Obama loan forgiveness is a plan that has been introduced by President Obama due to the increasing problems about students’ loan debts in United States. This plan is intended to help students who are not able to fully pay their loan and those who have settled a significant amount of their loan balance for numerous years. This plan clears all outstanding debts of students who have made timely and regular payments on their current federal loans for more than 20 years. Also, individuals who work in government departments like the military service might have their entire amount overdue cleared earlier before the minimum year based this plan.
Justification for this plan
The main goal of Obama Loan Forgiveness is to ease and alleviate financial burdens among graduates and college students. Moreover, the primary objective of this plan is to help students by freeing them of debts as fast as possible so as they can be able to focus on achieving a degree rather than settling debts for decades.
This plan takes into consideration the size and income of the family when calculating the loan settled by borrowers. Those who are qualified for this program may have their monthly loan payments restricted at around 10% of their income. For example, people who earns $50,000 per annum and have a current loan balance of $40,000 at 6.8% APR are generally needed to pay a minimum of $460 every month on the standard repayment scheme. Therefore, contrary to other settlement plans for student loan, borrowers may gain from low payments.
It’s significant to note that not every borrower may quality for this program. This plan is only eligible to people who currently have federal loans like Perkins or Stafford loan. Only those who people who had borrowed a loan on or later than October 1, 2007, or new borrowers with a current federal direct loan may qualify. In addition, you should have acquired your direct loan later than October 1, 2011. Therefore, it’s important to know the actual date when you acquired your loan so as to establish your eligibility. Moreover, people with default student loans are not eligible for this program. Therefore, you need to seek advice from your credit servicer for the perfect solution about this issue. However, it’s important to know that it may take long to clear your loan due to the lower monthly payments. The accrued interest involved in this program is very high compared to the standard repayment scheme. Nevertheless, those who have current private loan may use a student loan forgiveness provided by employers and private institutions. Moreover, there are a few employers in private institutions and companies that may agree to pay off the entire amount or outstanding debt if you meet the terms and conditions.
Obama Loan Forgiveness Program is designed to offer borrowers who have financial difficulties a reasonable loan repayment alternative. But there are certain requirements which borrowers must before they may qualify for the plan. Therefore, it’s important for students to take into account all potential payment schemes which may be appropriate to their situation so as to find out the most applicable option that work best for them.