With Americans facing a record over $1.5 trillion in combined student loan balances, many borrowers are on the hunt for ways to ease their debt burden. One option you may have seen is being called the Obama Student Loan Forgiveness Plan, which according to some websites, was a way for some borrowers to escape their debt for a small fee.
This offer might sound appealing, but there’s one problem: It’s fake. It’s just one example of language that scammers have used to target and bilk borrowers. Fraudsters have used lines like this to lure in their marks, then charged them hefty fees to fill out forms they could’ve filled out themselves for free. In the worst cases, people end up paying for nonexistent services.
Here are some answers to your burning questions on student loan forgiveness, so you don’t get sucked in by the cons:
Does Any Student Loan Forgiveness Act Exist?
Yes. The Student Loan Forgiveness Act was a congressional bill introduced in 2012 intended to help borrowers with paying down their student debt. In addition to capping interest rates for all federal loans, the proposed law would have introduced a student loan repayment plan that would have allowed borrowers to have their loans forgiven after 10 years if they made monthly payments equivalent to 10% of their adjusted gross income.
The bill also would’ve made borrowers in public service jobs eligible for loan forgiveness after five years, instead of 10.
Sound too good to be true? It is. Or was. The bill never made it out of committee.
What is Obama’s New Student Loan Forgiveness Program?
Even though you may have heard about it, Obama’s New Student Loan Forgiveness Program doesn’t exist. And it obviously has even less chance of existing now that President Obama has been out of office for several years.
During his tenure, President Obama did expand the reach of federal loan forgiveness programs. The Health Care and Education Reconciliation Act of 2010 allowed qualifying students who took out certain federal loans to have their balances forgiven in 20 years, rather than 25.
The same bill capped annual payments at 10% of adjusted gross income, rather than 15%. It also ushered in loan forgiveness after 10 years for borrowers working in qualified public service jobs.
Those changes preceded the introduction of the Student Loan Forgiveness Act (SLFA) of 2012 , and was never officially called “Obama’s Student Loan Forgiveness Program.” Likewise, and we know this goes without saying, there is no “new” student loan forgiveness program in Obama’s name, either.
Additionally, President Trump has proposed to eliminate the Public Service Loan Forgiveness Program, but nothing has actually been put into law as of this writing.
If you are wondering why you may have read about Obama’s New Student Loan Forgiveness Program at some point, however, that’s because it’s a term that some debt relief companies use to confuse student loan borrowers. The name seems convincing, since Obama did take action on student loans and legitimate federal loan forgiveness programs exist.
That’s why some borrowers have been duped into paying high fees for pointless—or nonexistent—services. Don’t be fooled: The program isn’t real!
What Are The Legitimate Options For Student Loan Forgiveness?
The government currently offers many income-driven repayment plans for federal student loans that can forgive your balance after 20 or 25 years. There are eligibility requirements, like making required monthly payments for a designated period of time, which are tied to your income. The plans you qualify for will depend on the types of loans you have, your financial situation, and when you took them out.
Public Service Loan Forgiveness
You may be able to have your loan forgiven in 10 years under the Public Service Loan Forgiveness (PSLF) program. To qualify, you must work full-time for a qualified government organization, nonprofit, or certain public-interest employers, such as a public interest law firm, public library, or public health provider.
Teacher Loan Forgiveness
Qualifying teachers can also get up to $17,500 of their Direct Subsidized and Direct Unsubsidized federal loans forgiven after five years teaching full-time under the Teacher Loan Forgiveness Program. The American Federation of Teachers has a searchable database of state and local loan forgiveness programs.
Medical Professional Loan Forgiveness
Health professionals have access to other loan assistance programs. The federal government’s Nurse Corps Loan Repayment Program pays up to 85% of eligible nurses’ unpaid debt for nursing school.
The Indian Health Services’ Loan Repayment Program repays up to $40,000 in qualifying loans for doctors, nurses, psychologists, dentists, and other professionals who spend two years working in health facilities serving American Indian or Alaska Native communities.
The National Health Service Corps offers up to $50,000 for loan repayment to medical, dental, and mental health practitioners who spend two years working in underserved areas.
Loan forgiveness programs are generally available for federal loans, as opposed to private ones. In rare cases, such as if your school closes down while you’re enrolled or soon after, you may be able to get your federal loans discharged or cancelled—but, again, these are very rare circumstances.
Interested in learning more about your options for student loan repayment? Check out SoFi’s student loan help center to find answers to your student debt questions.
SoFi offers student loan refinancing which, if you qualify, allows you to consolidate private and/or federal student loans into one loan. When you refinance, it means you’ll get one new loan, have one payment each month, and one interest rate. With SoFi, you could save money each month–or pay off your loan faster.
One thing to keep in mind though, is that student loan refinancing isn’t for everyone. For example, if you refinance your federal student loans with a private lender like SoFi, you will not be eligible for federal benefits like some or all of the student loan forgiveness programs above and income-driven repayment plans.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Student Loan Refinance
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