You may have heard about President Barack Obama’s new Education Reconciliation Act in which allows student borrowers new options on how they repay their student loans. The initiative was created by the Middle-Class Task Force, chaired by Vice President Biden and expects 1.2 million borrowers to qualify in the expanded program.
Pay As You Earn– This enables the Federal Loan borrowers (after 2007 and kept borrowing after 2011) to cap their loan payments at 10% of their disposable income to ensure that student loan repayments are more affordable, a decrease of 5% under the current law. More than 1 million qualified borrower will be able to reduce their monthly repayment amounts to less then $110.00 per month.
Debt Forgiveness– For those who are in good standing (timely, monthly payments) can qualify for debt forgiveness after 20 years (5 year reduction by current law) of the remaining loan balance. Those who work Public Service Jobs such as teachers, nurses, and military will see the debt forgiveness of their remaining loan balance in just 10 years.
These new reforms however do not affect the Student Loan Forgiveness, Cancellation and Discharge options if the borrower becomes one or more of the following
*Permanently disabled and is collecting SSI/SSDI
*Death Discharge
*Discharged by Chapter 7 / Chapter 13 Bankruptcy
*False Certification of Student Eligibility/ Unauthorized Payment Discharge
*Unpaid Refund Discharge
*Public Service Loan Forgivness/Teacher Loan Forgiveness
*Perkins Loan Cancellation and Discharge
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Ensuring That Student Loans are Affordable. (n.d.). Retrieved April 30, 2015, from https://www.whitehouse.gov/issues/education/higher-education/ensuring-that-student-loans-are-affordable