Student Loan Debt Forgiveness

Recent economic crisis saw the government taking measures to relieve the stress on the citizens by enacting reform laws. The administration has identified education as one of the sectors which needs to be supported and has come up with different forgiveness programs. The Obama administration enacted The Health Care and Education Reconciliation Act of 2010 that promises to help students with education loans.

Under the new act, student loans will directly be given out by the Department of Education rather than banks and other lending institutions. Loans will be given out to students with low repayment options than the existing ones. This act also sees increase in funding for federal education grants like the Pell grants. Student from low-income families will greatly benefit by the reforms made to student loans and government grants under this act.

Student Loan Reforms

The Obama administration has announced an economic stimulus package to cushion the economic spiral, it consists of tax debt forgiveness and student loan relief. Financial analysts have claimed that reforms in the education loan structure will save billions of dollars in the coming years. Till date education loans were given by banks which received federal subsidies, now this procedure will be discontinued. The Department of education will directly handle student loans.

The new act also sees considerable increase in government funding for education grants like the federal Pell grant. This means that more students will get grant money for continuing education and the award amount will also be higher. The Pell grant award amount for the year 2010 - 2011 was USD 5,500.

Another significant reform to the student loan structure is that students will now pay less than 10 percent of their discretionary income towards their student loan installments. Earlier, repayment would be around 15 percent of the discretionary income and this put a lot of financial strain on students with education loans.

The debt forgiveness act refers to the sweeping reforms made by the administration to counter the economic recession. One aspect of these reforms deal with student loan relief. The government recognizing the need to support the student population has started various programs which enables eligible candidates to apply for student loan relief.

Until recently, students had to repay their existing loans on time for 25 years to be eligible for federal student loan forgiveness program. This limit has now been brought down by five years and now you can avail debt forgiveness after 20 years.

Individuals with student loans who take up service in organizations like peace corps and AmeriCorp are also eligible for student loan forgiveness. Law schools tend to forgive loans of lawyers who take up nonprofit public service positions. Medical students who agree to work in under served communities can also apply for loan forgiveness programs offered by the US Department of Health and Human Services.

There are provisions for debt forgiveness for teachers, who choose to teach in schools, catering to students from low-income families. The government also recognizes teachers for this program who teach subjects like Science, Maths, and Foreign Languages. Students who are in the Army National Guard are also eligible for Obama student loan forgiveness programs.

The debt forgiveness programs are designed to help deserving students wipe off their student loans. It is advisable to apply for these programs, as it will help students come out of debt accrued for education.