COULD be in repayment when the plan was introduced
Got that? Pretty much anyone with Federal student loans, regardless of when they were taken out, and of what their income might be, is eligible for REPAYE, offering virtually identical benefits as PAYE.
Sorry to those of you who are still left out in the cold (those with Private loans, Federal loans in default or Federal loans of the types not supported here).
It’s possible that we could see an Obama Loan Forgiveness 3.0 that allows everyone to access these benefits, but if that happens, it’d be introduced just before he leaves office, and I think the possibility of that happening remains pretty unlikely.
Either way – keep checking back regularly because I’ll update this page as soon as any new information is released.
Obama’s Update to the Public Service Loan Forgiveness Program
The Public Service Loan Forgiveness Program (also referred to as “PSLF”) has been around for years, but it was updated (and significantly improved!) by the introduction of President Obama’s student loan forgiveness program.
Previous law stipulated that people enrolled in the PSLF program had to make 20 years worth of payments on their Federal student loans before their debt would be forgiven, but thanks to Obama’s student loan changes PSLF loan forgiveness is now available after making just ten years worth of payments!
This program is now by far the best student loan forgiveness program available to anyone, but better yet, it’s a benefit that almost anybody can take advantage of because the eligibility requirements are not that stringent!
If you have significant student loan debt, you need to look into the details for the PSLF program, because it is 100% worth the effort of getting enrolled in.
To get detailed information about how the Public Service Loan Forgiveness Program works, please visit my page about PSLF benefits here.
The Four Biggest Benefits of Obama Loan Forgiveness
President Obama’s plan to provide student loan relief is extremely lucrative for those holding federal student loans, with two significant changes that offer massive financial assistance to those who qualify for the program:
- Student Loan Debt Forgiveness for all Federal Borrowers- All Federal student loan borrowers will receive complete debt forgiveness after making 240 monthly payments (20 years worth of payments)
- Improved Public Service Loan Forgiveness Program Benefits – PSLF forgiveness is now easier to qualify for, requiring only 120 payments (10 years) rather than 240 payments (20 years)
- Introduction of the “Pay As You Earn” Student Loan Repayment Plan – This plan limits monthly federal student loan payments to just 10% of the borrowers discretionary income
- Introduction of the “REPAYE” Student Loan Repayment Plan – This plan also limits monthly federal student loan payments to the same 10% of the borrowers discretionary income
These reforms are likely to save millions of borrowers tens of thousands of dollars each, and are the most significant changes to Federal student loan forgiveness rules ever.
In fact, the total savings from these two basic reforms is likely to be in the hundreds of billions of dollars.
Improved Loan Forgiveness Benefits
Probably the most important piece of the new student loan reforms introduced by President Obama is the change made to existing Federal law regarding student loan forgiveness.
Previous rules stipulated that Federal loans would be forgiven after making 300 full, on-time, scheduled payments (25 years of payments), but the President’s new plan drops that restriction down to just 240 payments (20 years of payments), which will offer significant savings for some borrowers.
In addition, public service workers (teachers, nurses, military personnel, etc.) will be eligible to have their outstanding balances forgiven after just 120 payments (10 years of payments), which is a tremendous benefit to them, requiring only half as many payments as the old laws called for.
Improved Public Service Loan Forgivenes Benefits
President Obama’s updates to the PSLF program make it far more useful than it’s ever been before, with complete forgiveness offered after making just 10 years worth of payments (when the old rules required making 20 years worth of payments).
But better yet, with the introduction of the PAYE and REPAYE student loan repayment plans, which set payments based on your income, and cap monthly payments at just 10% of your discretionary income, it’s possible to earn forgiveness without paying for very much of your loans at all (or even after paying exctly $0!!!).
PSLF is the best debt forgiveness program on offer these days, so it’s absolutely worth seeing if you qualify for the benefit. To get the details on PSLF benefits, visit my page on the program here.
Introduction of the PAYE Repayment Plan
The Pay As You Earn student loan repayment plan is the single-best Federal student loan repayment plan currently available to borrowers.
This plan not only sets your monthly payments based on your income level, but also caps the payments at a maximum of just 10% of your discretionary income.
Not everyone qualifies for PAYE though, so you’ll need to see if you can enroll in plan by visiting my page about PAYE here.
Introduction of the REPAYE Repayment Plan
The REPAYE student loan repayment plan is the best plan available to everyone who doesn’t qualify for the PAYE plan, offering the same major benefits: payments based on income, and capped at just 10% of discretionary income.
Virtually everyone will qualify for REPAYE, so if you already looked at PAYE and found yourself disappointed – don’t give up yet! Check out my page about REPAYE here.
Frequently Asked Questions about Obama Loan Forgiveness
President Obama’s student loan forgiveness program is quite controversial, especially due to the insanely restrictive eligibility guidelines explained above, and there’s quite a bit of misinformation scattered around the Internet regarding how it works.
In fact, it’s so confusing to most people that we receive more emails and comments on a daily basis about this program than about everything else we’ve covered on this site.
Whether it’s asking who qualifies for the program, how to apply to it, or what it actually offers, we’ve received so many different questions that we decided to develop this FAQ section of the page to address the most common concerns.
If you have questions that aren’t covered here, please ask them in the Comments section at the bottom of the page. We’ll do our best to get you a response within 24 hours.
What Is Obama Loan Forgiveness?
A cancellation of your debt.
In fact, loan forgiveness is the best type of debt relief, since it typically involves cancelling some set amount of your debt, without any need to spend any money out of pocket (unless you end up owing income taxes on whatever amount was forgiven).
For example, the new loan forgiveness program proposed by President Obama allows you to completely stop paying off your loans after you’ve made 240 full, scheduled, on-time monthly repayments (20 years of payments). Whatever debt is left after those 240 payments is completely forgiven.
Who Qualifies for this New Program?
To qualify for President Obama’s student loan forgiveness program, you’ll have to satisfy each of the following conditions:
- You have both a Direct federal loan and a guaranteed federal loan
- Both of your student loans were disbursed in 2008, or later
- At least one of your student loans was disbursed in 2011, or later
- Your student loans are not in default
How Do I Apply to It?
You don’t, for the loan forgiveness piece, but you can for the Pay As You Earn Plan.
For loan forgiveness, there’s no application form to fill out quite yet, likely because no one will be able to qualify for forgiveness until after October 21st, 2031 (at the earliest).
For the Pay as You Earn Plan, the Government recommends that you first contact your lender to ask them for specific details regarding whether or not you would qualify for the plan, and only then should you complete the online form for Income-Based (IBR)/Pay As You Earn/Income-Contingent (ICR) Repayment Plan Requests, which you can find here.
How Does Income-Based Repayment Work?
This is pretty simple.
The way that IBR works is that your student loan repayments will be capped at 10% of your discretionary monthly income (income that’s above 150% of the poverty line for your family size and location).
So, for example, if your discretionary income came out to be $100,000 a year, your monthly student loan payments would be limited to $833.33. Here’s how to do the math:
- Your annual discretionary income / 12 months per year * .1 = your maximum monthly payment
Are Private Loans Covered?
President Obama’s administration does appear to be trying to get something done about reforming private student loan debt too, but currently, there is no protection or benefit available to those with exclusively private student loans.
For those of you that don’t have student loans yet, but are planning on using them, make sure that you avoid borrowing from private lenders at all costs, as they do not offer the same kind of assistance programs that you’ll have access to with federal loans.
What Loans Are Eligible?
President Obama’s loan forgiveness program is extremely selective, so even though it sounds like it’s going to do a world of good, only a very select few people will actually qualify to have their loans forgiven.
First, only Direct student loans are eligible, and second, only Direct student loans issued on or after October 1st, 2011 are eligible.
Additionally, loans issued on or after 2011 won’t be eligible if you had existing Direct or FEEL Program loan debt that was still in repayment when your new loan was issued.
Because of these restrictive qualification guidelines, the vast majority of people with student loan debt will not be able to take advantage of this program.
What is Pay As You Earn?
One of the biggest problems to President Obama’s student loan forgiveness program is that most people aren’t even aware of it’s existence.
We’ve all heard about Obamacare, but not everybody knew about Pay As You Earn, and that’s a shame, because it’s an extremely valuable program.
Pay As You Earn is the newest of the 7 Federal Student Loan Repayment Plans, and was first introduced as part of President Obama’s sweeping student loan reforms proposed in 2011, and officially live as of 2012.
Borrowers who sign up for the Pay As You Earn repayment plan have their monthly Federal student loan payments capped at just 10% of discretionary income, saving hundreds to thousands of dollars per month.
The downside to Pay As You Earn is that it extends the life of a loan by adding payments, and making the total loan more expensive since interest has more time to accumulate additional debt.
However, to protect borrowers from facing significantly more debt, Pay As You Earn also offers comprehensive student loan forgiveness once 20 years of full, on-time, scheduled monthly payments have been made.
In addition, those borrowers working in public service, either for the Government of a Nonprofit organization, are offered student loan forgiveness after making just 10 years worth of on-time payments.
Pay As You Earn might not be the best student loan repayment plan for you, since it depends on your particular situation (the amount you owe, your interest rate, your income, the poverty line for your state and family size, etc.), but it is a great option for many borrowers, especially those struggling to make their existing monthly payments, or those with excessive levels of student loan debt and no real hope for ever paying it off.
For additional details about the Pay As You Earn plan, and to find out if it’s the best repayment plan for you, please visit this page.
Should I Consolidate My Loans?
Maybe, maybe not.
If you’ve got both a Direct federal loan and a guaranteed federal loan, then consolidating them will allow you to receive a .25% decrease in your monthly payment. .25% isn’t a whole lot per month, but over the course of your loan, that can make a big difference.
There are downsides to consolidating your loans though, as some loans come with specific debt relief programs of their own, some come with special interest rates, and others are eligible for cancellation and forgiveness programs, so you’ll need to do some research to make sure that the .25% decrease in monthly payments is worth it.
Should I Sign Up For Automatic Payments?
If you sign up for automatic payments on your loans, you’ll also receive a .25% discount in monthly payments, just for proving to the Federal Government that your money will arrive on time, and in full, each month.
This is definitely worth it for those of you who aren’t shuffling funds between accounts to come up with enough for the monthly payment.
Does the New Plan Cap Student Loan Interest Rates?
The new program proposes capping interest rates for all federal student loans at just 3.4%, which is significantly lower than what you’d be paying if you borrowed from a private lender.
It’s lower even that what’d you’d get when borrowing to purchase a home! However, this interest rate cap is only being applied to loans that were taken out before July 2012, so for those of you looking to get a loan now, this piece won’t help.
Are Defaulted Loans Eligible?
In fact, most of the debt relief programs available for federal student loans won’t be accessible if your loan enters default. If you’re already in default, you need to contact your lender immediately to try and get out of it, but if you think you’re about to go into default, then it’s time to take drastic action.
Start by looking into the many available student loan deferment programs to see if you can put your loan on pause while you save up funds so that you can avoid defaulting on the loan.
Total & Permanent Disabiity Discharge Expansions
(Updated April 13th, 2016)
President Obama just announced that his administration is committed to ensuring the nearly 400,000 Americans who are permanently disabled will receive the student loan forgiveness benefits that they deserve.
These benefits were already available via the Total and Permanent Disability Discharge Program, but in the words of the Under Secretary of Education, Ted Mitchell, the program was “paralyzed”, preventing hundreds of thousands of Americans from being able to cash in on their rightful benefits.
The best part about this new change to Federal student loan disability benefits is that the Government is going to get proactive about informing eligible borrowers about the opportunity. Starting on April 18th, the Feds are going to send letters to everyone who qualifies for forgiveness, outlining the steps required to receive it.
Keep in mind that while this new forgiveness pakage is only available to people who are permanently disabled, the old President Obama Loan Forgiveness Program remains fully in place for everyone else. To get all the details about Obama’s student loan forgiveness program, keep reading.
Please note that all forms of Obama loan forgiveness apply only to those with Federal student loan debt. If you have private student loans that you’re having trouble paying, be sure to visit the Private Loan Relief section of this site, or call the Private Student Loan Relief Helpline at 1-888-906-3065.
Obama Opens up PAYE to 5+ Million More Americans via REPAYE
(Updated October 29th, 2015)
It’s happening! I’ve been talking about this for YEARS, and the day has finally come.
On Tuesday, October 27th, 2015, President Obama officially announced the expansion of the Pay As You Earn Student Loan Repayment Plan, and the development and introduction of the REPAYE Student Loan Repayment Plan, which offers virtually identical benefits to the previous PAYE program and will now allow anyone with Federal student loan debt (not just those borrowers who took out loans after October, 2007) to enroll in the best student loan repayment plan on the market.
The only Federal borrowers who remain ineligible for President Obama’s student loan forgiveness program are parents who took out PLUS loans to help pay for their children’s education costs. Why they’re being excluded, I’m not sure, but considering that the plan just opened up to a whole new segment of the borrowing population, I’m relatively hopeful that they too will get to participate in the near future.
This expansion of the PAYE program to all borrowers is set to cost the Federal Government $15.4 billion over the next decade, which is a high price to pay, but it’s for a worthy cause.
PAYE, REPAYE and President Obama’s student loan reforms are making student loan debt significantly easier to overcome, and I am definitely excited to see things finally headed in the right direction here.
When do the Changes go Live?
Officially, this program becomes available to older borrowers (anyone with loans from before October, 2007) in December of 2015. To enroll in the program, all you need to do is visit Student Aid IDR or contact whoever services your loans and request to be put into the plan.
Real quickly – there’s only been one nerf of the benefits previously provided via PAYE, and that’s for Graduate students. While PAYE allowed graduate loans to be forgiven after 20 years worth of payments, REPAYE will require graduate students to pay for 25 years. I’m not sure why they’ve decided to make this change, but it’s definitely something to be aware of.
In addition, there’s one other change made to the plan (but this is a good one), and it allows for lump sump payments (those payments larger than the required monthly payment) to count against the 120 payment required for Public Service Loan Forgiveness Program. This is great news for anyone who has extra cash handy and can afford to pay more than one monthly payment at a time, because it allows you to get out of debt even more quickly!
Obama Debt Forgiveness for Federal Student Loans
Under the rules of President Obama’s student loan forgiveness program, qualifying borrowers are eligible to have all of their Federally-funded student loans completely erased after making 20 years worth of payments on the debt, no matter how they still owe.
That means that you can borrow money for college from the Federal Government, and that after you’ve made 240 monthly payments on your debt (no matter how much you have or have not paid off), you won’t have to make any more monthly payments.
You will have to pay taxes on the debt that is forgiven, but we’ll leave that out for now and cover it in detail later on.
Eligibility Restrictions for the President’s Plans
There are two major eligibility considerations required to qualify for the Pay As You Earn plan. They are:
- You must have a Partial Financial Hardship – The amount you would be required to pay on your eligible federal student loans with the 10 year long Standard Repayment Plan must be higher than the monthly amount you would owe under Pay As You Earn
- You must be a New Borrower as of October 1st, 2007 – You must have taken out your Direct Loans on or after October 1st, 2007. Any loans taken out before then will NOT qualify for the Pay As You Earn plan, so anyone with older loans doesn’t qualify for this new repayment plan
The Problem With President Obama’s Reforms
As outlined above, there’s a pretty serious catch involved with President Obama’s student loan reforms, since excessive eligibility restrictions are going to mean that the vast majority of people reading this post won’t be eligible for either his new Student Loan Forgiveness plan, or for the Pay As You Earn plan.
Here’s a more detailed explanation of what it means to be a New Borrower, and what it means to have a Partial Financial Hardship.
What is a “New Borrower”?
To qualify for the benefits, you must meet the following conditions:
- You must count as a “New Borrower” on or after October 1st, 2007
- Here’s the official definition of a “New Borrower” (from the Pay as You Earn fact sheet, which you can find here)
“You are a new borrower if you had no outstanding balance on a Direct Loan or FEEL Program loan as of Oct. 1, 2007, or if you had no outstanding balance on a Direct Loan or FEEL Program loan when you received a new Direct Loan or FEEL Program loan on or after Oct. 1, 2007. In addition, you must have received a disbursement of a Direct Subsidized Loan, Direct Unsubsidized Loan, or Direct PLUS Loan for graduate or professional students on or after Oct. 1 2011, or you must have received a Direct Consolidation Loan based on an application that was received on or after Oct. 1, 2011”
So, in English… what does that actually mean?
- Only those borrowers with Direct Loans that were taken out on or after October 1st, 2007 will qualify for the Pay As You Earn program
- Your loans taken on or after October 1st, 2007 will only qualify if you don’t have any existing Direct Loans or FEEL Program Loans still in repayment which were taken out before October 1st, 2007
Our response? Are you kidding me?
Sorry, but why would President Obama talk about making higher education available to everyone, then pass a program that only helps those who have borrowed since 2007?
What about people who are already mired in student loan debt, who have been paying it off for 10, 15 or even 20 years, but owe just as much or even more than they did when they first began paying it off?
Honestly, I wish I had better answers to these questions, or that I could say that it comes down to something OTHER than “Politics as usual”, but I’m fairly certain that this is all politically driven.
Hopefully, the next President, or the American Congress (yeah, right!), will wake up to fact that EXISTING student loan debt is a threat to our national security, and that recent borrowers aren’t the only population in dire need of financial assistance.
What is a Partial Financial Hardship?
Having a “Partial Financial Hardship” is the other eligibility stipulation that even further restricts access to the Pay As You Earn repayment plan.
Not only do your loans need to have been taken out on or after October 1st, 2007, but you also need to be pretty impoverished, with a large debt to income ratio (and your ratio is calculated using only your student loan debt, not other debt like credit cards, mortgages, etc.).
The Government defines a “Partial Financial Hardship” as:
… the monthly amount you would be required to pay on your eligible federal student loans under a 10-year Standard Repayment Plan is higher than the monthly amount you would be required to repay under Pay As You Earn.
Fortunately, if you’re really having big problems making your monthly student loan payments, then it’s likely that you’ll qualify for the program under this stipulation, because it’s a little easier than it might seem at first glance.
And, Uncle Sam cuts you a pretty significant break when making your calculations, because you’re going to get to factor in all Direct Loans that are eligible for Pay As You Earn, as well as some FEEL Program loans (even though none of those are eligible for the Pay As You Earn plan).
To find out if you are, in fact, eligible for this portion of the plan, please visit the Federal Student Aid website and try out their handy “Repayment Estimator” (it’s a student loans repayment calculator).
Reforming Student Loan Debt Relief
President Obama’s student loan forgiveness plan attacks the problem of excessive student loan debt with a multi-pronged approach to providing debt relief, and as such it’s been celebrated by many people, including some of his political opponents.
