President Obama has been a champion of helping people who have been burdened by student loan debt, but a lot of people are having trouble finding out about the new program he created to help students in debt. The Obama Student Loan Forgiveness Program, which people are searching for, is technically called the Pay As You Earn (PAYE) program.
The goal of Obama Student Loan forgiveness is simple – keep student loan debt manageable and then forgive the remaining balance if certain requirements are met. Too bad more people aren’t enrolling in it. The reason? People just don’t know how to ask for it.
If you were to call up your lender today and ask for the Obama Student Loan Program, they will tell you they have no idea what you’re talking about. Remember, these companies are in business to make money servicing your loan, not to explain to you all of the different options available to you. Yes, they may give some details, but in reality you’re talking to a clerk, not a student loan counselor.
If you’re curious about Trump Student Loan Forgiveness programs, click here.
What you want to ask for is: Pay As You Earn (PAYE). Here’s why:
Obama Student Loan Forgiveness: PAYE
The Pay As You Earn Program is a great way to get student loan forgiveness while also making your student loan payments reasonable. This plan sponsored by Obama is technically a repayment program, not a student loan forgiveness program, which is one of the ways he was able to sign it into law. However, it has a student loan forgiveness option at the end, which is helpful for borrowers.
It works like this: you simply need to call you lender and ask to be enrolled in the PAYE Program (Make sure you say Pay As You Earn and NOT Obama Student Loan Forgiveness). In order to setup the program, you will need to provide your tax returns for the previous year, and pay stubs from this year. It will typically take 60-90 days to process your application.
Based on the paperwork you submit, the Department of Education calculates a “Discretionary Income” for you. The actual amount of your “discretionary income” is determined by a formula based on your family size and income tax returns. Studentloans.gov has a great calculator that can help determine the amount. Under Obama’s PAYE plan, your student loan payment will not exceed 10% of your discretionary income – which is a huge benefit for borrowers.
In 2016, Revised Pay As You Earn came out, also known as RePAYE. Learn more about RePAYE here.
Where’s The Student Loan Forgiveness?
But that’s not all. After making payments under the PAYE program for 20 years, any remaining balance you have on the loan will be forgiven **poof**. That’s the biggest benefit for borrowers. Not only do you get reasonable payments, but you also can have the remaining balance forgiven if you make all your payments in the program.
However, it’s important to note that under Obama’s Student Loan Forgiveness Plan, you will owe taxes on any loan balance forgiven. This is what makes it different from traditional student loan forgiveness plans.
For example, if you have $50,000 in student loan debt forgiven under the plan, you could owe around $11,000 in Federal income tax. That could be tough to pay, but for many, it’s easier to pay this smaller amount than the original student loan balance. Plus, you can setup payment plans from the IRS as well, which could ease the burden.
Is Obama Student Loan Forgiveness Right For Me?
It’s tough to say. If you can make your payments easily under the Standard Repayment Plan, you should keep to that. However, if you’re having difficulty making payments, specifically due to the amount of your student loan (under any standard repayment method), Obama’s PAYE plan or IBR (Income Based Repayment) may make the most sense for you.
I recommend using Credible, a marketplace for student loan refinancing where you can receive offers from multiple lenders by completing a single form to understand your options. You can get multiple offers in less than 2 minutes with NO credit check. Also, College Investor readers can get up to a $750 bonus when they refinance with Credible.
However, realize that with both PAYE and IBR, you will owe taxes on any student loan amounts forgiven.
If you’re not quite sure where to start or what to do, consider using a service like LoanBuddy. LoanBuddy is a tool that analyzes your student loans, and helps you determine the best repayment plan and loan forgiveness programs you’re eligible for. Check out LoanBuddy here >>
Have you looked into IBR or PAYE for your student loans?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.
Jason Vitug says
I hadn’t heard of PAYE program. I can’t imagine holding onto student loan debt for 20 years. The traditional 10 years was enough for me and even that I wanted to just get rid of it. But this like other programs are so beneficial.
Joe says
I looked into this one for myself and while it would definitely ease the monthly burden now… I discovered over the lifetime of the plan I would most likely pay more than expediting the standard repayment. I do have a friend who is taking advantage of the IBR though as he works with a non-profit and isn’t expecting to see significant gains in his overall income over the years. Like you said, I think the benefits of the program depend largely on each individuals circumstances.
Kathy says
Hi,
I received a refinance of my student loans in 2002, the original loans were in 1994, and I have NEVER made a payment. I have managed to keep the loans in forbearance all this time due to my low income. Now, my income has increased substantially and my payments are ridiculously high and it is showing late and ruining my credit. I know, it’s my fault but is there a way to have my loans forgiven based on time? – it’s been 23 years since my loans were originated.
Robert Farrington says
Did you refinance or consolidate your loans? Were you in forbearance or did you sign up on an income-driven repayment plan?
All of these questions matter.
