In his earliest days as President of the United States, Barack Obama announced the start of a plan that would make former students exempt from paying back the full amounts of their loans. After this announcement, the legislative act was named the Obama Student Loan Forgiveness Program. The program is aimed at students who are facing financial difficulties when it comes to paying back their student loans, even after repaying large parts of the total amounts. Similar to cosigner release in typical consolidation loans Obama Student Loan Forgiveness offers
UPDATE – Federal Student Loan Forgiveness 2015
Those students who are eligible for the program will not have to worry about the remaining debt, as they will be exempt from paying it. In order to be eligible, the student should have already paid part of the amount of his or her federal loan over a period of at least twenty years. In addition, the program also focuses on people enrolled in military service or those who work with certain governmental institutions. The following paragraphs provide more information about eligibility for the Forgiveness Act, as well as the impact this program will have on former students.
Who is Eligible for the Loan Forgiveness Act?
The first condition to be met by former students who want to apply for the program in 2014 is to have applied for a federal loan, such as a Stafford or a Perkins loan. Students who have opted to take out a private loan are not eligible. However, there might be other programs for these students covered by the policies of the companies providing the loans.
For example, there are certain companies who would clear off some of the debt if the former student agrees to become a temporary employee of the company. This practice is most common in the healthcare sector, but also exists in other businesses that have decided to implement a loan forgiveness program.
What will be the Impact of the Program?
The main goal of the loan forgiveness program is to make it easier for former students to manage their finances. Statistics indicate that a large number of them are struggling to overcome their debt burden, and this program aims to help them with this difficulty. According to the president, a college degree should not be overshadowed by the burden of too much debt, and students should be encouraged to become debt-free soon after their studies end, so they can continue living good lives. In addition, authorities hope that, with this program in place, more and more people throughout the country will decide to sign up for college.
What are the Major Benefits of the Program?
As students will no longer have to face the difficulty of paying back for their student loans in full, they will have the chance to better establish their priorities and to focus on what they really have to do. As opposed to the student loan consolidation programs offered by numerous financial institutions throughout the country, a student loan forgiveness program comes with no additional burden.
The Obama Student Loan Forgiveness Program is aimed at those former students who have consistently struggled to repay their student loans and have already paid back most of the amount. The remaining sum to pay back for their federal loans would be canceled after a certain period of time. In addition, the loan forgiveness program for military students is designed for those in public service departments.
How Can You Apply for the Student Loan Forgiveness Program?
President Obama announced that students who have been making regular payments for their federal loans are eligible to apply for one of the available loan forgiveness programs. For details about the application process, you should access the Student Loans Forgiveness page of the US Department of Education, at http://www.ed.gov/fund/grants-college.html. Note that you can only apply if you meet all the criteria listed.
When was the Program Introduced?
The Obama Loan Forgiveness plan was first introduced in March of 2012. The act caps loan payments at a fixed rate of 10% of the borrower’s income. In other words, regardless of how much former students are earning, they will never have to pay back more than 10% of their income. During bad times for the economy, this can be really advantageous for people who have the burden of student loan debt.
Can the Program be used for Private Loans?
President Obama’s Loan Forgiveness Program is currently only available to former US students who had applied for a federal loan, and it is specifically designed for these types of loans. Former students with outstanding debt on private loans are not currently eligible, but there is a chance for a legislative change in the future.
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