In the President’s own words, the reason for pushing this reform program is that “Student loan debt has now surpassed credit card debt for the time ever… and when a big chunk of every paycheck goes towards student loans instead of being spend on other things, that’s not just tough for middle-class families, it’s painful for the economy and it’s harmful to our recovery because that money is not going to help businesses grow.”
This section of the page will be used to track historical updates, announcements and changes to President Obama’s student loan forgiveness program. Please note that some of the information below could end up being outdated due to future updates, but I’m keeping it here to retain the historical record of this important program.
$3.6 Billion in Forgiveness for Corinthian Colleges Students
(Updated June 9th, 2015)
I’ve got awesome news! On June 8th, 2015 President Obama’s Department of Education announced that they will be offering student loan forgiveness for up to $3.6 billion dollars for student loans distributed to attend any closed campuses affiliated with Corinthian Colleges.
It looks like the Corinthian 15’s message is resonating in Washington D.C., and my personal opinion is that the politicans (and banks) are extremely scared of the potential for the student loan debt strike taking root with the general population.
But first, a bit about Corinthian – this network of schools was made up of a big chain of for-profit colleges, including Everest, Heald, and WyoTech universities. You’re probably familiar with them if you’ve watched any daytime TV in the last decade, because this was where they predominantly advertised.
These schools were well-known for overcharging their students and inflating expectations, but it’s only been in the last few months that the general public has finally begun to realize what a scam the whole thing was.
The Corinthian network collapsed under the weight of Federal investigations responding to rampant abuse allegations, which is a great thing, since this system posed massive potential to continue inflating the ever-growing student loan debt bubble.
The good news is that President Obama’s administration finally came around on the idea and is now promising significant forgiveness benefits for some Corinthian students. The bad news is that this forgiveness offer is limited to people who attended a Corinthian-affiliated school on or after June 20th of 2014.
For those of you who graduated from other for-profit universities, or from Corinthian schools before the June 20th deadline, unfortunately this program won’t be of any assistance.
Still, this sets a great precedent for the response to excessive student loan debt, and shows that President Obama is serious about dealing with this in a reasonable way.
To find out how to qualify for the Corinthian forgiveness benefits, please visit the official Federal Student Aid website page on the topic, here.
President Obama’s Student Aid “Bill of Rights”
(Updated March 11th, 2015)
More good news!
On March 10th, 2015, President Obama announced a new initiative this his Administration is calling the “Student Aid Bill of Rights”.
This Bill of Rights introduces some significant changes to the policy regulating Federal student loan debt, and promises to do three things:
- Create a complaint system that borrowers can use to file official complaints about loan servicers, debt collectors and Department of Education Personnel
- Make it easier for borrowers to pay off their Federal student loans by modifying the existing Obama Student Loan Forgiveness Program and increasing access to the Pay As You Earn Student Loan Repayment Plan
- Launch a new Federal task force focused on researching the problems related to student loan debt, and dedicated to finding new solutions via proposed legislative and regulatory changes
The most important part of the “Bill of Rights” is probably the reiteration of the President’s commitment to open up the Pay As You Earn Repayment Plan to everyone by December 2015.
Unfortunately, even though the President has requested that happen, it’s up to the Department of Education to actually turn that promise into a reality, and I haven’t received any updates on how well that process is going.
From what I can tell, they are still aiming to hit that deadline, but we’ll see how things play out.
For additional details, please view my recent Blog post about the Student Aid Bill of Rights.
CROMNIBUS’s Impact on President Obama’s Loan Forgiveness Program
(Updated February 22nd, 2015)
I’ve got great news!
As of February, 2015, the dust has had time to settle on the passing of the “cromnibus” proposal (the approval of President Obama’s 2015 Federal Budget), it’s clear that only positive changes are being considered for the President Obama Student Loan Forgiveness Program, the Pay As You Earn Student Loan Repayment Plan, and the Public Service Loan Forgiveness Program.
If you look back to my update from March 18th, 2014, you’ll see that I was seriously concerned about some of the proposed limitations being considered for these programs, especially because the changes would have reduced their effectiveness at helping people wipe out excessive student loan debt.
Fortunately, according to the language of the approved 2015 Federal Budget, it doesn’t look like any of the previously-proposed nerfs are going to be made into law any time soon. In fact, none of the changes were even mentioned at all in the CROMNIBUS, signaling that Washington Politicians may be abandoning their attempts to cut benefits from the excellent Federal student loan forgiveness programs.
But is this just politics as usual? Will the upcoming reauthorization of the Higher Education Act talks see the re-introduction of these cuts in benefits, or are they really out of consideration for good?
It’s hard to tell, but for now, the good news is that everyone’s favorite student loan forgiveness program benefits appear to be safe, and that the President Obama loan forgiveness program will continue to save people tens to hundreds of thousands of dollars on their Federally-funded student loans.
President Obama Increases Access to Pay As You Earn
(Updated June 10th, 2014)
On June 9th, 2014 President Obama announced new changes to the Federal student loan forgiveness program, including one sweeping change that makes the extremely valuable Pay As You Earn Student Loan Repayment Plan available to over 5 million more borrowers.
Here are the details of President Obama’s executive order:
- The Pay As You Earn repayment program will have its eligibility criteria relaxed, allowing anyone with Federal student loan debt to qualify for the plan (say goodbye to the October 2007 restriction!)
- Eligibility to enroll in the program will not open up until December, 2015, so those of you who don’t qualify for it under the current restrictions will have to wait until then to apply
Obama Announces Support for Refinancing
In addition to changing the rules on Pay As You Earn, President Obama’s speech also offered support for the Bank on Students Emergency Loan Refinance Act, which was proposed by Democratic Senator Elizabeth Warren of Massachusetts.
This act seeks to change Federal law to allow borrowers with Government-backed student loans to refinance them at current interest rates, reducing both monthly payments (like PAYE), but also reducing total outstanding debt.
For those borrowers who took out loans before interest rates plummeted, this change could stand to save them significantly more money than access to the PAYE plan, but more importantly, it would actually reduce their total debt.
Compared to PAYE, which reduces monthly payments, but actually increases total outstanding debt, we see this as a far more valuable reform, and we’ll be watching it’s progression closely.
President Obama to Announce Updates Today
According to a variety of media sources, President Obama will be announcing updates to his student loan forgiveness program today.
A White House official has alerted the media that the updates will include:
- Expanding the eligibility criteria for the Pay As You Earn Student Loan Repayment Plan, which caps monthly student loan payments at just 10% of discretionary income
Apparently, President Obama will also be promoting a recent proposal from Senator Elizabeth Warren, which suggests that borrowers should be able to refinance their Federal student loans.
The official announcement will be released today at 10:45 am, PST, and we’ll update this page as soon as details are made public.
Check back this afternoon, or first thing tomorrow morning, for the full story.
Proposed Changes in the Fiscal Year 2015 Budget
(Updated March 18th, 2014 – PLEASE NOTE: These changes appear to have been abandoned. It is HIGHLY UNLIKELY that any of them will be implemented, but I’ve left this content here just in case the topic comes back up again)
It looks like President Obama’s student loan forgiveness plan is about to undergo another series of significant changes, some of which are positive, but others which will crush some people’s hopes for ever getting out from under excessive student loan debt.
The Obama Administration’s proposed budget for fiscal year 2015 is set to make 7 major changes to his student loan debt reforms originally introduced a few years back, with 3 changes that appear to be positive for borrowers, and 4 that look pretty scary for certain situations (high-income borrowers and public service workers).
Here’s a comprehensive review of what is set to change, should Congress approve of the budget without altering any of it’s proposed initiatives.
Positive Changes to the Obama Student Loan Reforms
We’re going to start with the bright side of the proposed 2015 budget, since we like to lead with the good news first.
Here are three major reasons why you should be hoping that President Obama’s new budget plan gets approved by Congress:
1. Pay As You Earn Will Be Made Available to Everyone
Perhaps the biggest weakness to President Obama’s debt forgiveness program has been the fact that the awesome Pay As You Earn Plan (PAYE) was only available to certain borrowers who met excessively restrictive eligibility conditions.
Well – we’ve finally got some good news for those of you who weren’t previously able to qualify for PAYE benefits (anyone with student loans older than October 1st, 2007, meaning the majority of our readers!) – PAYE is about to get opened up to everyone, no matter when their loans were taken out!
Under current law, if your loan is older than October 1st, 2007, then the Income-Based Student Loan Repayment Plan (IBR) is likely to be the most affordable of the 7 Student Loan Repayment Plans available to you, capping your monthly student loan payments at 15% of discretionary income.
If the Obama Administration’s 2015 budget is approved, you’ll get the chance to enroll in the new Pay As You Earn Student Loan Repayment Plan, which has a lower cap for monthly payments, setting them at just 10% of discretionary income.
That 5% may not sound like much at first glance, but do the math and you could find yourself saving quite a bit of money each month!
In addition to reducing your monthly payments by 5%, PAYE also offers total student loan forgiveness after just 20 years of payments (whereas IBR doesn’t provide forgiveness until 25 years).
Those are some serious benefits, virtually guaranteed to help the vast majority of people looking for Federal Student Loan Debt Relief.
(Please do note though that compared to the IBR plan, PAYE could end up making your student loans more expensive in the long-run, since your loan term will be extended and more interest will accumulate over the course of the loan, but that switching to the new plan will certainly help make things more affordable in the short-term.
Although, if you’re planning on making 20 years of payments and taking advantage of Federal Student Loan Forgiveness, then don’t worry about this piece, because you’ll end up saving money from switching off IBR to PAYE in the long-run too!).
2. Loan Forgiveness Won’t Bring Tax Penalties
This is another huge benefit that will help the vast majority of Federal student loan borrowers, and it’s certainly a big step in the right direction for attacking the Student Loan Debt Crisis!
The biggest problem with previous Federal forgiveness programs (including forgiveness benefits under both the IBR and PAYE plans) is that when you have your student loan debt forgiven, the amount written off had to be added to your tax return as taxable income!
Many borrowers aren’t even aware of this catch to loan forgiveness, but it’s especially important since it could end up costing you thousands of dollars in additional taxes down the road.
In fact, the tax penalty could absolutely crush those borrowers with Direct Subsidized or Unsubsidized student loans whose minimum payments aren’t high enough to cover interest charges each month, since the balance they eventually have “forgiven” could end up being far higher than the amount of money they originally borrowed!
Faced with such a situation (and this is ridiculous if you ask us), it’s possible that the eventual tax bill on the debt you have forgiven could actually end up being more expensive that the amount of money that you borrowed in the first place!
How pissed off would you be if you finally qualified for loan forgiveness after making 25 years of payments, then realized that you owed more in taxes alone than you originally took out to pay for school, in addition to all the money you had spent over that 25 year period of making payments!!!
Fortunately, should the 2015 budget changes go through, whatever debt eventually gets forgiven won’t incur a tax penalty, which we see as the biggest benefit to anyone who’s actually pursuing eventual loan forgiveness, and a major upside to President Obama’s loan forgiveness program.
3. Monthly Interest Accrual Will Be Capped
Here’s another incredible benefit that will directly help many of our readers (including a great many of you who have commented here before!).
This change alone has actually encouraged me to create some sort of email list or newsletter that you can sign up for so that I can send out an e-blast whenever a change like this is proposed (so we can fill out petitions requesting it get approved) or implemented (so you all can take advantage of it!). More on that later though…
One of the biggest problems with paying off student loan debt happens when monthly payments aren’t high enough to cover the interest that’s accumulating on the loan, which leads to something called interest capitalization.
Interest capitalization is the process the banks use to dramatically drive up the long-term costs of loans, by adding the accrued interest to the original principal of the loan, which can end up making a loan significantly more expensive.
In fact, under existing law, it’s possible that you could be making your full, scheduled, on-time payments each month, but still end up owing more money anyway!
This is a major problem for those borrowers with Unsubsidized Loans who been relying on Federal Deferments or Forbearance Programs, since the Government doesn’t cover the costs of their monthly interest accrual for them while their loans are on pause.
These people are therefore receiving excellent temporary debt relief, but significantly inflating their long-term debt obligations due to having new interest recapitalized.
And this is exactly how you could end up borrowing something as little as $25,000 in student loans, then end up owing something like $250,000 15 years later.
Fortunately, President Obama’s 2015 budget includes a provision set to cap interest accrual at just 50% when a borrower’s monthly payment isn’t sufficient to cover the interest accumulating on their loan.
50% interest accrual might still sound high to you, but under current law, there’s no cap in place at all!
Again, this is huge for any borrowers having trouble making their monthly payments, especially for those relying on Deferments and Forbearance programs, and we’re sure that this piece alone will dramatically help a large population of our readers.
Negative Changes to the Obama Student Loan Reforms
Unfortunately, the proposed 2015 fiscal year budget is going to cause some serious problems for certain people hoping to take advantage of President Obama’s recent student loan reforms, especially those with a lot of debt, and those seeking forgiveness benefits under the Public Service Loan Forgiveness Program.
Here are the four major detrimental changes that are set to be put into place should this new budget get approved and implemented by Congress:
1. Borrowers With High Debt Won’t Get Forgiveness As Early
This is a major problem for high-debt borrowers, including anyone with more than $57,000 in federal student loans.
According to the proposed 2015 budget, these borrowers won’t be able to receive loan forgiveness under PAYE at the new 20 year mark, but will instead have to slog it out for the full 25 years worth of payments before their debt is written off.
That might not sound like much, but tacking another 5 years onto loans over $57,000 essentially means that the people with the worst debt (who likely need assistance the most), are getting the short end of the stick, and will end up forking out massive amounts of cash for a longer period of time.
The Government and even some industry watchdogs and advocates are claiming that this will help protect the long-term sustainability of the PAYE program and the other Federal forgiveness programs currently in place, but to us, it seems an unnecessary cut when there’s so much largesse in public spending for other sectors (i.e. certain military programs, farm subsidies, oil subsidies, bank bailouts, etc.)
For that reason alone, we just can’t get behind this one, and we’re hoping that it gets removed before the 2015 budget goes live.
If you feel the same way, you’re strongly encouraged to call, write, or email your respective U.S. Representative or Senators to voice your opinion on the matter.
2. PSLF Forgiveness Will Be Capped at $57,000
If you’re not taking advantage of the Public Service Loan Forgiveness Program, then this won’t impact you at all and you can skip on to the next issue, but if you are, we’ve some seriously bad news.
The new 2015 budget will be dramatically reducing what’s now being labelled as a “windfall benefit” built into the PSLF program and President Obama’s loan forgiveness reforms.
Instead of forgiving up to 100% of your Federally-funded student loan debt, should this budget be put into place unaltered, PSLF will now only allow you to write off up to $57,000 of debt.
Hey, that’s still a lot of money, and for most borrowers this probably won’t lead to any problems at all, but for those of you with hundreds of thousands of dollars in student loans, who turned down private sector positions and are working in public service, this is a slap in the face.
Before you get too riled out though, there is a potential bright side here, because according to our research some of the top experts reviewing this situation are claiming that the change won’t apply retroactively to anyone already enrolled in PSLF.
If they’re right, and you’ve been working towards loan forgiveness already, we’ve got our fingers crossed that you’ll get grandfathered into a protection portion of the program and will be allowed to eventually write off the full amount of your debt.
But like we said above, it might be time to pick up the phone or mail out a letter to whatever politician represents you, because this point could lead to a financial disaster if all the pieces fall into the wrong positions.
3. Only Income-Based Plan Payments Will Count Towards PSLF Forgiveness
For a President who got himself elected trumpeting the benefits of public service, it sure does look like President Obama has turned his back on public sector employees, since this change also reduces the impact of PSLF forgiveness benefits.
Under the President’s existing student loan forgiveness program, PSLF forgiveness kicks in after just 10 years of “scheduled, full, on-time monthly payments” have been made, regardless of which student loan repayment plan they were made under (the standard plan, the graduated plan, income-contingent repayment, etc.).
But under the proposed 2015 budget, the only monthly payments that will count toward that 10 years’ wroth of payments requirement will be those made under one of the income-driven plans (Income-Based Repayment, Income-Contingent Repayment, Income-Sensitive Repayment or the Pay As You Earn Plan).
That’s a big bummer to anyone who started on the other plans, made months or years of payments under them, then switched to one of the qualifying plans.
But again, we’re holding out hope that even should these changes get implemented, they won’t be applied retroactively, so anyone who’s been playing by the rules in the past will remain eligible for forgiveness at the ten year mark.
4. Married Borrowers Can’t Separate Income Anymore
For certain borrowers, current rules for both the Income-Based Repayment Plan and the Pay As You Earn Repayment Plan offer some serious advantages to filling out your tax return as married, filing separately, especially when your spouse makes significantly more than you do!
Under either of these income-driven plans, filing your tax return jointly would cause both of your incomes to get considered when calculating your monthly student loan payments, so including your well-paid spouse’s earnings could end up leading to dramatically more expensive monthly payments.
And, unfortunately, that’s just what the new budget seems hell-bent on forcing you to do.
If President Obama’s proposed budget gets approved, you’ll no longer be able to able to use married, filing separately as a shield from larger monthly payments, and if your spouse has a substantial income, especially one that’s higher than yours, then you’d better start putting money away, because your monthly costs are about to skyrocket.
There’s a subtle silver lining here (it’s very subtle), since filing jointly will make your eligible to claim the standard Student Loan Interest Tax Deduction, but as of 2014, that’s just $2,500 per year.
If your spouse makes $50,000 a year, $100,000 a year, or even more than that, the $2,500 deduction isn’t going to do much to protect you from massive inflated monthly payments.
I hate to say it, but for some of you, it might be time to start considering a divorce for financial reasons.
In fact, I’d bet my last dollar that many couples will end up doing just that to skirt around this specific regulation, should it go into affect unaltered.
President Obama is Not Forgiving 100% of Student Loans
(Updated February 26th, 2014)
First off – the articles claiming that President Obama’s new student loan forgiveness plan will erase 100% of Federal student loan debt in the country are a lie.
This story was born when a fake news website (like the Onion) wrote it as a joke, but has since gained momentum from SEO spammers and shady marketers trying to make money off your advertising clicks.
What is true is that President Obama introduced a new cost-savings program for those with Federal student loan debt that includes both loan forgiveness, as well as a significant reduction in monthly payments.
Find the details about the President’s real student loan forgiveness program below.
The State of the Union Speech
President Obama’s student loan forgiveness plans continue to evolve, but virtually no new insights were shared during his recent State of the Union address.
In fact, during his State of the Union speech delivered on January 28th, 2014, President Obama only briefly touched on student loans, signalling that he might actually be backing away from some of the bolder parts of his recent proposal to reform student loan debt.
He did state that he wants to make higher education available for everybody, but did he mention anything about how he actually intends to do this?
As usual, and this seems to be par for the course with political speeches, he didn’t mention any details about what he plans on changing, so we’re not entirely sure.
Below you’ll find a summary of the student loan reforms that President Obama previously announced, including an analysis of what’s changing, who’s eligible to receive the benefits, and how to apply for the program.