Robert Farrington says
I don’t. Sadly, several states make it difficult for these companies to operate due to antiquated state laws. If you find a company, really check the red flags in this article before moving forward. Read more here: https://www.thecollegeinvestor.com/16429/is-your-student-loan-repayment-company-a-scam/
Earlene Tyus says
I signed up for loans through my school and they used two student agency to borrow the money. Now one is in default and I was calling the only one I knew about and getting forbearance. Now one has been place in collections and will not return my calls. I want to set up a payment plan, but feel it is to late
Robert Farrington says
It’s definitely not too late, but you need to get back on track with your loans.
You can find your loans and get out of default by doing rehabilitation. Learn more here: Student Loan Rehabilitation.
Yarden Carroll says
The college network scammed me and over 2000 upstate New Yorkers. Out of our degrees.. Most loans were forgiven.. I paid mine off in full.. they reached a settlement with the bank.. I will only see cents on a dollar for paying ove 10,000. No one wants to take my case to try and recoup all of my funds.
Christine Herrera says
Is Student Loan Debt Solutions a good company to refinance my student loans?
Robert Farrington says
Hi Christine,
We’ve never heard of that company, and we know almost all of the refinancing companies. I’m guessing you’re looking at something different than student loan refinancing – maybe help with your loans in general?
Remember, everything with Federal loans can be done for free at StudentLoans.gov or by calling your lender. That includes student loan consolidation.
You can work with a third party company, but make sure you vet them first. Here’s a guide we created: https://www.thecollegeinvestor.com/16429/is-your-student-loan-repayment-company-a-scam/
For student loan refinancing, this is getting a private student loan to replace your existing student loans. It doesn’t make sense for 90% of borrowers to refinance their Federal student loans. Understand why here: https://www.thecollegeinvestor.com/17113/refinance-federal-loans-private-loans/
If you still want to refinance, we’ve reviewed all the major student loan refinancing banks and companies here: https://www.thecollegeinvestor.com/student-loan-refinancing-tool/
Maritza Martinez says
Are there any loan forgiveness programs for doctors?
Robert Farrington says
Yes, there are tons of potential programs for doctors. Check out our list of over 80 ways to get loan forgiveness: https://www.thecollegeinvestor.com/21541/different-ways-to-get-student-loan-forgiveness/
Cesar Ramos says
My girlfriend signed up for the Obama forgiveness act and they said they would help her even though they knew that her wages were getting garnished already and she even paid $1,000 to the Obama program and after she paid they told her they might not be able to help her and really I think it’s bull because that’s what the program is all about loan forgiveness so I just wanted to know is there anything else that she can do?
Robert Farrington says
Did you read the article? There is no such thing as the Obama Forgiveness Act or anything like that. It sounds like your girlfriend paid some type of third-party company to help her with her loans.
She needs to contact her lender and get her loans rehabilitated if she’s in default. Learn more here: How To Get Out Of Student Loan Default.
Also, you might find this article helpful: What To Do If You’ve Been Scammed For Your Student Loans?
Desiree says
Just to be sure im not working with scammers, you do have to pay a fee to be apart of the program?
Robert Farrington says
You never have to pay for anything with your Federal student loans. You can do it yourself by calling your loan servicer or going online to StudentLoans.gov.
You can always pay a third party company for help. If you go this route, read this first: https://thecollegeinvestor.com/16429/is-your-student-loan-repayment-company-a-scam/
LISA M. VAUGHN says
ARE THERE FORGIVENESS PROGRAMS FOR NURSES
Robert Farrington says
Yes! Check this out: Student Loan Forgiveness For Nurses.
Brian Windsor says
I have been paying my student loans for over 20 years and I still owe a considerable amount on them. When I applied I asked for a 20 year payment plan. They were moved from the US Govt. to EdFinancial a while back. I wondered how to I apply for the 20 year forbearance?
Robert Farrington says
There is no 20 year forbearance (and if you’ve done forbearance over and over again, that’s terrible for your loans). You need to start making payments on a repayment plan you can afford. That’s the only way forward.
James Bailey says
My student loans were discharged over 5 years ago due to my total and permanent disability. I was told as the time that I had to submit to Elnet any amount of money (other than S.S.) for the next three years. I did as instructed and now I am being told by the Dept. of Education that I may have to pay taxes and interest in the amount of student debt as Earned Income. What is the deal with that. Oh I also am living below the states proverty line./
Robert Farrington says
You should speak with an accountant about this. You are subject to a three year monitoring period after your disability discharge. If you had income above the poverty level, it could be taxable. Check out our full Disability Discharge Guide here.
Tegan says
Do you have any advice for people who have private student loans (that are in default and the financing company won’t offer any forbearance, deferment or income based repayment options?) My husband has two and they were thrown into default after we suffered some serious financial difficulties from unemployment. The federal student loans we have were compliant with forbearance during our time of hardship, but these other private loans have ruined our credit.
Robert Farrington says
Sadly private loans don’t have many options. Here is everything you can do: Options If You Can’t Afford Your Private Student Loans.
Sonya says
I took my loan out back in 89 for a private trade school that was shut down by the department of education, and also the president was arrested and sued and fined for fraudulent. Why am I being made to pay this money back,?
