Congratulations America. We have surpassed the $1 trillion mark in student debt. If that isnÃ¢â‚¬â„¢t bad enough, students are finding themselves having to empty their pockets once more to pay off their remaining school balances. This time however, it’ll sting a little less with President Obama’s newer Student Loan Forgiveness Program.
Just call it a mere glimmer at the end of this dreary, deep debt tunnel.
This program aims to help students who have responsibly been making payments on their student loan cover the remainder of his or her student debt from his or her direct loan. However, someone is only qualified for this particular forgiveness program if they are a full-time employee in a public service career, have already made 120 on-time qualifying payments, and got the direct loan after October 2007.
The first set of loan balances will not be forgiven until October 2017. So the teachers, police officers, nurses and even clerks at the DMV can benefit from this forgiveness plan, if they are willing to go through the complex process and of course, are eligible.
But what about the rest of the student-debtors?
Well, there’s always the Income-Based Repayment plan, which is a federal loan repayment plan that calculates your monthly payment based on income, family size, and state of residence. But, whatever loan service you use is also a determining factor in order to qualify.
According to the Consumer Financial Protection Bureau, IBR has two advantages. First, loans are forgiven after you repay them for 25 years, even if your loan is not completely paid off. Second, if you have a subsidized loan and your monthly IBR payment is less than the interest that accumulates, the government will pay the difference for the first three years that are being repaid through the IBR program, so the overall balance won’t increase.
With both forgiveness plans now available, students can feel a little more hopeful about not being buried alive in their school loans. It’s nowhere near the solution America needs for reducing student debt, but it’s a good start.