Be sure to check back soon for additional updates, as we’ll be expanding on the subject any time that there’s new information about the President’s plan to reform student loan debt.
Attacking Excessive Student Loan Debt
If you have federal student loan debt then President Obama’s student loan forgiveness program might be your best opportunity to save some serious money.
Virtually all of the students who graduate college in 2014 will emerge with massive student loan debt.
In fact, a CNN Money article released on December 5th, 2013 reported that the average student loan debt for college graduates in the United States now sits at $29,400.
A study by the Federal Reserve Bank of New York way back in 2012 revealed that, even then, more than 10% of graduates owed more than $54,000 in student loans, while 3% of them had racked up more than $100,000 in debt!
Fortunately, President Obama’s debt relief program offers some significant value to those with excessive student loan debt, providing major benefits that will reduce their financial liability, allowing them to avoid defaults and bankruptcy.
There is a downside to the President’s plans, however, which is that only very few people will actually qualify for his loan forgiveness program, because of excessively restrictive eligibility guidelines.
Student Loan Forgiveness Before President Obama’s 2012 Reforms
Previous federal law provided a provision stating that student loan debt incurred via federal loan programs would be completely forgiven after 25 years, but few borrowers were even aware of this provisions existence, so hardly any took advantage of it.
President Obama and Congress passed a law in 2010 to help further reduce the burden on former students by reducing the complete debt forgiveness timeline to a period of 20 years, significantly increasing graduates ability to get out from under crushing federal student loan debt, but this change wasn’t set to take place until 2014.
Under President Obama’s student loan forgiveness program, the timeline for complete debt forgiveness of federal student loans has been pushed up to being first available in 2012, allowing an estimated 1.6 million former students access to earlier debt relief.
New Debt Consolidation Options
The third major tenet of Obama’s new student loan forgiveness program is to help reduce the confusion and logistical problems that many with student loan debt currently face.
According to a study by his administration, they found that an estimated 5.8 million people were managing a Direct Loan (DL) and Federal Family Education Loan (FFEL) at the same time, making separate payments to the different accounts, which made the process more difficult, more time consuming, and more likely to lead to defaults.
Under President Obama’s changes to federal student loan law, the new plan allows borrowers to consolidate their student loan debt into a single account, making a single monthly payment to a single lender for both loans.
Furthermore, the plan offered borrowers who take advantage of the new debt consolidation option to receive up to a 0.5% reduction in their interest rates on qualifying loans, meaning lower monthly payments and perhaps tens of thousands of dollars of savings over the lifetime of those loans.
Debt Relief for Start-Up Entrepreneurs
In coordination with President Obama’s student loan forgiveness program, the U.S. Small Business Administration announced that it take part in the White House-led Startup America initiative to help walk young entrepreneurs through the process of reducing their monthly student loan payments.
Additionally, the Young Entrepreneur Council’s private sector Gen Y Fund announced it had committed to investing at least $10,000,000 in up to 100 startups headed by millenials, including promising to pay down remaining federal student loan debt obligations for the same entrepreneurs over the next three years.
Additional Public Service Benefits
One under-publicized portion of the President’s recent changes to student loan forgiveness includes a provision that reduces the number of years those entering public service jobs have to wait until their loans are forgiven.
While previous law stated that graduates with federal student loan debt had to serve 20 years in public service positions, but the new provision reduces that requirement by a full 10 years, making public service jobs significantly more attractive to those graduating with excessive levels of student loan debt.
President Obama’s “Know Before You Owe” Project
The second major piece of President Obama’s new plan to reform student loan debt includes an attempt to better inform potential borrowers of the dangers inherent in taking out student loans.
Announced by his administration, the “Know Before You Owe” project, a collaboration between the Consumer Financial Protection Bureau and the Department of Education, released a Financial Aid Shopping Sheet that included a draft model financial aid disclosure form to help colleges and universities present financial aid information to their students.
The goal of this new project is to let students better understand the type and amount of financial aid that they qualify for, and to help them better compare aid packages offered by different institutions (both public and private).
Furthermore, the form makes the total costs, and all of the risks of the student loans extremely clear, all before any student has enrolled in a program, by outlining total estimated student loan debt, monthly student loan repayments after graduation and any other costs not covered by the federal aid packages that the student qualifies for.
For more information on the Know Before You Owe project, please visit the Consumer Financial Protection Bureau’s page here: Know Before You Owe.
American society has always pushed higher education as an important step in becoming a respected, productive member of society.
For generations, college degree programs have served the population well by providing a major driver of upward mobility that allowed people to move from the very bottom of the earning barrel through the ranks of the middle class and into incredibly lucrative careers.
Recent developments, including excessive increases to college tuition rates, extreme increases in the costs of college textbooks and torrents of recent college graduates entering an incredibly weak economy have significantly reduced the expected return on investment for the average college degree, but this program seeks to counter those changes.
President Obama’s student loan forgiveness plan could help remedy an impending financial disaster by preventing excessive debt from being racked up by future college graduates, and by giving those who are currently being destroyed by overwhelming debt an easier, more efficient way out of the downward spiral that they currently face.
The student loan debt crisis is real, and programs like these are just one potential solution, but how well will they actually work?
What Do You Think?
The right and the left have both weighed in on this plan, with relatively expected results (we are in an election year after all), but what do you think about it?
Does President Obama’s student loan forgiveness program provide enough effective debt relief, or is it a band aid on a gaping wound?
Is he right to offer this kind of support for college students, or should he stick to other policy objectives? Let us know what you think.
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I attended Kaplan from 2010 to 2014. Unlike most of these people, I actually do work in my field, but not as a result of my degree; I was in the field before achieving my degree. I have a individual income of 64k, and a household income of around 100k.
Would I qualify?
You should qualify for the REPAYE Student Loan Repayment Program, which is a part of President Obama’s Loan Forgiveness Program, and which will get you complete forgiveness after you’ve made 240 monthly payments.
Hi Tim, I have several open federal student loans which are not consolidated. I have Federal Stafford subsidized and unsubsidized loans, and Direct subsidized and unsubsidized loans. I am currently on the Income-Driven Repayment plan. I am looking to switch to the PAYE program, however as I understand it, only the Direct loans are eligible for the PAYE or REPAYE programs. Being that my loans are not consolidated, would I be able to use the IDR program for my Federal Stafford loans and the PAYE or REPAYE program for the Direct loans at the same time?
Thank you in advance.
What is the IDR plan? Income-Driven Repayment Plan?
I think REPAYE is open to everyone with Federal student loans now, no?
Contact your loan servicer for details. They will be able to answer your question better than I can, and they get final say over it.
I HAVE AN IMPORTANT QUESTION AND AM SO CONFUSED!
My loan was taken out prior to 2007, the balance is just over 10,000, I am in default after trying to make payments, however I have become permanently disabled and live off of 700.00 a month. Do I even have a chance of complete forgiveness? What am I really looking at? Also my only income is SSD, is it true that in Michigan they can garnish my only income? HELP!
You should be able to qualify for 100% forgiveness under the Total and Permanent Disability Discharge Program. Google that phrase and you’ll get all the information you need to wipe out that debt. Sorry to hear about your situation, but congratulations, because you should be debt free in no time.
When will be able to know that there will be tax forgiveness? As you mentioned, under the new plan, after the loan is forgiven, it no longer becomes taxable income. How will we know this will come into effect?
We don’t. It’s going to get sorted out at some point, but I’m not sure when.
Are there any updates? I have a loan from 2004. Is there anything I can do with it? If an income driven plan is done, does that include the whole household? Thank you!
Yes, assuming that your loans are Federal, your debt now qualifies under the revised Obama Student Loan Forgiveness Program, via the REPAYE Student Loan Repayment Plan. You need to contact whoever services your loans (the people you send monthly payments to), to ask for instructions on getting on the plan. They will be able to guide you through the process.
WHAT ABOUT KATHERINE GIBBS- THIS SCHOOL WAS A FRAUD AND HAS BEEN SHUT DOWN.. who out there knows about any forgiveness for this school??????? I have some questions about student debt forgiveness- for schools that have shut down due to fraud.
I attended Katherine Gibbs school in Livingston NJ from 2004 to 2006. I was so excited because I wanted to change my life around and do something productive with my self. I saw a commercial for a school that pertained to what I wanted to do. It was “CRIMINAL JUSTICE PROGRAM at Katherine Gibbs college. I called and had a brief interview on the phone followed by a appointment to have a face to face. I was so happy. I went to the school talked with a counselor and he basically told me everything I wanted to hear, now being young and not really knowing anything about school, the process and procedures I had no choice but to trust this man and put my educational life in his hands. He also told me that they were in the process of starting a Bachelors Degree program nationally because of the demand on Criminal Justice students and by the time of my graduation in 22 months it would be in effect and I could further my education.
With that being said I signed all the papers, and got registered for school starting Oct 2004. Nothing seemed out of the norm. It was typical to see people dropping out here and there. Towards the middle of my education, I started noticing, teachers not really teaching, we would sign in and leave.. no “real exams” I went to the Dean at that time to discuss with her I was not satisfied with my classes and felt I was not learning anything, she said if I left then I would still need to pay back the entire loan anyway. She coerced me into thinking I should stay and finish and then would be able to transfer my credits to any other 4 year college.
I, like everyone who has attended KG was told that they did job placement and that the school was accredited and the credits would be transferable to other 4 year colleges. He also said that I would graduate with 90 credits, (come to find out you only need 60 credits for an Associates degree) SO WERE DID THE OTHER 30 CREDITS GO? NOWHERE!!!!!!!!!!!!!!!!!!!!))) they even gave us a paper that had a list of schools on it that would accept KG credit. This I later found out was false. KG never found me a job nor did they attempt too,they sent me on a interview to a place that did not exist.( the building was literally closed down.
I went to continue my education and EVERY school denied me saying Katherine Gibbs credits was not transferable, I went on to attend Montclair State University, they also advised that Katherine Gibbs credits was not transferable because they do not have classes that are worth 4 credits and they do not have classes similiar to the classes I took at Gibbs. This forced me to change my major to Jurisprudence and none of the credits from Gibbs transferred over. I had to pay all over again for classes I thought I had already gotten out of the way.
I WROTE THE PRESIDENT, THE DEAN AND EVERYONE ELSE THAT I COULD THINK OF, AND ALL I GOT WAS A RUN AROUND.. NOW THE SCHOOL IN LIVINGSTON THAT I ATTENDED IS SHUT DOWN, All the Gibbs are shut down now for fraudulent reasons.
I did decide however, just finishing my BA with the Montclair State University.
I agree that every person who attended KG should have they’re debt cleared. This is not right that we have to pay for this when the school was a scam and they are shut down because of it.. there has to be a way someone can help us. How can I go about having this debt from Gibbs cleared? This degree is worthless, it was not transferred, I had to pay for classes all over again… My mom was a co-signer and they will not leave us alone. My credit is ruined, I am in default.. I’M lost with where to get help for this? Can you help me?
I’m in the same boat 🙁
How do I know this is for real and I won’t get stuck with another loan to pay
Because you aren’t taking out a loan. This program was created to help you get out of debt that you already owe, not take on new debt.
hello I sign up for it last yr. I was suppose to be paying a 1000(200 a month) for 5months and i would be forgiven for my student loan. I had paid 600.00 until i loss some hours on my job and i just owe 400.00 more. I have tried to contact the people that had my information and I have left numerous of messages. I haven’t heard anything back, i hope i wasn’t scam out my money but I really need to know it this was you all I gave my money too..please email me as soon as you all get this message. PLEASE HELP ME!!!!!!
Who did you work this arrangement out with? That doesn’t sound like the way that the Obama Student Loan Forgiveness Program works.
This story was found while researching Ivy Bridge scams. Ivy bridge was closed due to fraud as well, however the loan servicer GREAT LAKES, refuses to allow or grant loan discharge even though the school was closed due to fraud. Their claim, the school was a branch of Tiffin University which is still in operation so the loans are still due. This is an ENRON scandal. Why don’t every University open a “sister” college, commit fraud and unethical recruiting practices allow debt to accrue until the government closes the school, and sit back and collect the student debts while paying a small fee for FRAUD! Ivy Bridge Students are being told they do not qualify because of the school closure, but then enrolled the students without consent to the main college in order to keep the loans valid. This process is covered by Ombudsman too, who also agree this type of fraudulent activity is ethical and legal or that is what i am being told. WHO CAN HELP?
I couldn’t figure out how to do this so I sent you a FB message. In addition to having a loan stipulation and working in public service for 17 years. I also suffer from mental illness and this is why they propably recieved some kind of loan stipulation to begin with. I still owe about $50000. in Student loan debt and I have never been in default, except for the fact that the loan is a stipulation and I have been paying under that for for 14 years. All money borrowed before 2007. Do you Have any suggestions?? I was hoping for some kind of Public Service loan forgivness for my years already served at the public library. I thought Obama’s plan was making allowances for people who borrowed before 2007 and the info was coming out in 12/15.
Yes, you have access to President Obama’s Loan Forgiveness Program now. Details emerged around October-December, 2015. There’s an update on this page that covers exactly what’s changed, so please check it out.
i am a 100% service connected disabled veteran. I returned to school to try to do something productive with my life, but the pressure was more than I could handle. Now trying to survive on my military comp. I have my award letter and inemployability paperwork. I’m hoping this will be enough info. to qualify for debt forgivness.
If you’re 100% disabled, then you should be able to qualify for a debt discharge. Google the “Permanent and Total Disability Discharge” program and you will find helpful advice from the Government website about how to proceed here.
I have not yet written an article on this topic because the Government page covers it in great detail, and provides step by step instruction on exactly what you need to do to qualify.
Thank you for your service, and good luck with getting your discharge!
When my husband and i agreed to co-sign loans and take out parent plus loans and loans for me to go back to school, my husband earned $90,000. He was fired in 2012 for filing a worker’s comp brain injury claim for an accident he had in 2008. His Union threw him under the bus. The accident he had was the first accident that he’d had in 19 years and was because he was not trained properly, he found out later. So now, we live with my mother, we take care of her. He is a registered caregiver and we now make only around $20,000 per year.
Our three daughters’ owe so much money it is criminal what these private student loans, Chase bank specifically, has done to them. We have had to declare chapter seven bankruptcy and we had to short sale our house. We own a 7 year old car. What will happen to our daughter and to us because neither of us can pay her loans?
Our other two daughters are making their payments, but we are paying only $100 dollars per month for daughter number three. Right now, they want $460, and new loans pop up all the time, plus this does not include her govt loans which are in hardship forbearance. What will they do to all of us?
It’s possible that the lenders could begin garnishing your wages, or put a lien on any piece of property or possession that you own (like a car, or a house). However, there’s no real way to estimate whether or not they move forward with coming after you in this way.
It’s more likely that they’ll simply harass you with threatening phone calls and letters, and try to make you miserable as a way of attempting to break you and get you to agree to a bad deal for them.
You’ve already filed for bankruptcy, and lost your house – there’s not much more they can do to you other than garnishing wages. However, since you’re making so little money (I’m pretty sure that $20,000 per year is below the poverty line in every state), you may be legally protected from them being able to do that.
The only way to get a clear, authoritative answer on this would be to consult with an attorney. It sounds like you can’t afford one of your own, so I would suggest trying to contact the Student Loan Ombudsman Group for some free advice. You can reach them here.
I wish I had better news for you, but I don’t think there’s much left for your lenders to do to you guys. They may be able to go after your Daughter (depends on what she makes, what her situation is like, etc.), but there’s probably very little they can do to you and your husband.
Hello: I would want to know How can I apply for this forgiveness grant to finish my studies. actually All I need is 5 class to finish My BA in English elementary education or 12 credits to finish as a Head start Teacher… please provide me the information that is needed?
This program works to reduce your debt AFTER you’ve accumulated it. There’s no benefit on offer for people who are looking to raise money. You’re going to need to research alternative opportunities if you need financial assistance to pay for college. Look into scholarships and grant programs.
I’ve been repaying federal student loans since 2000, I’m a nurse, is there is relief available?
Check out my section about Nursing Student Loan Forgiveness, then if you don’t find anything specific there, please review my page called How to Get Rid of Student Loan Debt. You should have lots of options available, as Nurses typically qualify for at least one or two forgiveness programs.
I have Federal and Direct Student Loans from my BA and my first MA in 1995. My ex- husband also had some Federal and Direct Loans from attending college about the same time. After several years of making payments to multiple student loan companies I received an offer to to do a student loan spousal loan consolidation through Sallie Mae. We did the loan and the divorced in about 2007. In the divorce papers it stated we were both responsible for our own student loans. He has never paid a dime.
Sallie Mae has told me since then that it is not possible to separate them back out again. I also have new loans on my own for a second Masters in 2010. I have no contact with him. No way to do income sensitive payments. Sallie Mae tells me we both have to sign all the forms.
I would love to have the loan unconsolidated. Any advice or help you could give would be greatly appreciated. I am now helping my children through college and paying for his and mine. HELP!!!!
I would advise you to hire an attorney and get this resolved legally, because that’s the only way you’re going to be able to get any closure here. It’s unlikely that Sallie Mae will work you on this issue – they just aren’t compassionate to personal concerns like these, and will simply tell you to keep sending in those checks.
You’re only hope here is to get a lawyer who can prove that you shouldn’t be responsible for the other loan, and force Sallie Mae to take your name off that debt liability.
I wish I had an easier or more convenient answer for you, but as far as I understand it, that’s going to be your only option.
Don’t give up! Keep fighting this one and good luck!
Face it people, Obama has been in office for over 6 years. He can’t get student loan forgiveness for anyone. I hope I’m wrong, but its not going to happen………….
Actually, President Obama’s loan forgiveness program is the most comprehensive, widely available forgiveness and debt relief program that I’ve ever come across. He may not be getting “forgiveness” (by your definition) for anyone, but he’s gotten some serious financial benefits for millions of Americans.
For the record, I am not his biggest fan or supporter, but I am pretty happy with the way that the President’s student loan forgiveness program was set up, and as long as it gets opened up to ALL BORROWERS, I think it’s a huge step in the right direction.
We’ll see how things shape up though throughout the Presidential Election. I believe student loans will become an important issue this time around, and I’m looking forward to some real plans for dealing with the country’s unsustainable student loan debt load.
Living in American Samoa and attending College online. I like the fact financial aid has helped me pay for my schooling, but after finding out how big of payment I will be paying monthly I am not able to make it with payment amount that is being schedule by the lender. The government of American Samoa is totally a rural area that is so unpredictable with the type of environment we are living in. Is there any help in this area?
I’m not sure what you might qualify for, but to start, please visit my page about Getting Rid of Student Loan Debt. Next, try looking at the Federal Student Loan Relief page, and if you have private loans, visit my page on Private Student Loan Help.
