Today, the standard federal student loan period is 10 years. For the borrowers who aren’t able to afford their monthly payments under the 10-year plan, the federal government has created income-driven repayment plans to help make student loan payments more affordable under the Federal Student Loan Forgiveness program and the William D Ford Act. If you are looking to qualify for a federal student loan forgiveness program, continue reading.
In certain situations, you can have your Federal student loan forgiven. Under the Pay As Your Earn (PAYE) and Revised Pay As You Earn (REPAYE), borrowers pay 10% of their discretionary income for 240 months (20 years). Under REPAYE if you have graduate loan debt, the repayment period is 25 years.
Trump plans to combine all the programs into one single plan to make it less confusing for borrowers. While Trump’s proposal raises the monthly payment cap from 10 % to 12.5% he cuts the repayment period by 5 years. He plans to pay for his new student loan plan by reducing federal spending overall.
PUBLIC SERVICE AND TEACHER LOAN FORGIVENESS
Those working as public servants or teachers who meet certain criteria, under the existing plans, are eligible for loan forgiveness after 120 consecutive monthly payments.
If Congress eliminated the Public Service Loan Forgiveness and placed all borrowers under the same income-based repayment plan, existing borrowers in the PSLF program would be grandfathered in.
OTHER POTENTIAL CHANGES
Expect to see other student loan policies emerge from Trump’s nominee for Secretary of Education, Betsy DeVos as well as other congressional leaders. These changes may include:
- Risk sharing between federal government and universities with respect to students who default on their student loans.
- Potential education of federal government’s role in student lending and a corresponding increase in the role of private lenders.
- Amount of “profit” the government generates from student loans, which may result in a reduction of interest rates for federal student loans.
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TOP 5 QUESTIONS AND ANSWERS
1. Will I save more money on my student loans under Trump’s plan compared to Obama’s existing plan ?
If Trump’s doesn’t change anything and everything else remains equal, student will be able to enjoy the forgiveness programs. Now, if Trump decides to change things around, you should think enrolling into the forgiveness programs soon as you will be grandfathered in once changes are made.
2. How do I apply for student loan forgiveness ?
There are a few factors that determine your eligibility for Federal Student Loan Forgiveness under the existing income-driven plans. To find out if an income-based repayment program is the best option for you, we suggest you speak with a loan specialist. They will be able to take a look at your loans and determine the best route for you. You can also read these 4 ways to get Federal Student Loan Forgiveness.
3. Under student loan forgiveness programs, "will I owe more money after the loan is forgiven ?"
If you have the right qualifications for student loan forgiveness programs, you WILL be saving a lot of money on your student loans as these programs are built to help borrows who are having a hard time paying their loans.
4. Will Trump’s plan lower my monthly student loan payment ?
This depends on what you’re being asked to pay now and if you’re grandfathered into an income-based program already.
5. What are the benefits and risks to income-driven repayment plans ?
Overall, the benefits of income-based repayment programs far outweigh the risks involved. These plans make it affordable for borrowers to pay back their student loans! While not being forced into a financial hardship in the process.
Under the standard repayment program, 10 years in length, borrowers are asked to pay roughly 1% of their current student loan balance every month. If someone owes $50,000, their monthly payments will be around $500/month. This isn’t affordable for the average American which is why these programs exist.
The main benefit: you’ll save money upfront by getting a lower monthly payment which extends the repayment period to 15 years. The yearly adjusted monthly payment will vary based on your income. We've seen students making $35,000 a year and paying nothing on their loans.
If you’d like to learn more and to see if you qualify for any of the FederalStudent Loan Forgiveness programs, contact us here or fill the form below and we'll be in touch with you soon.