President Obama recently announced a student loan forgiveness plan, and word has spread throughout the media. College students and their families are lining up to qualify for the new program in hopes of having their loans entirely forgiven. However, does this program mean college students won’t have to pay any of their loans? What options are available to students who don’t qualify for Obama’s program?
What “Forgiveness” Means
Despite what it may sound like, “student loan forgiveness” does not mean that debts completely disappear. According to Forbes, the Student Loan Services Group, the Department of Education, and other outlets, Obama’s plan only lowers the amount students are expected to pay. In most cases, a college graduate is only asked to make a student loan payment out of 10% of his or her discretionary income over a twenty-year period. Discretionary income is defined as “the amount you earn above the poverty line for your family size.” In other words, a student with $10,000 of debt, who earns $40,000 a year, would only pay about $187 a month over twenty years. After twenty years, his or her remaining balance would be forgiven.
Unfortunately, this program involves several strictures. Students must have borrowed on or later than October 1, 2007. Also, only certain grants, such as Stafford grants, are eligible for forgiveness. This does not apply to many students, some of whom choose to work with a bankruptcy attorney to manage student loans. Bankruptcy is a viable and positive option if you don’t qualify for forgiveness; no longer does bankruptcy mean immediate foreclosure and loss of all property. If you do not qualify, consider contacting an student loan debt attorney who can help you consolidate student loan debt.