I am a parent and I cosigned a loan for my child to complete his 5th year in a civil engineering program. Following graduation he became Schizophrenic. He refuses to take medicine and has decided he would rather be homeless than fight the illness. I am now stuck using my retirement to pay off this loan. Any advice on applying for loan forgiveness due to a disability? Thanks
Look into the Total and Permanent Disability Discharge Program. This might be your only hope for getting rid of that debt without having to pay the entire thing off.
Fed loans were never the issue. Private lenders are and will always be the issue. In the early 2000’s lenders handed out those loans like candy and gambled big time on the economy due to Fed rates. Since then those toxic loans have disappeared due to the recession. They were products of sick and distorted reasoning. Yet now still people are having their lives ruined because of it. These old financial gambles need to be resolved because they are the major sources of the American student loan crisis. Direct loans has always been resonable no matter what. I used to pay them 10% of my check with no issues at all. Told me I would be forgiven after 15 years of that. No big deal and a fair trade. However Sallie Mae and others are like animals. They create crazy interest rates based upon derivatives. These derivatives have been designed to be unpayable, yet the American people still have to pay as slaves.
I agree completely. The big problem with student loans is that private lenders have gotten completely out of control, allowing people to borrow far too much money, which traps them in never-ending debt.
Totally, totally agree with you. 100%.
HOW DO I GET MY NAME TAKEN OFF THE LIST! I have gotten nothing but sales calls from random student loan companies that tell me if I pay them money, they can do exactly what I already did to get my loans manageable…They are all just telemarketers that have nothing to do with Obama’s aid. Hell, nobody even qualifies because the standards are so high. I DONT EVEN QUALIFY yet I get 10 calls a day, and every time I get taken off one companies call list, they send my name to the next company that spam calls me until I answer and tell them to stop calling… PLEASE HELP!!!
Add your phone number to the National Do Not Call Registry.
National Do Not Call Registry is a joke !!!! I’ve registered with them numerous times and yet I always get calls from telemarketers, bill collectors, anonymous calls, blocked calls, private calls, not listed, etc, etc, etc. At least 20-40 times per day.
I also have at least 30-40K in student loans that I am never going to be able to afford to pay back due to being a disabled veteran who is unemployed due to my disability.
I have $5,000 in loans at 5.75% and my wife has 4,800 at 6.8%. Both Federal. I graduated in 2010 and my wife in 2007. Any hope to reduce the interest rate on these? I know we’re not the worst case you’ve heard, but would we qualify for anything? Thanks
As of now, there’s still no support available for Refinancing Federal Student Loans.
However, the good news is that Elizabeth Warren introduced a bill that would allow for it, and she has been pushing hard to get this onto the Congressional agenda. So far, there’s been no progress, but I wouldn’t give up on the idea over the long-run.
You can read about Elizabeth Warren’s student loan bill here.
I have a question, I went to a private college for Massage Therapist and at the end of my schooling I was in internship and hurt my back, after seeing a doctor and x-rays, I discovered I have arthritis in my whole spine and I cannot work in the Massage field. Yet I am able to work but not as a massage therapist. I am currently attending another college online for my bachelor degree in human services. my question is can I get a forgiveness to get out of paying for the 16,000 at the massage school?? From my understanding you have to be 100% disabled to receive a forgiveness, yet I’m only disabled in massage therapy would I qualify?
You may be able to have that Massage Therapy loan discharged by filing for bankruptcy, since it’s relatively easy to get costs that aren’t related to actual degree programs wiped out, but there aren’t really any forgiveness programs that would cover what you’re talking about.
The closest thing that I can think of would be the False Certification of Student Eligibility Discharge (explained here.
Technically, the school must have certified your eligibility to work in the field of massage therapy at some point, but because you have a physical condition, you’re disqualified from employment in that occupation.
It’s a bit of a stretch, and might require assistance from a lawyer, but I would contact a local attorney to see if they think you have a shot at getting the $16,000 discharged by using this program.
We consolidated my husband direct loans (sub & unsub) for $31,600 in 2000. We have paid over $25,000 in payments over the last 14+ years. Our balance is now $54,000. We have always paid under the Income Contingent Repayment Plan. Our payment just went up from $340 per month to $525 per month. I’m now 60 and my husband is 55. We just discovered that Direct Loans has incorrectly continued to capitalize our interest beyond the limit of 10% Cap on capitalized interest based on the original loan amount. I have read so many conflicting statements as to whether the 10% Cap applies when you have interest accrue during a forbearance. The law as stated at 685.209 is very non-descript. It just says that capitalized interest is capped at 10% of the original loan balance. They have capitalized over $20,000 in interest. We have filed a complaint and have been waiting to hear from Mohela for two weeks. Per our calculations, our daily interest rate should have have been more than $7.69 per day based on the cap. It is now approx $11.67 per day. We want them to recalculate our loan back to 2003 when the $3,160 of capitalized interest was added to the principal balance. Do you have any facts about interest accrued during forbearance while in the ICR Plan?
Hi Linda Sue,
I’m sorry for the situation you’re facing here – it sounds like you are being completely screwed over, but I have good news. If the loans really are having interest capitalized when they shouldn’t have been, then you may have a good case to get resolution here.
I want you to contact the Student Loan Ombudsman Group ASAP and give them the details of your situation. They are like a consumer advocate group for people facing legal issues over their Federal Student Loan Debt, and they can help you!
This is their website, and here is their phone number: 1-877-557-2575
Good luck! And please check back in to let me know how things go once you’ve got it all resolved.
i am a nurse. I have been paying on my student loans since 2003. I am just curious as to how to qualify for any assistance from this program. I was told that my previous payments will not work?
My loans have been traded several times. I signed up for this program but in reading more up on it am very disappointed that I sold them again to this program. What I do not understand, is they told me my previous payments would not qualify— I was paying more then. So that doesn’t make any sense to me that I was over paying — that is why I will not qualify for any forgiveness. At this rate I will never pay off my debt and if max is only 57k your screwing me over. Since by making me pay less to qualify my interest climbs so I will be hundred thousands in debt……
Just frustrated thinking about it.
The $57,000 maximum amount hasn’t been instituted yet, and likely wouldn’t be for anyone who already has loans (if it is ever put in place at all). When were your loans taken out? If they were taken out before October 1st, 2007, then you are not eligible for this loan forgiveness program.
However, word is that EVERYONE will be eligible to enroll in the Pay As You Earn Repayment Plan by December 2015, which WOULD make you eligible to start going after loan forgiveness.
The deal is that you have to be enrolled in one of the income-based Federal Student Loan Repayment Plans (PAYE, the Income-Based Repayment Plan or the Income-Contingent Repayment Plan), and make 20 years worth of payments to receive total forgiveness.
If you’re a Nurse, I would look into the Public Service Loan Forgiveness Program, and into the many Nursing Student Loan Forgiveness Programs currently on offer.
All of what I’ve written here assumes that you have Federally-funded student loans. If your loans were privately funded, then you need to look at my page about Private Student Loan Forgiveness, which is an entirely different story (and far less useful).
Hope this helps to clarify things for you!
Hi Matt, What new programs for parent plus loans? Got to get my payment down. Why are we being left out of the repayment .program. 3 children going to college. I need some help. Thanks
Owe about 140,000 which is less than the max owed of 150,000 3 years ago. Borrowed about 80,000 and have paid about 60,000. Wish these programs were available 15 years ago. Hope they’ll be made available to older borrowers sooner or later. Sucks to still be paying for the bad decision I made at 18 to go to college. Wish income tax let me discount all my student loan interest instead of just 2,500 each year.
I completely agree with you – these programs need to made available to EVERYONE! Fortunately, that should happen this year with the Higher Education Act Reauthorization.
I will be sure to post an update as soon as that process gets sorted out, but keep your fingers crossed and hopefully we’ll have good news for you later on in 2015.
Will there ever be a fee, of any kind, to enter into any of these forgiveness programs?
There should NEVER bee a fee of any sort to take advantage of any of the Federal Student Loan Forgiveness Programs.
Anyone who contacts you requesting a fee is a third party trying to take your money.
This is so much BS. This is NOT “Obama’s Loan Forgiveness”. I’ve been working in Financial Aid since 2000 and this has always been a program.
The difference is in the updates that Obama made to the programs themselves, including:
I don’t know how you could argue that this isn’t President Obama’s program, or at least the result of the new laws he got passed. His administration is directly responsible for these major updates.
BEWARE—-there are scammers out there who when you think you are getting help with repaying your loan and getting a break, they will take advantage of you! My daughter went to a tech school, has been physically sick with systemic candida for quite a few years and hasn’t been able to work, had deferments for her school loan with PHEAA and in September of 2013, she received a phone call stating that this place could help her get loan forgiveness—we had to pay upfront $599 and her loan would be forgiven.
We paid it and she called PHEAA and they said, yes, they had the money–in the meantime, PHEAA changed their name to Navient and when she received a phone call from them, she told them we had paid the $599 to 1st American in September of 2013 and that they said her loan would be forgiven–NOT—now PHEAA is requiring me, the mother of H, to repay $5900 to them for this loan.
The 1st American that we sent the $599 to apparently was a scam and I guess we have lost our money now!!! BEWARE—-this is what happened to us–don’t let anyone but your loan servicer help you with repayment! I wish we could get our money back but every time I call the phone number my daughter had for this place, I am on hold for 15 + minutes and no one ever answers the phone.
This is absolutely true. As I’ve stated throughout this site and it’s comments – there is nothing that these companies can do for you that you cannot do for yourself. DO NOT PAY ANYONE TO HELP YOU WITH LOAN FORGIVENESS!
The only time it makes any sense to pay anyone other than your lender is if you’re going to consolidate your existing student loans into a new loan from a different lender.
Be careful out there!
Thanks Tim for having this forum. I have student loan debt totally 60,000 both subsidized/unsubsidized they were both disbursed in 2009 and my interest rate is 5.6%. I am currently paying through IBR and have been enrolled in the PSLF program for a little over 2 years. My IBR payments are not enough to cover the interest and it is capitalizing on my principal each year. Right now my adj. gross is 37,000 and my 10 year standard repayment amount would be 800.00. My current IBR is 240.00. I am currently underwater in my mortgage and barely have money left over each month. I work for the county government I live in and my job class salary tops out at 57000. I am 51 yrs old and I am deathly afraid of having my Social Security benefits garnished when I’m retired. I can’t sleep at night, my stomach is in knots and all I can think about is being financially destroyed by this. My worry is that they will cap the PSLF at 57000 and with my loan increasing each year I will actually owe around 80000. So that would leave me 20000 or 30000 more to pay off after ten years or if I go to the 25 year regular forgiveness which I will be 75 yrs old, then I will have to pay huge on the tax for the forgiveness. I wish I would’ve never gone to school, biggest mistake of my life is to actually want to get a degree and better myself and now I’m staring right in the face of complete financial ruin all in the name of wanting an education. Can you give me any advice? What would be the best way to handle this situation? Is there a site that I can get updates on what is going on and how I can actively help by signing petitions and contacting my representatives? I’m looking for sound financial advice on how I can be free of this huge debt before I retire hopefully at the age of 65. I want to have some sort of happiness in my golden years.
First – let me say that I’m sorry to hear about what you’re going through. Being in debt just plain sucks, it’s stressful, frustrating, and it’s especially upsetting when it feels like there’s no way out.
Fortunately, you did a good thing by relying on Federally funded student loans, and I would not worry a bit about the PSLF cap being put into place, because there is virtually no chance that it will be a retroactive thing which applies to people who’ve already taken out loans.
In fact, I just heard (on good authority) yesterday that there has been no movement to actually institute the PSLF cap anyway – apparently it was in President Obama’s proposed budget, but there was no mention of it in the final, approved budget.
My advise would be to do whatever you can to avoid allowing that interest on your loan to capitalize. If that means working some overtime hours, or getting by with a little less discretionary spending each month, then that’s what I would do in order to prevent the debt from escalating.
The one thing you know for certain is that you’re going to get taxed on whatever amount gets forgiven after you’ve made enough qualified payments, so your strategy should be to reduce (as much as possible), the amount that you’ll receive forgiveness on.
I’ll continue to post updates whenever I hear of anything, but I would also suggest that you simply use Google to search for relevant news whenever you feel like looking into things.
It sounds like you’ve got a handle on your debt for now, and that you have at least thought things through for the future, and I wouldn’t worry about losing access to the PSLF forgiveness benefit because, like I said, there’s virtually no way that they’ll apply any new updates to that program to people who’ve already taken out their loans.
I hope this was helpful, but for better financial advise, I would recommend speaking to either a CPA or some sort of financial or estate planner who can delve into more details with you and be certain to get all your financial cards in order.
Good luck, and thank you for stopping by and commenting!
Thank you so much for responding. I will keep a good watch out. It does help to hear that you don’t think that they will cap the pslf and I will definitely pay a little more to keep that debt down. Thanks again.
Ok so to my understanding…..PAYE is available for my loans after October 1st, 2007 but not the ones before?
Does this new PAYE plan let my unqualified ones in?
Should I wait and enroll when they are all qualified?
Sorry. I meant to post my question here regarding whether any of the proposals in the spending bill actually passed. Any updates?
The Cromnibus was passed, but details are still forthcoming. I’ll post an update as soon as I have more information.
Hey I just came across this tonight and immediately put in all of my information and PAYE seems like it will actually really help. I have been in deferment ever since I graduated (2011) and haven’t even started making any payments. I have been preparing myself for $400/month with my roughly $32,000 owed.
With PAYE I can get it down to $50/month compared to $400. I will take that.
I have a FAFSA account. What do I need to do next? Is this even in effect right now or do I need to wait until 2015? Is the PAYE program available right now?
Thanks for any help or clarification in advance.
Glad I found this article.
Yes, PAYE is available right now, but only for people who had no student loans before October 1st, 2007. Depending on when you took out your loans, you may be qualified to start using PAYE right away!
Check out my page about the Pay As You Earn Repayment Plan here for additional details.
Your next step will be contacting your lender to let them know that you want to enroll in PAYE, rather than whatever repayment plan you’re on right now.
Ok so to my understanding…..PAYE is available for my loans after October 1st, 2007 but not the ones before?
Does this new PAYE plan let my unqualified ones in?
Should I wait and enroll when they are all qualified?
Completely unfair! The loopholes ensure that only the Y generation benefits since NOTHING is covered before 2006. Completely biased! I’ve busted my ass the past 15 years making regular payments to my Stafford Loan, including Peace Corps service, and I’m not even eligible for forgiveness! That’s a friggin’ insult! How am I supposed to stay competitive against a younger generation that gets by with a free education while I spend my money making payments on mine!?
I completely agree with your sentiments, but the good news is that President Obama is looking at opening up his program to everyone, regardless of when they took out their loans.
Hopefully, you’ll soon be able to take advantage of some of these benefits too.
Keep checking back for updates as more information is released, we’re staying on top of the story and will be sure to let you know as soon as anything changes.
Great Article I just came across today:
What is going on with the married filed separately issue??! So now my future wife and I will get screwed after our incomes are considered?!! Do you think that will actually pass i was really hoping to get around that issue by filing separately after we get married.
Also, i’v been on a Income Contingent plan for 5 years.. will i still get credit if it is moved to the pay as you earn plan, meaning instead of 20 years left i’ll have 15?? But what about the excess loan amount of 57K plus?? So obama will not lessen the amount of time to 20years for me and keep it to 25years if I owe more than 57K? Which I do.. also is only the excess amount past the 57K payable for the extra 5 years or is the entire loan excluded???
if you have a mailing list, add me to it.. because i’m really interested in this case. My loans are a major issue in my life right now. My loans are consolidated and majority are from Law School total over 200K right now. So yes, this is a major issue for me.
I do think the married filing separately loophole will be closed, and I think that’s a good thing. These programs weren’t created for people who can afford their monthly payments; they were created for people who are facing default and other disastrous financial outcomes.
What do you think would happen if everyone in the United States used the same loophole that you’re planning on exploiting? The program would use up all it’s funds and be discontinued. No one (including those who really need it) would have access to student loan forgiveness again. Ever heard of “The Tragedy of the Commons”?
On your payments via the ICR plan, you should get credit for them as long as they satisfy the other eligibility conditions – all three of the income-based repayment plans qualify for Obama’s forgiveness program – so I wouldn’t worry too much about that part.
On the high debt part, yes, because your loan is over $57,000 you will need to make repayments for a full 25 years to receive forgiveness. Nothing is ‘excluded’, it’s just that you won’t receive the benefit until you’ve made 25 years worth of payments.
I totally get that this is a major issue for you, but you need to keep in mind that you were the one who took out over $200,000 in student loan debt, and that it’s not every other taxpayers’s responsibility to help you repay your massive loan.
I recently got a phone call from someone claiming to be an agent for student loan forgiveness. I just completed my final course on 9/12/14 and he was telling me because I’m on disability and there are two people in my household, that I fall below the SC poverty line, and that under this plan I would only have to make two payments of $369 and the rest of my loan will be forgiven. Is there any truth to that, because it just seems odd to me and I’ve just finished school.
Do you have student loan debt? Are your loans Federal or Privately funded? How much money do you owe on them? When did you take them out?
I think you were contacted by someone who works for a debt consolidation company, and who was trying to sell you something that you don’t need. If you really do qualify as being under the SC poverty line, then you can probably qualify for a loan deferment or forbearance, but that wouldn’t wipe out your debt, it’d just put your payments on pause for a while.
It’s possible that you might qualify for the Pay As You Earn repayment plan, or one of the other income-based repayment plans, and that your monthly payments would end up being $0 because your income is so low, so perhaps that’s what he was referring to, but you’ll need to look into this further to find out what’s going on.
First thing you should do is call whoever services your loan (the bank that you send your monthly payments to) and ask them about this company, and their offer.
To me, it sounds like a scam.
Thanks for this great information. I have federal loans, subsidized and unsubsidized totaling 75-80,000. They are in deferment/forbearance right now. I pay $300-350 per month towards them, I can’t afford the required monthly payments and I’m not entirely covering the interest now. I started college in 2004 so I did not qualify for PAYE. So I guess I will wait till Dec 2015 to pay for this and try to get my loans in forbearance again next year so that I don’t end up in default.
I have a few questions, if I can’t afford the full monthly payment but pay something towards the loans like $300 per month, will my loans still go into default because I’m not paying all that they ask for? My lender is Sallie Mae and they don’t really work with their borrowers. I’m just wondering if legally I will be in default despite paying something. I will request a forbearance just in case.
My mom also took loans for me, parent plus loans. Hers are also $75,000 and I’m responsible for paying them too. The situation is much rougher on that end as there are fewer repayment plans to choose from. We are currently using the last deferment available for hers. I can only afford to pay $100 monthly towards those. When this deferment runs out, my only option remaining will be to consolidate and apply to ICR (income contingent) but I don’t even know if we will be accepted to it. And with ICR, there is again forgiveness after many years, but we will have to pay tax which might end up being huge if we don’t pay down the interest.
