Obama Student Loan Forgiveness
The rising tuition fees in the U.S. have compelled many students to take enormous amounts of student loans and later on, it is seen in many cases that these students are unable to repay their debts. The U.S. President Barack Obama has put forward a proposal for student loan forgiveness in the recent budget. According to this proposal the loans of various students of about billions of dollars plan to be forgiven. This is in the view to expand the income based system of repayment of the program. The Obama Student Loan Forgiveness Plan is a rain from heaven for many students who are not financially capable to repay their education loans. This program is also meant for those students who have paid a vital amount of their loan amount but are unable to pay the rest.
Important Elements of the Program
a) The Obama Student Loan Forgiveness Program is also known as Pay As You Earn Policy. This program estimates the total amount of payment of the loans by students while considering their income and family size.
b) With this program, it is possible for borrowers to repay their debts even if they have a low income. People who are eligible for the Obama Student Loan Forgiveness Program will have the facility of capping their monthly loan payment up to a limit of 10 percent of their total income. Take for example, a borrower who is earning $ 50,000 in a year and has a remaining loan debt of $ 40,000 at the rate of 6.8 % APR will be having to pay a minimum amount of $ 460 in a month according to the scheme of standard repayment.
c) It should be noted that these borrowers being eligible for the Obama Student Loan Forgiveness Program need to pay a monthly amount of $ 277 only. Thus, this scheme is different from all the other federal student loan programs as in this scheme, borrowers can be benefitted from lower payments.
d) Another important point is that this scheme is not fruitful for all borrowers as only new borrowers who have an existing federal direct loan are eligible. Even those individuals, who have borrowed a loan amount on or after the date 1st October, 2007 are also eligible for the Pay As You Earn Program.
e) So, keeping this condition in mind it is very essential for you to know the accurate date that when you have borrowed the amount of the student loan in order to ascertain your eligibility for the Pay As You Earn Policy.
f) Apart from the above elements, you also need to know that the loan that you have drawn will take a much longer period of time in order to be paid off because of the sole reason that you will be paying low amount of monthly payments. Therefore, the total sum of the interest that is related to the Pay As You Earn Policy is much higher if you choose the scheme of standard repayment.
Other Important Information about This Scheme
Pay As You Earn Program is applicable only to those individuals who have currently borrowed federal loans like the Perkins or the Stafford loan. Individuals who have taken private loans can also opt for this student loan forgiveness scheme which is offered by employers and private institutions. These do not come under the federal program by the American president Barack Obama.
Looking further, you can also observe that there are certain employers of private institutions and private companies who may be willing to repay the entire amount of the debt or the remaining amount of the loan in case you are willing to meet the terms of their specific conditions. Take for example, these companies and institutions may want you to work in their organization for a certain span of time as stipulated in their agreement policy. Even though the Pay As You Earn Program is typically applicable to those individuals who work in specialized institutions such as healthcare companies, there are a great number of private firms also who feature certain policies for the student loan forgiveness program.
Thus, the bottom line is that the Obama Student Loan Forgiveness Program aims at eradicating and lessening the financial burden of student loans among college goers and graduates by assisting them in repaying their student loans.