In this program, there are many benefits that a borrower can cash in of. The borrower has the power to consolidate all their federal student loans into one new loan, and therein consolidated loan the borrower is in a position to settle on a repayment plan that’s affordable.
The loan program offers five different repayment plans:
Standard Repayment – The borrower can pay a fix amount monthly for the lifetime of the loan. The payment would be determined by your borrowed amount, rate of interest , and term of the loan.
Graduated Repayment – The borrower would make payments less than the quality repayment plan, but would gradually increase every two years.
Income Contingent(ICR) – during this plan, the borrower would make payments supported their income, family size, loan balance, and rate of interest .
Income Based(IBR) – This plan bases the borrowers payment strictly on their income and family size. The balance of the loan and rate of interest aren’t utilized in calculating the monthly payment. The borrower would be responsible to pay 15% of their discretionary income to their federal student loans.
Pay As You Earn(PAYE) – This plan usually has rock bottom monthly payment, and is additionally supported your income but uses 10% of your discretionary income as a payment rather than the 15% utilized in IBR. Qualifying for the PAYE repayment plan is harder than the others. the amount of individuals enrolling in these repayment plans has far outpaced what was expected. About 5.3 million people (24% of all borrowers) are currently return their loans this manner , the report said.
Actual costs won’t be known until loans are fully paid off, which could take decades. But the GAO also found that the way the Department of Education has estimated the value “has numerous weaknesses” that make it difficult for policymakers to assess the program.
Obama Loan Forgiveness Programs Available
President Obama’s national goal: America will again have the highest percentage of college graduates in the world by 2020. Considering Obama Student Loan Forgiveness, people usually talk about this student loan forgiveness program which being implemented by President Obama.
Standard Repayment Plan
If the student has a federal student loan, the Standard Repayment Plan allows the students to repay loans for 10 years. After this period all those loan debts will be fully paid off.
Income-Contingent Repayment Plan
To be eligible for the Income-Contingent Repayment (ICR) Plan, a student should be eligible federal student loans.
Although the ICR Plan is an ideal option for any student who has a low budget, the plan does not require to state your income. Under this program, monthly payments to students are based on their own discretion, or the amount that the student will pay within 12 years on a fixed repayment plan.
Income-Based Repayment (IBR) Plans
Like other plans, students will need to have federal student loans that qualify too. If the student has a federal loan and plans to pay income (IBR), can get the remainder of student loan forgiven after 25 years, or 10 years if he/she works in the public service. All federal student loans are eligible to participate, with the exception of student loans in default, Parent PLUS loans, and Parent PLUS consolidation loans. Monthly student loan payments are limited depending on income and family size. For example, a family of 3 people with an annual income of $ 45,000 pays only $ 157 per month according to the IBR plan. Students can apply for an IBR by contacting the lender servicing loan. Loans taken after July 22, 2014, according to the IBR plan, will be forgiven after 20 years instead of 25 years.