First of all, although Obama endorses student loan forgiveness, I have not found any programs that would completely forgive any student loan immediately. The programs that Obama was talking about allows any remaining balance of your student loan to be forgiven after 20 years. If you are a public service worker, your remaining balance will be forgiven after 10 years. This seems a little bit unrealistic. Not everybody can work as a public service worker for 10 years to have their student loan forgiven after that.
If you are a teacher, there is a teacher loan forgiveness program for FFEL loans and Direct Loans. However, not all teachers are eligible. Those who qualify are full-time teachers who have been working as a teacher for 5 consecutive academic years in an elementary or secondary school which the US Department of Education designates as “low-income” schools.
If you are enlisted in the military with a degree, there is a program to have your student loans forgiven. This also applies to Coast Guard Reserves. More information here.
If the options above doesn’t suit you, another option is to look into the Income Based Repayment (IBR) program. Obama proposes to have student loans repayment plan capped at 10% of their income after living allowances. Currently it is capped at 15% of your income. You may not have your student loan forgiven right away but this will help you reduce your monthly payment.
However, this income-based repayment is only available for students with federal Stafford, Grad Plus, and Perkins loans. Private lenders such as Sallie Mae or Chase are not included in the plan. To read more about the Income Based Repayment program, click here. If you want to find out what your monthly payment would be under Obama’s new income based repayment plan, go here and use this calculator.
The income based repayment program is more effective for newer loans. Although it does not matter how long ago the loans were issued, choosing this repayment option will start the clock all over again. If you are a public service worker and have been working as one for 8 years, under the new Obama student loan forgiveness program, it will take you only 2 more years until the remaining balance will be forgiven. How ever, if you switch to income-based repayment now, the clock will be reset and start over again and you will have to wait for another 10 years as a public service worker to be able to be forgiven. elMost federal student loans are eligible for income-based repayment, no matter how long ago they were issued. The only exception to this rule is if you were previously in an income-contingent payment program.