Robert Farrington says
There is a process called Borrower Defense To Repayment which you can pursue. Read about it here: Borrower Defense To Repayment Loan Forgiveness.
However, in the meantime, you still need to take action on your loans as well – make payments, etc.
DeAnna says
I have about 60K left in loans ive been paying in some way for 12 years already. As a nurse with a dual income household, my income based payments would be 6-700 month. Which right now I am paying leas than $300/month. Clever, i will be nearly paid off in 10 years. So much for forvigness
Robert Farrington says
What payment plan are you currently on?
SharonS says
I have a student loan under the Income Driven Repayment plan, which I was told is a forgiven plan. But I have been working for the State in public health sector can I change my forgiven plan since, I now work for the State now?
Robert Farrington says
I think you’re confusing the loan forgiveness that comes with your income-driven repayment plan with a different program called Public Service Loan Forgiveness. Read this: https://thecollegeinvestor.com/22857/public-service-loan-forgiveness/
Jackie says
I have a good job but I have two malignant, inoperable brain tumors. I’m told my average life expectancy is 5 years. Is there a forgiveness program for me? I’d rather see the Grand Canyon with the money and time I have left. What happens if I just pay less than the minimum? I’m on a deferred income based repayment plan working at a non profit.
Robert Farrington says
If you become permanently and totally disabled, yes: https://thecollegeinvestor.com/22781/student-loan-disability-discharge/
Until then, you can either continue a disability deferment, or consider making income-based payments. But only you can decide that.
Alice says
I borrowed 8750. In 1998 and was a single parent, that became homeless for about a year after that my loans got sold SEVERAL times during that time, to the tune of somewhere close to 16-17,000 I can’t recall exactly. I got scared and ignored them some because I couldn’t pay what they were asking. In 2002-3 I started fir forbearance thing, but loans kept growing and growing , when I got them the interests was 8%. I started an IBR (I am on my 5th year) which I believe the man said would take 10 years to get forgiven, but said nothing about taxes at the end. Before I started my IBR my loans were at $ 67,000. I just read about the tax part in your questions and answers. That is going to be more then I can do. Do you have any advice? Please and thank you
Robert Farrington says
The 10 year program most people refer to is public service loan forgiveness. That is tax free loan forgiveness, and has other qualifications besides being on an income-driven repayment plan. Read this: Public Service Loan Forgiveness.
As for the tax consequences, most people won’t need to worry much about it. Read this: student loan forgiveness, taxes, and insolvency.
Shantel says
Are the any loan forgiveness programs the following majors: Sports, Sports Media, Sports Management, Communication, Public Relations.
I currently have over 50k in student loans and trying to find the best options to pay my loans back. My 6 month deferrment period is coming to an end I would like all the information I can get about forgiveness programs.
Robert Farrington says
Loan forgiveness programs have nothing to do with your major – it’s all about where you work. Read this: https://thecollegeinvestor.com/21541/different-ways-to-get-student-loan-forgiveness/
Nicole says
My loans are consolidated–grad are from 2006 and undergrad are from 2002. I also have a Perkins from 2008. I’ve been making on-time payments since I took out all of these with a forbearance for grad school. Would those previous payments “count”? Or would I have to sign up for a whole new program and start over? Thanks in advance!
Robert Farrington says
Count for what specifically? Any IDR plan payments you made since you consolidated count toward IDR forgiveness in 25 years. But are you referring to another loan forgiveness plan?
Jordyn Messinger says
Robert,
I am already almost certain, after reading your articles that I have been scammed but would just like to confirm. I was told I signed up for the Pay as you earn program, but had to submit a one time fee (which was rather large) to enter the program. I am now getting calls about an annual recertification that I need to go through however, when I asked to speak with the folks I signed up with they gave me a phone number that isn’t working.. scammed right? However, how do I go about moving on from there? I am not back in school, however prior I was receiving mail that indicated I had $0 payments due to my income. I just want to know how to fix this going forward so that in the future I am not in trouble or responsible for payments I’ve never made based on what I was told with the PAYE program.
Robert Farrington says
Yes, you never have to pay to enroll in a program like that. You can always pay for help, but it doesn’t sound like this company has been very helpful.
Check out this guide on what to do after you’ve been scammed. Note: you really need to check your loans yourself and get on the proper payment plan for your needs.
Andrea Josey says
We started to pay my husbands student loans back in 1998. His loans were consoldated. He has been paying on them since. Would he be eligible for the obama program? He is an inner city teacher for 20 years and they have rejected him for the teacher forgiveness program. This made no sense. For us to do the application now for the 10 years of service forgiveness would be about the time we would have his loans paid off (2027). Would he have needed to sign up for the Obama program 20 years ago? That doesn’t make sense to me. We are paying on them monthly.
Robert Farrington says
It depends on the repayment program, loan type, and more. You’re mixing up several programs in one.
But yes, all programs will reset the clock from the date he updates his information. You need to do the math and see if working another 10 years is a better option than paying them off.