The Obama Student Loan Forgiveness Act 2015 has evolved into a successful plan set up by President Obama. Initially, this plan allowed borrowers to erase all their federally-funded students’ loans after making 20 years of monthly payments. The new reform on the debt program made available debt relief after only making just 10 years of payments. People working in public service jobs have had excellent opportunities to have debt forgiven.
Easy eligibility requirements also made it easy for wary borrowers to find relief. The Student Loan Forgiveness Act is ever-changing with new amendments and implemented changes all geared towards making higher education an obtainable goal.
In the past, the biggest disadvantage of the Debt Forgiveness program was that it was formed around looking at the future debt of new borrowers. The program made it so only those eligible were people who obtained federal loans after October, 2007. We have come a long way since 2007. As promised, Obama continues to build upon the forgiveness program foundation. 5 million people will be eligible for the program opening up to student loans taken out prior to 2007.
For students currently enrolled in college
The eligibility requirements are not that stringent, so basically any borrower can benefit from this student loan forgiveness plan. The Obama Loan Forgiveness program is loaded with a lot of information and is consistently updated, as the President tries to make it easier for people to borrow money for college without extreme burden of debt and stress of default for borrowers.
President Obama’s student loan forgiveness plan is taking a multi-pronged approach to the problems of excessive student loan debt. Plan on seeing yearly reforms, and changes to this ongoing new program. The positive side is as time goes on, more borrowers will become eligible for the debt relief and other reforms will be implemented, hopefully to grandfather some of the loans from past decades. Relief is needed for students of today, as an encouragement tool to be able to attend college, but with that being said, President Obama’s student loan forgiveness plan needs to identify other generations experiencing the burden of excessive educational loan debt.
Other positive incentives coming to the student loan forgiveness program
Bank on Students Emergency Loan Refinance Act, 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.
Loan Forgiveness won’t bring huge tax penalties. This had been the biggest problem with previous Federal forgiveness plan is that when you have your student loan debt forgiven; the amount written off was added to your tax return as taxable income!
Monthly interest accrual will be capped. This actually needs to happen. When monthly payments are not high enough to cover the accruing interest, it leads to something known as interest capitalization. This is a major problem for those borrowers with Unsubsidized Loans who been relying on Federal Deferments or Forbearance type programs, since the Government doesn’t cover the costs of their monthly interest accrual for them while their loans are on pause. So people are going to receive temporary debt relief and watch their loans inflate significantly. The average borrower takes out $25000 in student loans, then end up owing over a 100,000 due to compounding interest slamming that deferred loan. Monthly interest accrual being capped will be one of the greatest advantages for borrowers who use default programs, or financial hardship forbearance programs.
Here’s a list of the federal student loans that will qualify for this component of President Obama’s student loan forgiveness program:
- 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
On March 10th, 2015, President Obama announced a new initiative called the “Student Aid Bill of Rights”. It 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
Expect to see more changes in with this program and others created by President Obama. He holds education in high regard, and this is evident by the implementation of loan relief programs which he created.