Every consolidation that we process will be under the William D. Ford Federal Direct Program, also known as the Obama Student Loan Forgiveness program.  This program has loan forgiveness built in to the end of your payment terms.  When you have made your payments for the allotted time, any unpaid balance can be and will be forgiven by the Department of Education.  There are many different repayment options associated with the “Obama Student Loan Forgiveness” program.

Obama Student Loan Forgiveness

The name “Obama Student Loan Forgiveness” has become the nickname for a program actually called the William D. Ford Direct Loan program. Many people only know about the program, and have heard of it through others as the Obama Student Loan Forgiveness program.  The name came about when President Obama reformed part of the Direct Loan program in 2010 by signing the Health Care and Education Reconciliation Act of 2010. It is important to keep in mind all the programs are offered for federal student loans.  Private loan borrowers are not eligible to apply any of these federal benefits to their private loans at this time.

Public Service Loan Forgiveness

Under the Public Service Loan Forgiveness (PSLF) program, eligible borrowers will have their federal Direct Loans forgiven after 120 qualifying payments (10 years) while working full time in stipulated public service positions or who are employed by qualifying 501(c)(3) non-profit organizations. FFEL Loans or Perkins Loans will not qualify for Public Service Loan Forgiveness UNLESS they are consolidated under a qualifying Direct Loan program. Currently there are no limits on the amount that can be forgiven and the forgiven amount under the PSLF program is not taxable income.

If you consolidate your FFEL or Perkins loans into a Direct Consolidation Loan, those loans could then become eligible for forgiveness. Just remember, any payments you made on your loans before they were consolidated will not count towards loan forgiveness. And anytime you consolidate a loan you could lose any benefits attached to that original loan, so be sure to evaluate your loan terms before deciding to consolidate.

It’s extremely important to understand that certain steps need to be taken to qualify for this program. Many borrowers wrongfully believe that by just working in the public sector, their loans will be forgiven in ten years. This is unfortunately not the case, as most borrowers do not have the right loan types, or are not in the correct repayment plan. Make sure you take the necessary steps to make your payments count! CALL STUDENT LOAN MOVEMENT TODAY TO VERIFY YOUR ELIGIBILITY!

In order to receive loan forgiveness, you must be enrolled in a qualifying repayment plan:

• Standard Repayment Plan

• Income-Based Repayment Plan (IBR)

• Income-Contingent Repayment Plan (ICR)

• Pay As You Earn Repayment Plan (PAYE or REPAYE)

• Any repayment plan where your monthly payment is equal to or greater than what your payment would be under the Standard Repayment Plan

While Standard Repayment is an eligible repayment plan for Public Service Loan Forgiveness, if you make all of your monthly payments for 10 years under Standard Repayment, there will be no balance remaining to forgive. If you are enrolled on a plan that lowers your payments based on your income, you will likely still have a balance to forgive after 10 years.

Examples of public service employment include working for:

• A government organization

• A non-profit501 (c)(3) organization

• A private, non-profit organization that provides a public service, including: law enforcement, public safety, military service, emergency management, public education, early childhood education, public or school library services, public interest legal services, public health, public service for the elderly or those with disabilities.

• AmeriCorps or Peace Corps

Because the program was introduced in 2007, only payments made towards your loans after October 1, 2007 will count towards loan forgiveness. The first borrowers will not be able to apply for loan forgiveness until October 2017. 

You may also Contact Us and speak to one of our Student Loan Advocates if you would like to get one-on-one, personalized advice on how to qualify and apply for any of these assistance programs.

General Student Loan Forgiveness / Capped Repayment Terms

If you enroll into either the Income Contingent Repayment (ICR), Income Based Repayment (IBR), or Pay As You Earn (PAYE or REPAYE) repayment plans, your loan balance would be forgiven at the end of the term if you still have a remaining balance.  The term of the loan would be between 20-25 years depending on which repayment plan you choose, and when your loans were originally borrowed.  The amount that can be forgiven will be determine on your original loan amount, how much you are earning, and how much your earnings fluctuate during your repayment term.

Example: Borrower owes $85,000 in federal student loans.  The interest rate is 6.875% and the term is 20 years in the Income Based Repayment Plan.  The borrower is currently earning $35,000 per year, files “Single 1” as their tax status (FYI – a validated increased family size can significantly reduce the required payment amount) and expects their income to stay the same for the term of the loan.  This borrower would qualify for an IBR or PAYE payment of $218.69, and assuming the income doesn’t change, would make these payments for 20 years or 240 payments. The total amount the borrower would pay on this loan is 240 x $218.69 = $52,485 of the original $85,000 that was borrowed.  This person could qualify for $32,514 in student loan forgiveness after making those qualifying payments. This does not include the interest that is being forgiven as the borrower would normally pay much more than the original debt due to the interest on the loan.

Teacher Loan Forgiveness

The Teacher Loan Forgiveness program is the most beneficial to teachers and may provide additional benefits above and beyond those stipulated in the Public Service Loan Forgiveness program, as it allows for early forgiveness as well as the principle reduction. If you are a teacher and also a new borrower (i.e., you did not have an outstanding balance on a Direct Loan or FFEL Program loan on Oct. 1, 1998, or on the date you obtained a Direct Loan or FFEL Program loan after Oct. 1, 1998) and have been teaching full-time in a low-income elementary or secondary school or educational service agency for five consecutive years, you may be eligible for an additional $5,000 to $17,500 of your subsidized or unsubsidized loans forgiven.  Parent PLUS loans are not eligible for these additional benefits. Public school teachers already qualify for complete loan forgiveness after 10 years of payments and service as a teacher. For more information, please call us.

Total and Permanent Disability (TPD) Discharge

A TPD discharge relieves you from having to repay any remaining federal student loan balances on the basis of your total and permanent disability. Before your federal student loan obligation can be discharged, we must provide information to the U.S. Department of Education (DOE) to show that you are totally and permanently disabled. The DOE will evaluate the information and determine if you qualify for a TPD discharge and provide Student Loan Movement, on your behalf, the necessary documentation stipulating such..

You can show that you are totally and permanently disabled in one of the following three ways:

• If you are a veteran, you can submit documentation from the U.S. Department of Veterans Affairs (VA) showing that the VA has determined that you are unemployable due to a service-connected disability.

• If you are receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits, you can submit a Social Security Administration (SSA) notice of award for SSDI or SSI benefits stating that your next scheduled disability review will be within five to seven years from the date of your most recent SSA disability determination.

• You can submit certification from a physician that you are totally and permanently disabled. Your physician must certify that you are unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that can be expected to result in death, has lasted for a continuous period of not less than 60 months, or can be expected to last for a continuous period of not less than 60 months.

If you are unable to work because of a physical or mental impairment, you might qualify for a total discharge of your Federal Student Loan balance. For more information and assistance with checking your eligibility and submitting the necessary documentation, please call us.

Death Discharge

If you, the borrower, die, then your federal student loans will be discharged. If you are a Parent PLUS loan borrower, then the loan may be discharged if you die, or if the student on whose behalf you obtained the loan passes. Erroneously many borrowers have the perception that these loans could and would be passed on to heirs or an estate; however, this is false.

The loan will be fully and completely discharged if a family member or other representative provides a certified copy of the death certificate to the school (for a Federal Perkins Loan) or to the loan servicer (for a Direct Loan or FFEL Program loan).