Are there any other options for lower payments for parent plus loans?
Like everyone else here, my student loans have become a nightmare. I have a Master’s degree with a very low paying, work from home job. I have been job hunting for some time with no luck.
Some people think that it’s unfair for the government to offer forgiveness because people made poor financial decisions. I don’t deny that. I made a mistake. I should have gone to a community college at most. But coming from a family where everyone has college degrees from good colleges, it didn’t seem like an option. Like others, I want to pay my loans! I really do! I’m not just trying to get out of it. I accept the responsibility. The problem is that I don’t make enough money to cover the monthly payments requested of me.
What’s worse is that lenders have a policy to pay accumulated interest first. So whatever I do pay, never even touches the principal. If it did, my loan would not be growing so rapidly. All the payments go towards the interest and what’s not paid gets added to the principal and interest accrues on it again. I believe lenders want us to stay in debt forever. That’s their goal. They don’t want to see us pay it off and they try their best to make it difficult.
Sorry for the long post. If you are able to reply to my questions, I will look out for your answer Tim. Thanks again.
It sounds like you’re in a pretty tight spot – I think you took out way too much in student loans, unless you’re working for Wall Street or pulling in a massive income, but there are some things you can try to reduce your monthly payments and basically pray that you can make it to a forgiveness period (and somehow avoid a massive tax liability, like you mentioned).
On Default – If you don’t make the full payment each month, then your loan will go into default. You can’t just pay a piece of it and avoid default, so you’ll need to do whatever you can to reduce those payments (sign up for an income-based repayment plan, put the loan in forbearance or get a deferment), then start working on earning more money so that you can pay these things off.
On Parent PLUS Loans – This is a really tight spot – these things don’t offer a lot of options, other than signing back up for school as a half-time or more student (which technically pauses repayment of the loan), or trying to roll them up into a Direct Consolidation Loan and praying that you’ll somehow reduce your monthly payments along the way. This one’s going to be difficult to deal with.
I’m sorry to hear about your situation – this is exactly what I try to warn all of my readers against. The math is terrible, and basically the deal works out that you shouldn’t be borrowing any more in student loans than you’re expected to make the first year after graduation.
I agree with you that lenders want you in debt forever, and the bigger problem is that the Federal Government seems to fully support their objective, but the potential good news is that things may be changing soon, and if the Pay As You Earn Program were opened up to you, then you’d at least have a shot at making affordable payments until it came time to pay off the massive tax bill once forgiveness was issued.
I don’t have a good solution for you at this time, and I apologize for that, but don’t give up, contact Sallie Mae to let them know EXACTLY what’s going on, and see if they’re willing to work something out for you that you can afford. I think your best bet will be an income-based repayment plan, deferment and forbearance, and somehow planning on paying off the big tax bill come forgiveness.
Stay positive and don’t give up! Keep your fingers crossed and hopefully Congress will do something for borrowers like you who are in way over their heads.
” if the Pay As You Earn Program were opened up to you, then you’d at least have a shot at making affordable payments until it came time to pay off the massive tax bill once forgiveness was issued.”
Thank you for your response. In your article you said, “should the 2015 budget changes go through, whatever debt eventually gets forgiven won’t incur a tax penalty,”
So if nothing changes until then, PAYE after Dec 2015 will be tax-free correct?
As for the parent plus loans, I guess my only option is to consolidate and then pray that they accept us to the Income Contingent Plan. I believe this is the only income based repayment plan available for parent plus loans. Am I correct about this?
It was shared on facebook. We’re told ti fill out the form and a person instantly contacted me. His name was Dan Dunthy. He said I qualify for a hardship forbearance and would help consolidate my loans and lower the payments but I’d have to pay 500.00 which he reduces to 300.00 because of my finacial situation. I’d have to be approved, sending in my tax return proof for last year. Then I’d have to pay the enrollment fee within 30days. 7047646154 is the number that called me. So is the forgiveness based on lowering payments based on my income? Where do I apply? What should I do if this was a scammer who has gotten my personal information as far as protecting my identity?
It’s relatively unlikely that this individual was trying to steal your identity or anything like that, but it sounds like they are trying to get you to pay for something that you could do entirely on your own.
You can file for a hardship forbearance without any assistance from a company, organization or individual, and you can consolidate your Federal loans to a Direct Consolidation loan anytime you want, all on your own.
To do either of these things, contact whoever is servicing your loan (whoever you send your monthly payments to), and ask them how to apply for these programs.
Don’t fall for this trick!
Thank you for your help.
Ok, I saw the link on FB about the program, told by a family member to check the link out. Im over 50,000 in debt. I struggled to land full time work after graduating. Finally I found a temp job, in going. That ended this year. When I entered my information I was called. I experienced a very rude encounter with an account manager who yelled at me and told me I could get the $ if I wanted to when I told him I couldn’t pay the enrollment fee.
If we are struggling and can’t pay our debts as it is, why is there a $500 enrollment fee, which they expect to be paid within 30days of approval? Mine was reduced to $300 because of my financial situation. Who has $300 sitting around?
My question is, is there really a enrollment fee that is thay large or are scammers trying to take advantage of us?
I’ve been reading about the program with hopes to gain insight about whether theres a “fee”or not. Any help would be appreciated. Thanks!
I’m not sure I follow – what were you trying to sign up for? As far as I know, there is no enrollment fee to get on the Pay As You Earn repayment plan, which is the official name for President Obama’s student loan forgiveness program.
What number did you call? What was the company you called, and the name of the person you spoke to? I want to start collecting this information and making these people accountable for their behavior, because I’ve been receiving a lot of similar complaints.
Concerned for a friend of mine. And just wanted some more information about these programs offered by our government, and your insight on them. She finished her 9 month program for a medical administrative certificate. She only took out federal loans with her institute, so she does qualify for the programs. Her total loans are currently at $11700 for the next 10 years.
She recently has signed up for a IBR program and qualified…
I guess my concerns are… It just sounds too good to be true… They will extend her term up to 20 years… After 10 years working in a public service it loan will be forgiven… She works at Blue Shield (insurance health company in California). The company deals with the public… But are they considered “Public Service” in the rule book? And after the loan is forgiven there is also a Tax that will be implemented? The new consolidated loan is about $40/month for the next 20 years. At the end of the day… Should she just stick with the original $127/month for 10 years? Or does this IBR program for 20 years really work for her? The consolidation agent who helped us out, just made it sound too good to be true. My worries are; a loan dragged out for another 10 years(total of 20 years) will accumulate massive interest compared to just sticking with the original payment plan.
The plan with the 20 year term loan IBR program is… Pay a very minimal $40/month… Save up to the point where she can just pay a lump sum to the loan entirely and move on with her life.
This was the most informative website that I could find on the programs offered through our government… Searching Obama’s Student Federal Loan Forgiveness Program on Google, just brought up a lot of “PROS” about the program and pretty much shadowed the “CONS”, so I really appreciate the person whom dedicated all the time and research into writing this article, it is a great help to the public who are seeking answers for their student loans.
I understand the student loan case above that I am sharing with the public of this website may seem like a very very minuscule loan compared to the huge cases that are shared above… But my friend is a young graduate who is just beginning her new life in her new career; and every attempt must be made to save as much on student loans as she can; As living conditions in California have gotten more expensive, she is just trying to save as much money as she can, for the rainy days ahead. And I understand there are some people out there struggling with much bigger loans and are in much more dire need of help, and I hope that somewhere soon along the line the government will open their eyes and help those in need.
With my post above… I guess ultimately my question is…. In your opinion, or in the opinion of the public of this site, is she making the right move forward? Does the IBR program work for her? If she only has to pay $40/month; then save, lets say $10k, and pay off her entire loan with no pre-payment penalties. Is this the best way to move forward?
Thank you so much for all your kind words, and for your detailed explanation of the situation your friend is facing. Big loans and small loans alike can lead to the same amount of stress and financial heartache, so even though her loans are relatively small, they should still be taken very seriously, because student loan debt has a way of ballooning out of control when it isn’t dealt with properly.
Here’s my thinking:
The Public Service Loan Forgiveness program and the Pay As You Earn student loan repayment plan are both excellent offers, and combined, they do allow you to get completely debt forgiveness after just 10 years of making payments.
However, like you mentioned, that comes with a big tax bill, and under certain circumstances, it can end up making loans more expensive in the long run if things go awry.
Let’s make something clean though – when you’re saying “IBR”, I think you’re actually referring to one specific type of IBR program, called the Pay As You Earn plan, which is the official name for what we all refer to as the “Obama student loan forgiveness program”.
It sounds like you’ve already determined that your friend qualifies for Pay As You Earn, and I think she definitely qualifies for the Public Service Loan Forgiveness program, based on the requirements found here.
Click on “Work for a Qualifying Public Service Organization” and you’ll see the requirements. The important part is the last bit, reading:
“A private non-profit organization that provides at least one of the following public services:
Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations)”
Blue Shield is apparently a non-profit organization, and your friend is working in nursing, so she should be fine. The big decision is whether or not the loan forgiveness option makes more financial sense for her than just paying off the loan via monthly payments over 20 years.
And that depends on her specific financial plans, her income, her ability to make payments each month, in full, and on-time, as well as a variety of other factors like how comfortable she is with carrying a debt load, etc. I don’t want to offer advice on that decision, because sometimes it makes more sense for people to spend a little more in the long-run by remaining slightly more liquid in the short-term, and sometimes it doesn’t. This is a really personal decision, and doesn’t necessarily come down to which option costs more over the course of the loan.
This is a good time to be asking these questions though, because it sounds like she’s planning on going through some sort of consolidation process? This was the only part of your comment that really scared me – what loans is she consolidating, why is she consolidating them, and who is she going through to do that?
Consolidation is a complicated process than can screw things up, and destroy her eligibility for loan forgiveness if it’s done wrong, especially if she’s trying to consolidate different types of loans, or trying to combine private loans with federal loans (which is NEVER a good idea!).
This part must be handled with extreme caution, because it’s very easy to screw it up, and end up losing access to the best benefits. Be very, very careful here, make sure that she’s dealing with whoever is actually authorized to handle servicing her Federal loans, and not being promised the world from some scummy organization trying to make a fast buck off her by ruining her financial future.
Debt consolidation companies have a habit of over-promising and under-delivering, and they are on of the easiest ways to get into hot water, so be wary!
I am currently a special education teacher at a low income school, where I’ve worked for 13 years. I was told that I would have up to $17,500 of my student loans forgiven if I met specific teaching criteria, which I did. I decided that would be a win-win situation, however, after the 5 year “term” I applied and was told I didn’t qualify due to a loan I obtained prior to 2007 (FFEL?). Essentially the DEPT. of Education neglected to give all the details. Are there ANY forgiveness programs for people like me that fall into that category? As for the public service forgiveness program… I will have mine paid in the 10 year time frame and have had a forbearance … any help would be great!
My loans are currently consolidated…
I’m wondering why you were told that you don’t qualify for the program, and there are a number of different reasons why that might be.
1. Your school isn’t on the list of approved “low income schools”
2. Your teaching position doesn’t satisfy the requirements stipulated to be eligible for the benefit
3. Your loans aren’t eligible for the program
There’s some other nuances involved as well, and I can’t tell where the issue is because you only gave me a little bit of the required details here.
What types of loans did you originally take out? (Hopefully they were all Federal). Did you consolidate them into a Direct loan? (Hopefully). What school did you work at, and what was your official position?
This is the type of information that’s needed to determine what caused the problem, and figure out if it’s worth appealing the decision. It’s possible that you could still qualify for the program, and that all you need to do is reapply.
You should take a look at the following pages of this site, which fully explain teacher loan forgiveness and teacher loan cancellation:
The Perkins Loan Forgiveness Program (Teacher Loan Cancellation)
The Stafford Loan Forgiveness Program (Teacher Loan Forgiveness)
How do I file a complaint. I went to check eligibility, answered one question and then was hung up on? If student debt isn’t enough to deal with, this company, which reports to help with it seems to be a scam and filled with rude people.
Something tells me this kind of incident happens a good bit.
It says you don’t qualify if you have exclusively private loans…what if I have both federal and private? Can I consolidate all of them into this pay as you earn program?
No, unfortunately Private loans are not eligible for Pay As You Earn. You will be able to sign up for your Federal loans, but do not consolidate Federal loans with Private loans, as that is likely to disqualify your Federal loans from Federal assistance.
No matter what you do, keep those Private loans separate!
How do I clear all my information? I signed up to see if I was eligible and then decided to consolidate my loans elsewhere and now they won’t stop calling me. I have asked numerous times to delete my information and take me off their call list and I am a still getting calls almost everyday. I have rejected every number that comes through, but there’s always a different number. I’m half tempted to change my number, but would rather not resort to that. Someone please help me!!!!
What did you sign up for?
Try requesting that whoever is calling put you on the Do Not Call list. Tell them the’re to remove your information from the database as you are no longer interested, and that if you receive another call you’ll pursue legal action.
Crock of crap. What about the rest of us who had to take out private loans because our parents made 1k more than the allowable limits? why can’t someone help us?
Thus far, the Federal Government hasn’t shown any real interest whatsoever in regulating private student loans, so I would not be holding my breath hoping for assistance along those lines.
There are extremely powerful lobbying interests working to keep the Government out of private student loan debt – it’s very unlikely that any forgiveness programs for private loans will be introduced any time soon.
Sorry to be the bearer of bad news =(
I have been paying my loans on time for about two years now under the IBR plan and just decided to defer them for a few months to save up some money. With this deferment would this have any effect to me applying for Obama’s plan? If my loan is up to $48,000 and I rack up $4,000 worth of interest would my loans still be forgiven?
Be really careful about going over the limit – I don’t believe that the specifics of how this all works have yet been determined, but if you end up over the allowable forgiveness threshold, there’s a very good chance that you will get screwed and won’t be eligible for the program.
If I were you, I would not put that the loan into deferment, or I would make sure to pay off the interest while the loan is in deferment, so that you don’t end up increasing the total amount of your loan.
Be very, very cautious. The Federal Government is not in the habit of making one time exceptions for people who just barely don’t qualify for things, no matter how close they are, or what caused the loss of eligibility.
Thanks for the advice. I think I will leave them in deferment but make payments along the way.
My husband and I consolidated our loans (stupid thing to do) years ago and I have worked in public health for over 20 years. My husband has not been able to work for years so we have lived on my salary. We use every program available to keep our monthly payments dirt cheap and the loan that started out to be less than $12,000 is now approaching $75,000 dollars. We have no hope of ever paying them off or recieving loan forgiveness. It’s depressing.
The Bankruptcy option is still not an option? I can not understand how Donald Trump can claim bankruptcy and I can not. 20 year old debt in default and I am unemployed for the most part of my life. I could not pass the core math requirement or figure out how to apply for graduate status. It is true, I heard there was a process and I had no idea how to do it. I have a learning disability that was undiagnosed until my life was out of control and I am carrying the weight of debt on my back. 25,000 dollars of education loans and 25,000 of interest owed. Not only will I never be able to find a job which I could repay this debt, but I am almost certain when I die my debt will go to my children if I should have any. Try finding a husband when you reveal you are indebted to the government for 50,000 dollars. I’m owned. I can never get a car loan, I can never get a home loan and I can not file bankruptcy for this loan. I was hoping Senator Elizabeth Warren would move that mountain for me and others like myself.
I’m sorry to hear about your troubles, but don’t give up quite yet. Remember – you do have the option of using Bankruptcy to discharge a Private Student Loan (assuming you’re talking about a Private student loan, and not a Federal loan), if you can prove that it’s causing an undue burden on your life.
Take a look at our page on Bankruptcy rules and perhaps you’ll find something useful there.
Also – things are developing that could help with the debt, but it is happening slowly. Good luck out there, and don’t give up!
I have been paying student loans since 2000. For 14 years I have paid on time and without a problem. But it appears there isnt any break for me. Is there any loan forgiveness programs for loans this old?
Yes – when Pas As You Earn is fully enacted and available to everyone, you will be able to sign up for it, and you will be on track to receive debt forgiveness at some point. I’m not sure how they will implement the new law, so it’s possible that you might get credit for previous payments made, and it’s also possible that nothing you’ve done before will count toward the twenty years worth of payments threshold. Unfortunately, for now, we are all stuck waiting to see what happens.
I hope that more help is given to the parents who take out the Parent Plus loans, for their children. The income based repayment plans do not help us out at all, we only have the option of extended loan for 30 years…. we have taken out a Federal loan too, why are we the Parents left out? Our incomes get smaller as we get older,
Thanks for commenting. I agree completely, but this seems to be President Obama and the Democrats’s stance on the student loan debt issue – they’re using it to buy votes from future college students, and leaving everyone else behind.
I think anytime anyone can get free money from the government, there is no downside except for those of us who support ourselves, pay our own way AND pay taxes. In our “I want it all and I want it right now society”, anything other than a free ride and having someone else be responsible for paying YOUR bills is interpreted as being mistreated.
I graduated in 1992 with about 16k in student loan debt. Have been making payments and have had deferments (during a period of unemployment) /used income sensitive repayment plan and now Sallie Mae said that I am no longer eligible for any relief other than to make payments of about double what I have been making which I cannot currently afford.
It is a federal subsidized loan and the interest has been capitalized so I currently owe about 14k and have made about 22 years of payments totaling about 37K. it was recommended to me that I refinance my loan so that I can have affordable payments and not go into default. Sallie Mae said there is no other alternative than to make the payments they have requested and it was recommended by the DOE Ombudsman to refinance or come up with a way to make the larger payments since I would be paying less interest over time.
Amazing. I have been back and forth with Sallie Mae since February over my repayment terms. I get a phone call from I think the “student assistance program” and they conference call Sallie Mae in and *now* i am eligible for income sensitive repayment and a forbearance that all had been used up for the last few months.
It’s possible that they’ve changed their policy based on the updates that President Obama announced. I’m curious to find out how things play out for you here Jean, so please come back to let me know if it all goes well.
So my best understanding about the changes to student loan forgiveness is that since I had my loan from 1992 and have made regular payments for about 22 years, it won’t be forgiven under the new Obama guidelines?
In a nut shell, yes. Your loan is too old to qualify for President Obama’s new loan forgiveness program, at least as of 2014.
However, changes are in the works, and the program is supposed to be getting opened up to everyone soon, which would allow you to take advantage of the forgiveness benefit at some point in time.
Details haven’t been released yet, and it may be a while before we find out exactly how this will work, but I’ll certainly update this page again as soon as more information is available.
I graduated in May 2006 and have a private loan through AES. My co-signer at the time is my now ex-husband. AES will not allow me to refinance even though every payment is made on time. My ex is demanding that I refinance my loans as the debt is on his credit. I am so excited about the possibilities this may bring for me. Is there anyone I can speak with regarding options?
