Q:

What are the details of the Obama Student Loan Forgiveness program?

A:

Quick Answer

As of 2015, the Obama Student Loan Forgiveness program has five different repayment plans, interest forgiveness and student loan forgiveness, according to Student Debt Relief. The name is actually a nickname for the William D. Ford Direct Loan program, which President Barack Obama modified in 2009. Modifications he made include changing the student loan forgiveness time period from 25 to 20 years for new borrowers, and ending the federal government's providing of subsidies to private lenders for federal loans.

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Full Answer

The five different repayment plans are: standard repayment, graduated repayment, income contingent, income-based and pay as you earn. In standard repayment, the borrower pays a set amount, which is based on the loan amount, interest rate and loan length. In graduated repayment, the borrow pays a lower amount than in standard repayment, but the payment amount increases every two years.

The income contingent plan uses the borrower's income, family size, loan balance and interest rate to determine the payment amount. The income-based plan only uses the borrower's income and family size, and the payment is equal to 15 percent of the borrower's discretionary income. The pay as you earn plan is similar, using 10 percent of the borrower's discretionary income as the payment amount.

Interest forgiveness applies to the income-based repayment plan. The borrower doesn't have to pay interest on the subsidized portion of the direct loan for the first three years.

Student loan forgiveness applies to the income-based repayment plan, the income contingent plan and the pay as you earn plan. The borrower doesn't have to keep paying back the remainder of the loan at the end of the term.

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