I agree that the opportunity to refinance Federal student loans would present one of the best opportunities in years, but unfortunately nothing is officially available yet. At the current time, the idea remains in the proposal stage.
To keep up with what’s happening, make sure to watch out for news related to Senator Elizabeth Warren’s Bank on Students Emergency Loan Refinance Act, which is the official name of the plan.
I’ll be writing a new page of the site in the next week to track the progress of this plan, and will be sure to update it whenever any new details are announced.
For now, I’d just type the plan name into Google every few days and see what news pops up.
My daughter has 2 student loans through Sallie Mae. One is at 6% and one is at 8%. Will Obama’s plan bring it down to 3.4%? Do we have to apply for something or will it do it automatically and when? The payments are high. She is working but isn’t making a lot. Since she is living home I don’t thing she wants to lower her payments if it means extending it longer. Thanks for your help.
Interest rate changes, thus far, are not part of President Obama’s program. However, he did announce support for Senator Warren’s Bank on Students Emergency Loan Refinance Act, which is a proposal that seeks to change the laws and allow borrowers with Federal student loans to refinance them at current interest rates.
I’ll be sure to update this site as news about that Act gets released, so stay tuned, and keep your fingers crossed.
The most ridiculous part of this proposal is the 2007 cut off! So, people who would be close to getting the 10 year on time payment forgiveness won’t be able to reap the benefits. I understand that they need some time to allocate funds, but 13 years?!
Also, forcing married couples to essentially pay for their spouses student debt flies in the face of the “spirit” of this program. Many people get married after college and their previous debt shouldn’t become the other persons responsibility. A good friend of mine is already struggling to make ends meet with her husband. He has a TON of student debt, which he pays for… They split current costs. This new law will make them struggle more and I have no idea how they will continue to support themselves in their current home.
Thank you for stopping by and leaving a comment. Fortunately, the 2007 cut-off SHOULD be getting removed today, when President Obama officially announces his updates to the plan.
On the marriage thing – this is the Government’s attempt to close what they view as a loop-hole in the existing system. I’m sorry to hear about your friend’s situation, but in their eyes, she has been getting away with something by not having to count her own income in the equation, and we all know that the Government will do anything to raise tax revenue.
Like I mentioned in the article, I believe we’ll see a slew of divorces driven purely for financial reasons, with couples dissolving marriages on paper, but remaining “married”, simply due to the new laws.
I’ll update this page today after the President’s speech, so check back this evening or tomorrow morning to find out if the 2007 cut off becomes a thing of the past.
I just graduated on May 17th, 2014 with my bachelors of science. Because, after high school I went and got my associates degree and right afterwards applied at a university I was lucky enough to get my career before I graduated. That being said, my employer stated that I MUST have my Bachelors of Science by the end of may 2014 as I informed them that was my expected graduation date.
I just don’t see why recent grads with Student loans from the government can’t get the same offers. I owe about 60,000 in Student Loans. This was for my Associates from a community college and then Bachelors from Tulane. I will be paying student loans for the rest of my life until I DIE. Which is sad, Do i give up m career just to get these special student loan forgiveness programs ?
Where is the 5% percent reduction for current student federal loan holders?
Where is a student loan forgiveness program for people like myself who work at top private technology companies that are creating AWESOME SOFTWARE that is changing the world? I work at a company were we create Software for professionals to create E-Learning YES E-LEARNING, AGAIN E-LEARNING content and material that MAJOR COMPANIES even the government uses for their new employees etc..
Dear President –
I beg, please help us. I’m not requesting that you wipe my loans. I’m willing to pay, I’ve never been late on any payment in my LIFE. But, during my exit interview my monthly payment will be 600-700 DOLLARS A MONTH!!!!!!!!!!!! I have a house note that I split in half with my partner, a small car note, but food cost is rising, gas is rising, and every time i turn around…. In Louisiana we have a Hurricane.
Sorry to hear about your situation, and I totally agree – this is one of the biggest problems we face in this country – the poor and the rich are making out like bandits, while those of us in the middle shoulder all the costs, pay the bills, and don’t have access to any sort of assistance whatsoever.
The Federal Government has definitely lost it’s way, and as a result, the Middle Class is being squeezed for every last dime. I don’t think this system is sustainable, and I’m worried about what could come a year, or a few years from now.
I hope you find a way through the turmoil, and hopefully when the 2015 Fiscal Year Budget is approved you’ll get access to Pay As You Earn just like everyone else, which should help make those monthly loan payments more affordable, or at least give you some peace of mind to know that forgiveness is eventually at the end of the road.
Good luck out there Ronnie, and thank you for chiming in. Your voice is much appreciated here!
I personally feel as if this is a band aid for a small amount of Americans. For those it is helping, well, that is great. For those of us who have been struggling since before 2007 or have private student loans, this is nothing. I am a single mom with 3 kids. I pay 1500.00/month on my student loans. Even with working overtime and two degrees, I am still sinking. Obama has done nothing for me.
I agree completely! For most of us, this is less than a band-aid, and more like a band-aid commercial!!!
I’m surprised that people aren’t out in the streets protesting these kinds of lackluster political moves, but I guess it’s because we’re all too busy working multiple jobs to keep up with our student loan payments.
President Obama definitely hasn’t delivered on the many promises he made during either of his election campaigns, and I’m hoping whoever we get next won’t drop the ball like he did on the issue of student loans.
Keep your head up out there, and watch out for the coming reforms, because when and if Pay As You Earn becomes available to everyone, that might significantly reduce your monthly payments, or at least put you on a track to loan forgiveness.
Good luck, and thank you for stopping by!
I am $100k deep for my UNDERGRAD education. It took me 3 years after getting my RN to find a low paying nursing job in the middle of the desert. Not long after that I found a real nursing job with a somewhat competitive salary and good benefits. I went without basic health insurance for almost 5 years because I was working two part-time non-nursing jobs to pay my bills… Which of course didn’t cover student loans. It completely empathize with everyone here struggling to make ends meet. Now that I have a much better income I’m able to make all the minimum payments for all 13 of my student loans which totals $1500/month. Luckily I’m not engaged yet (hopefully soon) nor do I have kids nor do I live on my own. Because I can’t afford any of that on too of the mortgage I’m already paying right now on my student loans. ON TOP OF THIS, I am longing to go back to grad school to get my masters and my license as an NP. But that’s another $50k for 3 years. I don’t mind paying that but I’m looking to get an additional part-time job just so that I can start saving for my future (ie wedding, buying a house, going to grad school) and make even larger payments on my student loans every month. I did the math. If I continue to make payments at this rate I will be able to pay them off in 8 years. But this education system is a sham!!!! The cost of a degree is 100% more expensive now than it was 10 years ago. No wonder our parents could afford everything that we want (yet are not able to afford because of our surmounting debt). It took me 3 years to find a nursing job and in that time I accrued quite a bit of interest because I could barely afford gas.
I am a cosigner parent who is stuck paying my child’s student loan I make the payments it is hard and getting harder due to not having a big income. I worked with people with disabilities for 26 years as a super visor somehow that does not count towards a forgiveness loan. I am the cosigner making the payments what about other parents that co signed for college loans no knowing that forbearance came with high interest rates making it impossible to pay off
How does this loan forgiveness help someone whos school has gone out of business,the owner has admitted to scamming and signing people up for this school and sticks you with having to pay for a loan. For years I have been fighting to get answers for this question. For several years my income taxes have been taken for a student loan and I never withdrew from the school but knowing that I was never in attendance the school continued to accept federal funds in my name. Now that the school is no longer in business there is no way to prove if I was there or not. There are no transcripts which would show if I attended and even though the owner served time the loan is not dischargeable. Finally after 25 years(since 1989) The Department of education wants to consider the loan paid in full.
This is a scam and no one seems to be able to answer the question as to why this person was able to scam me and the government for so long…..The name of the school was PSI a trade school in Baltimore, Maryland…..Everyone dances around scams like this . Is there anyone that is willing to take on the government to get an answer? All I would like is an explanation and my funds that were taken from me. If the owner did federal time and paid restitution why am I paying for something he admits to doing to me?
I’m so sorry to hear about your situation. Unfortunately, this loan forgiveness program isn’t going to do much good at all for your unique circumstances.
Have you spoken with a lawyer, because that’s likely the only way to get assistance in this case.
Hi all, I am writing in response because I am in the same boat as you but with a twist….. I am TOTALLY DISABLED and a single parent!!! When my disability was approved in 2012 I never received a letter stating that I could be approved for total loan forgiveness if I sent in certain criteria showing my student debt and my approval from disability. I only found out about this after looking through some websites about loan repayment. Of course I jumped on this, who wouldn’t?!! No where was it stated when I took the loans out or when I applied for the loan forgiveness that it would be counted as taxable income that I would have to pay back. I receive $952.00 monthly on disability and I am a single mother of two. If I had the money to pay a monthly payment on my student loans I would have if I could have but being disabled gave me a chance of not having to do that, but now the government is telling me even though my loans were discharged due to my disability I still have to claim that as income received even though I had to fight 4 years to get approved for disability in the first place!, with 2 lawyers working for me. It all came down to them having a problem with my age, they didn’t want to pay me MY money that I had worked for and payed my taxes since the day I had graduated high school. I guess they liked my money too much to give it to me, the RIGHTFUL recipient. I was informed after I had filed my taxes of this and was told that I should have known this when I received form 1099c through the mail, which I didn’t receive otherwise I wouldn’t have been on hold waiting for an hour and 45 minutes to talk to someone!! Which by the way, does the IRS EVER hire nice people or is their main qualification to work for them is you have to be an a**hole?! ( Another story for another day though.)
As stated with everone else the taxes owed is more than what my loans were. I was wondering where someone in my situation stands in all of this mess. My loans were taken out in 2001.
Thank you for your website, very informative!!
It sounds like you’re in a pretty tricky situation here – have you already received complete loan forgiveness, and the tax bill for what what discharged (and is being counted as taxable income)?
You are NOT UNIQUE in being surprised by the massive tax bill! Virtually everyone is surprised when they find out about the huge tax liabilities resulting from loan forgiveness, but I am surprised to hear that your taxes owed are higher than your loan.
Do you mean that the taxes owed are higher than the monthly payment, or do you mean that they’re somehow higher than what you originally borrowed?
Either way – I will do some research to see if it’s possible to have the tax liabilities discharged – there might be a program out there specifically for this, and even though I haven’t heard of anything like that yet, it could be that I just haven’t come across it.
I’ll let you know as soon as I can set aside some time to figure this out. Thank you for visiting, and good luck!
What I want to know is why people can go crazy with credit card spending for cars and shopping then get away with not paying by filing bankruptcy and people who are trying to do good and get jobs that contribute to this world can’t file for that. I know if that happened then everyone would probably do it but maybe they could make certain qualifications in order for those students to file in the future if needed. Im one of those people owing way more then I initially borrowed and its very hard to get by with all my money mostly going to interest and not the initial.
Good question Krystal.
It doesn’t make sense at all to me either. The only possible answers are politics, corruption and greed.
The proposed changes to the PSLF disproportionately affect the students most in need of such assistance. Higher education was previously out of reach for low-income Americans, but the PSLF, passed as part of President Bush’s 2007 College Cost and Reduction Access Act, made even law or medical school an attainable goal for low-income Americans. ??
The proposed changes (if applied to existing borrowers) equate to a bait and switch by the Administration, where the program begged low-income students to take a chance and to reach for higher education, and where the rug may now be being pulled out from under those saddled with debt that was promised to be forgiven if they applied themselves in the public sector.??
If these changes are to be adopted, the changes should be prospective, and should apply only to students who are not yet enrolled in college, and who may choose whether the new program makes financial sense for them. Any retroactive application of the new program places an undue burden on students who come from low-income communities, on students who agreed to work harder during this country’s time of economic turmoil, and on students who dedicated themselves to public service.??
For those interested, this whitehouse.gov petition forces the White House to address the issue when 100,000 signatures are received: http://wh.gov/ly4yq??
I completely agree with you that the proposed changes should not be adopted, for all the reasons you mentioned, but you should think about starting a new petition and using the program’s proper name.
That petition refers to the “Public INTEREST Loan Forgiveness Program”, instead of the “Public Service” program.
I’m not entirely sure that the White House will take it seriously, even if it does collect the signatures required for them to comment on it.
I have student loans from 1986 and was in default but got out of that. Just graduated with a medical assisting certification to find out this field is flooded and no one wants someone who just graduated so now I have $40,000 in debt and no job to pay it down. Obama didn’t help us. Plus I am an EMT but I was told that’s not public service. Hope he never keels over in front of me!
I borrowed $23000 from 1988 -1992, that debt is now $50000. I only know of two ways to get rid if this camel riding my back and that is either becoming disabled or Dying. I prefer the 1st.
Mr. T, you are a genius. Thanks for taking the time to spray all the bs off the hope of what his loan forgveness is really about.
Im 44 and did a masters in my early 30’s. I took out a private school loan w a co signer for 30k. I used 20k of this loan for my school debts and my brother who co signed used 10k. Since repayments began i have paid 14k on this loan and my co signer has paid 10. Thats 24k. Guess how much rhe loan still is? 37,000. All the money we paid has gone to interest only. The balance of the loan after paying 24k dollars on it is still more than the original amount. It comes with nothing that allowa us tobsurvive this 6 headed beast who will not die. Neither myself nor my brother can make the 440.00 interest only paymemt and the torch of our misery has been passed to our father who is a vietnam vet on permanent disability. 440.00 a month comes out of his disability checks to keep our heads just above water.
This is exactly what’s wrong with student loans and it’s exactly what President Obama’s loan forgiveness program SHOULD have addressed. Unfortunately, he and Congress have used the opportunity for real reform as a political game and are simply attempting to buy the votes of current college kids.
I don’t understand how any of them can sleep at night knowing that people have paid off nearly as much, if not more than their original principal, while still continuing to be buried in excessive debt.
Are your loans Federally-financed? If so, what repayment plan are you using? How many scheduled, full and on-time payments have you made so far (at some point you will be eligible for loan forgiveness)?
Do you happen to work in a Government position, at a non-profit organization, or are you a member of the military? (These employment positions have special options available to them, like earlier loan forgiveness, more deferment options, etc.).
Have you used, or thought about using, the deferment or forbearance programs?
You’re in a tough spot, but you do have some options for fighting back!
Funny how little research you seem to have done for this article.
First, the Pay As You Earn plan caps payments at 10% of discretionary income (Income ABOVE the 150% of the Poverty Line for a borrower’s family size), not 10% of all income. For a single borrower, that 150% mark is about $17,500. Anyone with income under this mark gets a $0 payment until their situation improves.
Second, all federal loan debt is “guaranteed”, so a borrower only needs one Direct Loan to qualify for Pay As You Earn.
Third, ALL Post 10/1/07 loan debt is eligible for Pay As You Earn. You state that only a borrower’s first loan is eligible. This is blatantly false.
Fourth, if a borrower were to pay off their pre-2007 loans before taking out any new federal loans, those newer loans would be eligible for Pay As You Earn. Something to keep in mind.
Finally, you state that “there is no application”. I beg to differ. The StudentLoans.gov website has an online application for all three of the government’s Income Driven plans, including the Pay As You Earn plan. Obviously, borrowers should contact their servicer with any issues, but the application is available online, on a government site no less.
Actually, quite a bit of research has gone into this article, but the information regarding specific details for the President’s plan has been confusing, incomplete in many areas, and contradictory in others.
It appears that some great new explanatory pages have recently gone online at the Federal Student Aid website since I last revised the article, and that helped clarify some of my own outstanding questions regarding specific details of the plan.
I do appreciate your effort to add clarity to specific points of the plan, but I still stand firmly behind my criticism of this plan’s excessive eligibility restrictions.
I think President Obama should have offered a much more comprehensive set of reforms that included forgiveness or debt relief for people who have proven that they’re attempting to repay their debt, but who have fallen behind on payments due to excessive interest accrual.
In my opinion, the only reason that these reforms have been targeted to loans issued after 2011 is to pander to college students in an attempt to garner their votes in future elections.
Like I said in the article, it’s simply politics as usual, but I don’t think that should have any bearing on an issue that threatens our national security.
I’ve been faithfully paying my loans about 14 years now, barely made a dent, had to go into forbearance multiple times, and in fatter times I added parent PLUS loans so my son could attend school. Well, now I’m underemployed and having to take forbearances again. My combined loans = 37% of my income! And my rent alone = half of my income…And my son can’t find a job in his field and I’m also supporting him. My combined loans would total about $200 more than my social security check will be.
My question is this:
I’ve sought and attained the “Loan Debt Burden” forbearance from Sallie Mae and ACS but FedLoan refuses to give it to me, saying they don’t have to factor in the debt I incurred from other lenders and through this reasoning THEIR loan in isolation doesn’t take more than 20% of my income, so they say according to Federal guidelines they can deny my application.
(ACS and Fedloan were both parent PLUS loans, so that isn’t the deciding factor, as ACS granted me the forbearance)
– Is FedLoan yanking my chain by saying Federal guidelines say they don’t have to take into account my total debt burden?
– Would loan consolidation help or hurt me in my situation?
– If I applied for the pay-as-you-go, what happens if I can’t pay my bills into retirement?
– If I were to one day get married and can’t pay my bills, would I put my partner’s property in jeopardy?
What’s going to happen to us all when we are geriatric and can’t generate any income??? Somebody somewhere is making a killing off our interest. We signed ourselves into slavery for life. 14 years of paying and I’ve barely made a dent in my loans. Debt relief should go to those who have already paid a decade or more of interest instead of new loans, my two cents…
I’m sorry to hear about your situation =(
I totally agree with you that loan forgiveness should be going to those who’ve been faithfully paying off their loans for years rather than to those who are just starting out and having even made more than a few payments, but this is politics as usual.
I wouldn’t feel comfortable answering your questions because they’re a little more technical than I’ve personally dealt with, but I would direct you to try asking your contact at Sallie Mae if FedLoan is right in their assessment.
You should ask them as well about loan consolidation and pay-as-you-go, as they’re going to be your best bet for getting an authoritative answer.
On getting married – yes – I do believe that you would be putting your partner into financial liability by bringing debt into the marriage, though perhaps a prenup could be drafted that specifically states that the debt is entirely your responsibility. You’ll want to consult with a lawyer on that question.
Wish I could be of more service, but I don’t want to give you bad advice and send you off on a misguided adventure.
Thanks for taking the time to answer, Tim. This is a great service providing clarity to people about debt forgiveness smoke and mirrors.
That’s a great suggestion asking Sallie Mae. I’ll do it. As is the pre-nup lawyer thing, (don’t even have a partner or dating, just really don’t wish this burden on my worst enemy so want to take care and not curse anyone) that’s good advice too.
One more thing – is there someone/body we can complain to? I’ve been turned away two times and am working on my third by FedLoan. Each time I talk to whoever it is talking to me, I get different conflicting responses. Most people are not as tenacious as I am and I wonder how many have just accepted this misinformation, lost hope, and gone into default. Somebody should know about this…
Thank you so much,
Hey absolutely. It’s been said many times before by people far smarter than me, but I definitely view the student loan debt bubble as a national security issue and one that needs to be dealt with soon.
On who to complain to, there’s the standard “Send a letter to your Congressman/Senator”, which is definitely a good step in the right direction (and worth doing), but another idea would be to contact a reporter or some type of investigative journalist who has a history of attacking the student loans industry, offering to share your story.
If you’re truly being mislead about federal regulations and your options, then that could be a HUGE story!
Like you, I won’t be giving up on this issue and I’ll continue to write about the shortfalls of this forgiveness program until something is done to right the wrongs of excessive interest payments and ballooning, wildly excessive debt repayments.
Good luck Leanne, and please come back to let us all know what you find out!
Sorry to get this to you late, but your comment about the forbearance guidelines and the 20% threshold got me curious, so I did some research this morning and I think I have good news!
According to the studentaid.ed.gov website (the official source for Government information regarding student loans and student loan debt), I believe that you DO in fact qualify for a Mandatory Forbearance.
Here’s what I’m basing that judgment on:
The above quote was pulled from here.
If this is accurate, then FedLoan should have no choice but to offer you another forbearance.
I hope I’m getting this to you on time, and I hope that I’m reading things correctly here. I really hope this helps, and perhaps if you print that page’s content out, highlight those specific lines and bring them into their office (or mail, fax or email them to them), you can prove your point and force them to comply.
Unfortunately, I’m not sure who to go to if they refuse your request, but I would bet that simply asking for all of your contact’s information and requesting to speak to their supervisor or manager enough times might get you to someone who can make an executive decision and get the forbearance in place for you.
Good luck! And let me know how it goes!
Thank you, Tim.
I quoted them that information before. The problem is I speak to different people each time.
– One will say that my income is too high and that they only have to look at their own loan and not include the other loans
– Another will say that if I send documentation of my other loans I will get my forbearance granted
– I sent my account summary to them (probably another person) and they say that doesn’t qualify as documentation
It’s like they WANT me to ruin my credit and go into default…
I still have to contact Sallie Mae and will do that now, since I can’t work today due to the weather. Will update you on how that goes.
The nice Sallie Mae customer service rep says qualification is based on only their loan, but that doesn’t make sense since I wouldn’t have qualified for the 20% income based on that. Same with ACS.
And that’s also not what the FedLoan verbiage quoted says:
Per section six of the Student Loan Debt Burden Forbearance application, “To qualify for forbearance on your loan(s):
(1) The monthly payments due on all your Title IV loans must be equal to or greater than 20% of your total monthly income.
(2) You must provide your loan holder with:
> (a) Documentation of the most recent monthly payments due on all your Title IV loans (e.g., copies of monthly statement or repayment schedules); and
> (b) Documentation of your most recent total monthly income from all sources (e.g., copies of current tax return, pay stubs, W-2 forms, dividend statements), unless you do not have income.”
I asked what government agency these lenders are accountable to that I can complain about FedLoan, and Sallie Mae said that, if it was a complaint against Sallie Mae that I would have to contact a different department in Sallie Mae. So it seems like there is no regulation except self regulation. We’re basically at their mercy. Don’t know why FedLoan people have to be jerks about it.
Anyway, I’m sending in my third application to FedLoan. Maybe I’ll hit the right combination with a reasonable person this time.
Btw, I called Direct Loans Consolidation and it is possible to consolidate any Federal loans together, even if some are PLUS parent loans. Interest is calculated from a weighted average, which seems fair enough. They dictate the terms, however. Income sensitive payment plans exist for consolidation loans as well and they can be renegotiated. Consolidation loans supersede any forbearances and commence 60-90 days after approval, so I’m definitely going to go that route at some point before my forbearance ends.
I’m sorry to hear that the system isn’t quite working the way it’s supposed to. I have to wonder how many others are facing the same issue that you are, with essentially no recourse for issuing a complaint or challenge!
The consolidation sounds it’s a better deal that I had understood it to be, especially with the potential for renegotiation. I hope that helps, and good luck with your next attempt with FedLoan.
I’ll keep watching the space and updating this page as new information gets released regarding the President’s forgiveness program, but if I stumble upon anything else that might help I’ll be sure to shoot you an email to let you know about it.
Thank you again for coming back to share what you found out with the rest of us. Your comments are going to do a lot of good for some very confused people!
I am sure that this will be nice and workout to someone’s benefit, at some point. I was a single parent with two children when I went to college, partially through my time going to University, D.S.H.S. decided that I needed to drop out of school or lose our benefits. Obviously with two children I did not have a lot of choice, I dropped out. Since that time, I have been in default, pulled myself out by consolidating and I have struggling to pay ever since! This all started about 16 YEARS AGO! I am almost at the 20 year mark that I would have been able to be forgiven according to this… if I had waited to go to college until my children left home and I was about 60 years old. There should be some kind of program for people that are rapidly close to being Seniors that can not afford to make their payments, pay for their bills and medications and still eat! The income standards are also a bit interesting. Where are the people “living” that are making it on the income guidelines? Student loans are the only financial burden that you can NOT declare in a Bankruptcy and they can FORCE you to pay to the point where you would end up homeless and it is acceptable!
Thank you for your comments Angela. I could not agree more with your analysis on the fact that student loans are an excessive burden. Legislation should be enacted to help people reduce their student loan debt in a fair, reasonable way, especially after they’ve paid back some percentage of the original debt. The problem with extremely high student loan debt is driven by the penalties, interest and other additional costs.
No one gives a damn especially our own government. It doesn’t matter if you are a senior citizen with medical issues. Even though I should retire due to a chronic medical condition I cannot afford to – some days I can barely move and have to take sick time – and this is definitely taking its toll on my health & welfare including stopping some medications because I can no longer afford to – thanks to evil loan servicers. Don’t kid yourself – these loan servicers use every predatory tactic and our own government allows this. I am at the end of my rope with absolutely no where to turn
I’m so sorry to hear about your situation – it’s true though, the lenders are in this business to make a killing, and they’re profiting off the misfortune of many people who took out loans for college degrees that simply cost too much money.
It’s not a good deal for everyday Americans, but so far the Politicians haven’t quite built up the nerve to deal with the issue effectively. Even this new loan forgiveness program is a band-aid placed over a gaping arterial wound.
Hopefully there will be additional benefits announced soon, and something can be done to help people like you. Good luck WL, and hang in there.
I had subsidized and un-subsidized student loans from 1999 but I consolidated all of them 13 years ago.
Are there any options for me?
Unfortunately, your loans aren’t eligible for the Obama forgiveness program. If you need help reducing monthly payments, or simply pausing your loans, then I would suggest looking into switching payment plans, or requesting a deferment.
As far as forgiveness goes, I’m not aware of any assistance available for your loans at this time, but I’ll keep you updated as things progress!
So there is no help for those who have student loans prior to 2007 at all? Or the 10% income base cap is available? And does that include total family income or my individual income? My loans are from 2002.
Yes, President Obama’s forgiveness program doesn’t offer any assistance to people with loans from before the qualifying date in October of 2011.
Accordingly, your student loans from 2002 will not be eligible for the 10% monthly repayment cap, but you should still have access to the traditional 15% cap and you might qualify for one of the other existing income-based student loan repayment plans.
There are 7 different student loan repayment plans currently available, with 4 of them setting monthly repayments based on your income.
Those plans are:
-The Income-Based Repayment Plan
-The Pay As You Earn Repayment Plan
-The Income-Contingent Repayment Plan
-The Income-Sensitive Repayment Plan
What you need to do is contact whoever services your loan (the people you send your monthly payments to) and ask them what you qualify for. They are the only people who can speak about your debt relief options with any real authority.
Other than that, you could also consider looking into opportunities like student loan deferments, which could allow you pause your loans for a time (and which are definitely available for loans from 2002).
Many servicers will not work with folks with student loans (Ed Financial and ECMC are the worst). They refused to provided me any information including making statements, “We don’t have to assist you – you owe the money you pay the bill”; “we don’t have to work with you”; etc. There ought to be a class-action lawsuit brought against them. There is no where to turn to prevent and stop these kind of tactics. They also told me they did not have to notify me of any changes they made or provide me with receipts for payments I made. Shortly before the new rules came into effect they put my loans into default AFTER ARRANGEMENT were made to make payments. Tactics like this are “evil” and only serve as proof that servicers will not work with those with student loans.
A new article from this morning stated that 100% of all federal loan debt would be forgiven November 1st. That sounds way different than this. From the sound of this, this isn’t going to benefit me at all. I am already paying 10% of my income and my loan payments are set for a 10 year loan. I couldn’t drag it out to over 2 years if i tried.
That article and any claims about 100% loan forgiveness are completely bogus.
It looks like this idea originated from a satirical Onion-like news article distributed as a joke by a radio station.
It’s a shame that the station hasn’t removed their disinformation, since it’s been confusing people for a few weeks now, leading to a ton of questions and a great deal of disappointment.
There is zero chance that the federal government is going to forgive 100% of student loan debt.
I have student loans from the late 1980s and would like information on Ian forgiveness for it..I owe around $25000 and it was a federal loan.
I’ve got some bad news for you =(
Under the current rules, your loans from the 1980’s will not qualify for forgiveness under President Obama’s program. However, you should definitely be able to qualify for loan deferments (read about them here), and one of the following types of repayment plans (each of which can help reduce monthly payments):
We’re still working on building out content to cover these three repayment plans, but for now, try searching their names on Google to see what you’ll be able to qualify for.
I wish I could offer better advice, but the new forgiveness program is quite limiting with it’s strict eligibility guidelines.
I’m sorry but that’s simply not true, the age of the loans is not important, the type as you know is.
There must be either 120 or 300 qualifying payments made on eligible loans.
If loans are not the right type they must be consolidated which will give them a new loan type which is eligible.
I disagree with your assessment, but thanks for stopping by and commenting anyway. The age of the loan absolutely matters when dealing with the Pas As You Earn Program (President Obama’s loan forgiveness program) and qualifying for federal loan forgiveness, because currently only a very tiny slice of the federal loans out there qualify for the benefit.
President Obama has proposed allowing everyone to qualify for the PAYE program, but that is not yet officially law, and there is no telling when that proposal will (if ever) go into effect.
Additionally, the number of payments that must be made to qualify for loan forgiveness are 120 and 240 (not 300) – or 10 and 20 years worth of payments, respectively.
I’m not sure where you’re getting your information, but as of today, it’s not accurate.
Hello. My name is LaVerne Marie Wizy. I am also looking into the Obama Student Loan Forgiveness program. Where do I have to go to receive this valuable information? I have student loans from 2010 til 2014. I was always being downsized from companies and I wanted to go into the healthcare industry. I attended Kaplan Career Institute for Medical Assisting/ Pharmacy Technician programs in Ohio. I have been without work for over 2 years and also in debt because I just graduated from Sanford Brown College
in 2013. Both of my parent’s are gone. I am really struggling to make ends meet and I cannot find a job. I have been looking for over 2 years and still have no employment prospects. I do not know what to do. I hope that someone can contact me via my email address or by telephone. I really hope that things get better and that I am employed soon. I would appreciate any information on this important subject. This is a wonderful thing that the President Barack Obama is doing for the american people. This would really help me out alot. Please reply as soon as you possibly can. Thank-you LaVerne Marie Wizy.
Sorry to hear about the difficulties you’re facing. All the information you need about Obama’s student loan forgiveness program is on this page. To take advantage of the loan forgiveness, you’ll need to contact whoever services your loan so that you can request a loan modification that puts it in line with the new standards.
Unfortunately, you’ll only receive assistance if you have federally funded student loans, but the assistance is fantastic. First, you can set your loan repayments to 10% of your monthly income (this is called Income Based Repayment), and secondly, you should look into getting a deferment on your loans so that you can take some time off paying them back.
You can get information about applying for a loan deferment here.
I hope this helps! Good luck!
I have federally funded students loans starting obtaining them since 2006. I currently work as a nurse. When would that ten year period begin? I have never missed a payment. Would I qualify?
Hey Jim, thanks for stopping by.
For more information on how the ten year student loan forgiveness plan works, please check out our page about Public Service Loan Forgiveness. It spells out the eligibility guidelines, considerations and requirements in detail.
Basically though – your ten year period starts as soon as you start making payments, and each payment that you make which is on time, in full, and “scheduled” (meaning part of your actual repayment plan, not additional payments that aren’t required) will count toward the required 120 payments.
Don’t think of it as a ten year period, but as a 120 payments period. Once you’ve hit 120 payments, you should be eligible to have the debt forgiven. The trick is that those 120 payments have to be according to your actual repayment schedule, so making extra payments won’t help.
Again, all the details of the program can be found on our PSLF page, which you can find here.
My name is rafael simmons and I am looking into the obama relief program for student loans. At this time I am not workibg and having hard times to pay my everyday bills. I do not have and source of incime at this time to pay in full. I am looking for relief. I dont have any problem in paying my student loans but need help. Please keep me posted on which direction to go. I owe about 13k and I am looking for work. Thank you
Are your student loans federally funded, or were they borrowed from a private lender?
You have to go directly to your loan provider to apply for an IBR Income Based Repayment plan. If I am not mistaken it is now a law that your loan service provider must make this repayment options available to you and how to apply. If you have a Sallie Mae Loan, their IBR application is available for download on their website and it’s not hidden. You can also request to have your loans reviewed for consolidation,.
My Graduate loans were with 2 organizations but I requested through another application on Sallie Mae’s website to review consolidating under the new law. In fact, I received several emails from Sallie Mae regarding these new changes. The process of consolidation took 4 to 5 weeks and it was done. Annually, I must reapply for the IBR with my 1040 where they determine my monthly amount. I am paying $125 more a month this year than I did last year and that is because the IBR payment adjusts as your income increases annually.
And, Liam was right…the 5% was a $600 a month change for me. There is no way I could have paid $900 a month for my student loan payment. Thank you President Obama, Joe Biden and the law makers who helped put this in action.
Glad to hear that President Obama’s forgiveness program is making a real difference Gina! Even though it’s not available to everyone, it is nice to know that it’s putting a dent in some people’s payments.
Hopefully there’s more debt relief to come, because a lot of people out there are hurting pretty badly because of their extremely high student loan payments.
Thank you for stopping by and offering that advice regarding Sallie Mae’s IBR program!
I’m glad the loan forgiveness program is working for a few. I haven’t seen any kind of program or help for student loans 30 years old, which makes Senior citizens indentured servants. It’s come down to garnishing Social Security, already a very limited income, and many Seniors must rely on it for their only survival income.
Yes, higher education in this country belongs to the elite. Everyone else gambles for a chance to better their life’s, and if they don’t win, they are held prisoner for life. This can only lead to an uneducated population unable to compete in a global economy. Education should be a right for all those that are willing to make the sacrifices and put in the hard work that it takes to be a learned person. All society benefits.
Thanks for stopping by and sharing your opinion. We agree with your sentiments, which is why we created this website!
I am curious to know what kind of relief there is for students who acquired loans prior to 2008. It seems as if we are being punished for choosing to further our education. I am currently taking care of my brothers 2 kids to keep them out of foster care. Because I make 60k a year, my payments are $500 per month. I am literally living paycheck to paycheck trying pay student loans on time. Where is my relief!
Were your student loans federally funded or are they private?
Hi there. I have subsidized and unsubsidized Stafford loans from 2005-2009. Is there any way I can get some help? All my other lians are private and are kicking my butt!
You’ve got all sorts of options! Federal student loans are the easiest type to deal with, and you should have access to both the Stafford Teacher Loan Forgiveness Program, as well as any of the other general Federal student loan debt relief programs (like the federal deferment programs).
You should be able to qualify for Income Based Repayment (part of the new Obama loan forgiveness program) on all of your federal loans, which would limit your monthly payments to 10% of your salary, and it’s likely that your entire federal student loan balance will be forgiven after you’ve made payments on them for 20 years (this is another part of Obama’s new loan forgiveness program).
Your private loans are another matter entirely. Getting effective debt relief for private loans isn’t easy, but there are some options available there as well. Check out our pages on Private Student Loan Forgiveness, Consolidation and Bankruptcy Discharges. You also might want to check out what Deferment options you’ve got for the private loans, as putting repayment on pause will buy you some time to generate additional funds.
So, yes… you’ve got all sorts of options! Good luck!
I’m confused. I thought the poster above would not qualify because some of her loans were before Oct 2007. I started grad school in Sept 2007-09 and am back in grad school in part because I got no value for those degrees at top schools (job referrals, mentoring, LORs from professors, etc.). I’ve become disabled through a series of injuries while unemployed and without health insurance between schools. I went back to school this time in part to finish projects from the previous program, in the hope I could sell them, but also because I needed money for medications and physical therapy. The PT will, I hope, make me able to work again. I had thought I would get disability and use that to take 6-12 months to recover. I was turned down because I moved by myself (I’m single and have no kids, who was supposed to move my stuff?), can swim (as could the lady in a wheelchair when I could afford the Y), can perform my pre-degree job (which is hard to find where I’m located now and rarely pays a living wage as it did in a big city where I lived before), and can sit in a chair (so could my ex, who played video games and talked on the phone all day while collecting SSDI). As a person who always worked, often 2 jobs, it’s disheartening that there was no help when I needed to get back on my feet, but if I’d had a sheister lawyer and quack to blow up the case, I could be collecting while dancing in KIA commercials!
As a result, I have an insanely high amount of student loan debt. Like a mortgage worth. Fortunately, it’s all federal, a peer in grad school Was not told to do PLUS loans and had private loan collectors calling although she is permanently disabled (schizophrenic). Given my experience during these tough years with government programs like disability and public assistance — I’m a citizen and used birth control, so I was unqualified for cash aid, even to get prescriptions or for gas/bus fare to mandatory volunteer work. I only qualified for food stos and General Relief, which is a loan that will garnish pay 100% if/when I can work, until it’s paid off. So I’m not very confident in government assistance. It seems geared toward people who know how to play the system and fake disability. I just wanted to get better, not be on SSDI forever.
Anyway, I’m trying my best to do well in school, but cutting back hours so I can start PT. The kind if therapy I need is not within 30 mins of me and it’s been hard to finish work (injuries and meds for then slow down my mind and body), let alone make time for an hour drive and an hour or two of PT 4-6 days a week.
I’m so concerned with what happens if I get married.
Finally, my reading of IBR was that ANY give or non-profit work qualified if it was 30+ hours and considered FT by the employer. Lucky me, I briefly found an entry level job a few years ago, where they wanted to pay me as a low level assistant, perform the work of a data analyst, and work “part time” 32 hours a week and pay into benefits, although FT emotes get a benefits surplus. It took me 18 months to find that! Again, before going back to school to qualify for career-track jobs, I earned enough to support myself.
I just looked IBR up last night. Would I be better off if I can graduate and strart the existing IBR before the new programs kick in? My debt will be about $400k. Yep, that’s what happens when you go to “top” schools that supposedly take care of students and alums, but really only do so for those who are already members of the “club.”
I wasn’t freaked about the amount of debt, because I planned to do IBR and work whatever NP/gov job I could find, hopefully where I could help poor students, since my precious schools gave all the big scholarships and jobs to the wealthy and talentless.
First, I’m sorry to hear about the issues you’re facing – it’s one of the biggest problems the United States faces right now – people who actually need help and are willing to pull themselves up by their own boot straps don’t get it, while others who are simply lazy and irresponsible are able to qualify for repeated Government handouts.
It sounds like you’re in a bit of a tough spot, but it is very fortunate that you’ve got exclusively Federal Loans, and haven’t fallen prey to private lenders, because you do have options to get out of this mess. Take a look at our page on Relief for Federal Student Loans, where you’ll find some additional ideas other than the Obama program.
On the October 2007 issue, current law doesn’t offer forgiveness benefits or access to Pay As You Earn Program to anyone with loans older than that date, but this is being updated soon (check out point #1 above under the “Positive Changes” section for an explanation of the proposed changes in the Fiscal Year 2015 Budget). In a nutshell, EVERYONE will be getting access to PAYE as soon as those changes go live, so we’ll all be eligible for Federal Student Loan Forgiveness.
Regarding IBR, it’s hard to tell what will happen when the changes go live, and when that will occur, but personally, I would bet on things getting worse. If I were you, I would probably sign up for the Income-Based Repayment Plan now, then switch to the Pay As You Earn Plan as soon as it’s made available. I think PAYE is by far the best of all the available Student Loan Repayment Plans, but there are cases where the other plans make more sense.
Again, I totally agree with you that the way things are lined up – especially at the big schools – is a scam. The rich, connected, and privileged have created all sorts of aid programs that don’t work for regular people, are only available to those with expensive lawyers or CPAs, and which protect their own class of people from the under-educated, under-funded masses who just want to put in an honest day’s work and make a life for themselves.
Wish I could be the bearer of better news, but this the reality that we’re facing right now. Good luck out there, and hang tight!
Thanks Tim. I’m in school until next Nov, so I’ll see what things look like then. Who knows, maybe I’ll sell a book! It’s been quite an eye opener trying to get badly needed help from government programs. Anyone can have a string of injuries or a health problem…how many can wait 4 years to be turned down by disability? They were looking for any excuse to turn me down, because it would have been $50k in back benefits. Based on the year I could afford access to a pool, I think it would take 6-12 months to recover (I’m worse off than ever, I have to sit to cook or do my hair, whichI could do after the initial injuries). So, it would have been about $15k in benefits if it had been approved earlier. I could have been working 3 years ago. I might have been able to have a child, which was the motivation for me to go back to school. That possibility is quickly slipping away.
I’m generally pretty resourceful, but haven’t been at normal energy/mental sharpness I was. As you said, the system benefits the wealthiest and the poorest or scammers on both ends. I was treated like a criminal when I needed help. I’m educated, but it’s difficult to navigate these programs.
At least I was able to go back to school to have something come in so I can recover. I think we’re only hitting the tip of the iceberg of the student loan debt bubble. Years ago, my dad was taken by a tech school. They put him in classes he wasn’t qualified for (he dropped out of high school, had a GED, maybe had some algebra), so he was lost and quit. The school got the money. That pales in comparison to the online programs popping up everywhere these days. All the easier to get people to apply and enter programs they don’t have to commute to and can do work at any time of day. Doesn’t mean the degree is worthwhile.
It’s a load of crap like everything else. Only teachers, public service workers (cops) and the military can get loan forgiveness.
Teachers can get some loan forgiveness, not all, if they work 5 years, full time. I’ve had a teaching license since 2008 but have not been able to find anything but long term sub jobs and part time work. So not all teachers benefit. I owe 50k for my Master’s degree. hurrah.
I just wanted to add that the teacher loan forgiveness benefits aren’t all that easy to qualify for either. It’s not just 5 years of full-time teaching that’s required, but “5 complete and consecutive years of teaching full-time in a federally designated low-income school”.
Basically, only teachers who work in terrible school districts are able to qualify for loan forgiveness, and that forgiveness is only offered on Stafford loans (a type of federally-funded loans for teachers). Just like President Obama’s new loan forgiveness program, the teacher loan forgiveness program is quite restrictive.
I am currently a teacher at a very low income area and have been teaching for 11 years now. I have been paying my loans religiously up to this date. They are Stafford loans and still owe about 40,000. Am I correct to say that my loans can be totally forgiven up to this point and if so why hasn’t my lender cancelled them or forgiven them.
President Obama’s Student Loan Forgiveness Program won’t apply to you because it sounds like you took your loans out well before the October 2007 deadline, but you should look into the Stafford Loan Forgiveness Program, which would help you to get your debt forgiven.
You need to contact whoever services your loan to start the process – they don’t do anything for you, and forgiveness is only offered if you actively pursue it. It’s possible that you’ve been wasting a lot of money unnecessarily, so I’d look into this right away!
I wish I could qualify for this program, but I don’t satisfy any of the conditions. Are there any other ways to get out of student loans without paying them off?
There sure are! Do you have federal student loan debt or did you use private student loans?
Tim, I have federal loans. What other ways are there besides the old ‘after 25 year automated payments forgiveness’?
For other options on reducing Federally-funded student loan debt, check out our page on Federal Student Loan Relief Programs.
Thanks for the information. I read the article talking about Obama cancelling all student loan debt and got pretty damn excited until I realized that it sounded a little too fishy…
This program is bullshit. I have federal student loans outstanding since 2003. I owe $115,000.00. I have deferred and done everything I could to not pay because I just can’t afford it. The loan company wants $425.00 per month. No way I am paying that much. I don’t think I could even pay $225.00 per month. On top of that I have a Sallie Mae loan for $17k, where they want $200.00 per month. So this program does nothing for me. If the government can bailout the banks and GM, why can’t it bail out students/former students? I don’t know what they are doing in Washington D.C. but it seems like every time they come up with a new program its just window dressing and doesn’t do much for most of the people.
I’m in the same boat you are. I have over $50k in student loan debt dating back to 2000 and while I am paying what I can, it’s still not even putting a dent in it. I’ve had to defer multiple times and don’t think it’s fair that we are not getting any help either. I am a nurse and won’t qualify for the forgiveness after 10 years of service like the newer nursing graduates.
I think the student debt scam is ridiculous. I am only a freshman in college and extremely worried and stressed out all the time about student debt and I haven’t even graduated yet. Literally, I am trying to plan for a job that will give me student loan forgiveness but that in itself is impossible to plan for. I want to become a nurse I think, like you, but when I think about debt I just want to quit college. I am paying for school with a private student loan and stafford loan and will probably accrue over $120,000 if I stay at my university for 4 years (once publicly paid for)…. I chose to go there (university of Illinois) because of its great reputation and high percentage of job placements after school BUT nothing is guaranteed. Other countries pay for their workforce to go to college. Ive been told my whole life you can’t really get anywhere without a degree unless you’re the lucky one in a million, but getting that degree is a scam. Im paying for it with money I don’t even have to be in debt the rest of my life. We need to stand up as a nation to fight this! This is the number one problem in our country. How are we supposed to take care of ourselves and each other and live happy and healthy lives if we can’t afford to do so.
I’m in the same situation, I’m not against paying my loans they helped me go to school my loans are from 2001 and on all together i owe $50k maybe more I can’t afford to pay $400 a month on top of my rent and other living cost. Its outrageous. I’ve have deferments and hardships but its coming to the point where I can’t get anymore postponements. I don’t know what else I can do. I’ve tried multiple times to get a better paying job but that hasn’t worked out so now what do i do, go back to school again and get more debt
Sorry to hear about your situation PhillyGurl, but whatever you do, don’t keep adding to your debt. That will only make matters worse!
Amen! Same here. My payment was $467 a month and I currently owe $123K. My original loan was much lower, however, I signed up for the 30 year program to have smaller payments in the beginning and billed-up as time went on; however, that ballooned my interest. I lost my job at one point and couldn’t make the lower payments and defaulted. I tried last year to begin repaying my loans, but the $467 a month was just too high. I’d like to pay back my loan, but I’m the only bread winner in our home and cannot afford the payments on my salary. I wish I could just pay back my original loan which would probably make my payments closer to $150 a month. I wish I could go back in time and not make the mistake of signing up for the 30 year payment plan, but I can’t. Can Obama just revert defaulted loans to their original borrowed amounts? I am sure I could afford that. All the time that has passed since 2001 and my default status has tripled what I originally borrowed in penalties and interest. How is this helping anyone?
Really? So taxpayers should be burdened with your obscene loan. Let me suggest another class for you: Living within your means 101.
Listen, Jason. You don’t get it. When a student comes out of school with $30,000 in loans and he hasn’t got a job to start paying them off, the lender tells the student “we will defer the loan, and when you get a job you can pay us again”. Guess what? They don’t tell you about the interest that is accruing while your are in deferment….. My daughters $28,000 shot up to $53,000 in just two years of deferment which is just plain GREED. Now my daughter is paying for this lenders money for nothing interest, and she is sick with worry that she will never get out of debt. She’s now 28 and has NO CAR… NO JOB, and lives at home still. She lives off me, and I am working my ass off to support us both. My youngest child has seen first hand what this has done to her sister, and wants NO part of college. She was offered a scholarship (a stipend to what the real cost would be for 4 years,) and turned it down because she knows the trap they want her in. It’s just PLAIN and SIMPLE…GREED!!! When I went to school in 1969 I borrowed $7,000 for a BA and paid it all off in five years. You can’t do that these days. College loans became an industry of government guaranteed loans that the banks had a field day with, and locked these kids into a lifetime of debt with NO way out. It’s shameful!
These student loans are a big scam. Even more disturbing is the fact that servicers do not want to work with the student borrow – they are trained to be rude, use predatory tactics and threaten with garrnishment, judgments, etc. Ed Financial definite will not work with anyone and then they place the student borrower in default even when they’ve beaten the borrow down to agree to making payments they cannot afford. Usually Ed Financial defaults to ECMC (one of their cronies in crime) – who again lies, cheats, use predatory tactics and threatens (and, our US Government has them handle student loans – tells you a lot about our government!). College loans are a government industry placed with predatory servicers whose intent is to default thereby tacking on an additional 18.5 to 24% without notification or disclosure when forced to make payment to them STAY AWAY.
Think of all the non-traditional folks who were highly encouraged to go back to school so they could become employable – Right! Another Lie! This county is fraught with discrimination and ageism and now these folks are in financial ruin without a “hope in hell” of ever getting out. This will be another group of homeless folks – but it’s OK to spend hundred of thousands a day on those who cross our borders illegally and deny the US citizen the assistance they need
I agree with some of your assertions, but I think that people need to be more cautious about their own financial decisions. For example, borrowing from a private lender when there are federal options available makes no sense whatsoever.
Everyone should be relying on exclusively federal student loans, especially when there are so many programs available to choose from. And for those who can’t borrow enough from the federal government? It’s time to start saving, and wait to go to college until you’ve saved up enough to actually afford it.
Irresponsible borrowing is what’s gotten us into this financial crisis in the first place, with far too much easy money available to pay for degree programs that don’t end up providing real job prospects.
If everyone would be more cautious about taking on extremely large student loan debt loads, we’d likely all get access to better forgiveness and assistance programs, and we’d all be better off financially.
The Obama Student Loan Forgiveness Program is helping my family to stay in our house! That 5% reduction in interest covers our monthly groceries and more, so anyone who doesn’t think this is a big deal needs to redo their math. Thank you President Obama for this fantastic debt relief program!
Please advise where you received all the qualify information for the Obama Student Loan Forgiveness Program ? Also were there any hurdles you had to jump to get approved? I’m trying to get my loans lowered/reduced and I’m having trouble finding the correct information for the Obama Student Loan Forgiveness Program.
Yeah where is this information located so I can try to apply or see what options I have?
It is super frustrating not knowing where I can actually go look at this information.
Correction. Where can I find more information on this
To get your loans modified to meet the conditions of President’s Obama new loan forgiveness program, you’ll need to work with whoever services your loan (that’s the entity that you send your monthly payments to).
There isn’t a single website, agency or organization that handles updating and monitoring all this stuff. You’ve actually got to contact whoever you’re paying to make sure that they modify your contract so that it’s in compliance with the new stipulations.
How do I apply for this relief? I have been making timely payment since 2001′ and will still be paying until I am 58! Right now the extra cash amount would be helpful in my husband and my household account, as he is 67. Please advise.
Contact whoever services your loan (the people you send your monthly payments to) for additional details.
How do you sign up for these prograhams
Contact your loan servicer.
For the Pres. Obama Student Loan Forgiveness Program I am also considering a career change in either Teaching (Teach Grant) and/or Healthcare Administration.
Where can I locate the correct website to apply for the Student Loan Forgiveness Program and also alleviate the student loan bill collectors from blocking me from employment and endless telephone calls to my home.
Do you have federal student loans or private student loans? And have you defaulted on any of your student loans? It doesn’t make sense that you’d be receiving calls from bill collectors unless you are in default.
There isn’t a website to apply for Obama’s new loan forgiveness program. You would actually need to contact whoever services your loan (whoever you send your monthly payments to) to talk about revising the loan’s structure (terms and conditions) to meet the new guidelines.
Unfortunately, if you’re talking about private student loan debt, then Obama’s new program doesn’t apply, and if you’ve already defaulted on your loans, then you may not qualify for any debt relief at all (like forgiveness or deferment).
Most of the federal debt relief programs stipulate that they are only available to loans that are not in default.
Dear Pres. Obama:
I would like too know more about the Pres. Obama Student Loan Forgiveness Program. I am currently like all of the other people trying to seek full-time employment. I have been granted several interviews, but only assured that the position was only contractual. I possess my Associates and Bachelors Degrees in Business Administration – Management. I have exhausted and I am still using all of these avenues:
Buffalo Educational Training Center
What other avenues can I take? Also, considering relocation, but this is difficult to do because I have no other resources.
No jobs. Um I wonder why? Maybe ya all can vote in some more Progressives to fix that? If we could just raise taxes on the Rich some more we could easily pay for all these predatory student loans. Those crooks who took advantage of our unfounded faith in ourselves that led us to invest in our educations should go to prison. Good thing that we are letting in some refugees to shore up the job market and promote economic growth. The minimum wage should be raised to $30 an hour. That would make more jobs by increasing spending. If we just took all the money from the productive and gave it to the unproductive this entire economic mess would be solved.
My sarcasm detector nearly failed me there.
I too have amassed a fair amount of federal student loans and am doing my best to pay them off. I originally received my associates degree in Welding Technologies. I later went back to school yet again, this time I earned my P.H.D. in Proctology. I guess I really just wanted to understand what made Lawyers, Politicians, and Bankers tick! :’)
Hah, good one Nick!
I recently graduated with a MA degree in Clinical Mental Health Counseling and currently have 124,000 in federal debt. I justified going back to school with the PSLF program in mind, however after visiting you page (which is great, by the way) I am concerned. If I had Federal Loans prior to 2007 but reconsolidated them with my “new” graduate school loans (2014), would I qualify for the PAYE plan? Also, what do you think the chances are that the forgiveness will be capped at the 57,000 dollar mark?
If you consolidated pre-2007 loans with loans from 2014, then they will NOT be available for the PAYE plan (not yet at least).
The good news is that EVERY Federally-funded loan is supposed to become eligible for PAYE by December, 2015. This is just a Politician’s promise at this point, but I do believe that the Federal Government and Department of Education are working on ensuring that it becomes a reality (the introduction of the rule could get delayed, but it should happen eventually).
I do think loan forgiveness will get capped, again, eventually, but I’m not sure that it’ll happen at the $57,000 mark. The thing is, I do not believe that new rule will be applied to anyone with outstanding debt. I think it’ll be passed into law, and set to go into place at some point a few years from it’s passage, so that everyone has time to plan for taking that into account when determining their collegiate financial plans.
I wouldn’t worry about the cap. I would worry about consolidation, and the introduction of universal acceptance for PAYE. Hopefully Congress will come through and get PAYE expanded by December, 2015, but I’m not holding my breath on that one because this Congress is a much different one than the group that originally allowed PAYE to be created in the first place.
I’m optimistic though. Eventually, you will be able to leverage PSLF and have your loan discharged. Just not sure when that’s going to happen.
Well said. We don’t need to revamp the student loan repayment programs, we need to trash the federal student loan program altogether and make them normal, commercial loans. By removing the federal “insurance” on the loans, lenders will now have to ask themselves “am I confident that this 18 year old with no income, no credit score, and no job history will repay the student loan in a timely fashion? Am I willing to take the risk of making this loan?”
That should separate the wheat from the chaff by raising student loan standards, removing taxpayer money from the equations, and letting educational institutions know that infinite tuition money supply is gone, so they need to run their “business” in a cost effective fashion.
It fixes everything. It does leave little Jimmy who wanted to take out a 100k loan for a Phd in greek philosophy and lots of beer bong money in a bad situation. Boo hoo. Get a job and work 40 hours a week while going to school full time and managing a family at the same time like I did.
I agree COMPLETELY.
“lenders will now have to ask themselves “am I confident that this 18 year old with no income, no credit score, and no job history will repay the student loan in a timely fashion? Am I willing to take the risk of making this loan?””
This is *exactly* what happened to my daughter. She was 18 just by a few months, was flighty & wild, and she got a wild hair that she wanted to be a graphic designer. So she started getting info from schools, and when the one she chose called, I talked to them. I *BEGGED* them not to loan money to her; I told them right then she’d never finish school & she wouldnt repay the loan. She couldnt get a job because she had a new baby & got caught stealing at her last place of work. They tried to talk me into co-signing for her. I refused because I *KNEW* my daughter; I knew what would happen. I tried to talk her out of it but since she was 18, I couldnt forbid her to borrow that money. I know she has to pay for her bad decisions, but I think that there should be ramifications for a school that loans money even when they know they wont get it back. I feel they took advantage of her lack of life experiences. Are there any options for her to have this expunged? Please email me if you see this; Im not sure Ill find this website again. Thanks in advance.
There probably aren’t any options for your daughter because it sounds like she took a private student loan and basically screwed up of her own accord. There are two POTENTIAL solutions though…
I would look into these options and see if you think either applies to her specific situation. Good luck!