Obama Signs Student Loan Reform Into Law: What does this mean to me?

[TvS]

I am about to enroll into grad school. I got accepted by Columbia and Bloomington, Indiana, but I am really worried about student loan debt I will retain after I graduate. However, the new law states that I will only have to pay a maximum of 10% of my income towards that loan once I have graduated, and, if I enter public service, the loan will be forgiven completely after 10 years of payment, 20 years if not in public service. This sounds too good to be true.

Indeed, the law won't go into effect until 2014, so I am wondering if it will still apply to me, since I am expecting to receive my PhD in 2014 at the earliest. So I will be taking out the government loans prior to the law going into effect, making me wonder if I can still pay off that loan in the manner stated in the new law, or if I have to pay it all off the old way. Will I benefit from this or not? I cannot find any real information on those specifics anywhere online. If anybody knows, I would appreciate the clarification.

[za232]

Yup, the new law won't apply to you (as far as I understand). However, the old law (also Obama) is not that bad... the numbers are 15% of your income that is above the poverty line, 25 years of total payments or 10 if you are in public service. If you search for "Income based repayment" you can find a nifty calculator that will tell you how big your payments will be.

[TvS]

Thank you for the help. I used the calculator and came to the conclusion that if I would make use of this whole loan forgiveness thing under the old plan, there would not be much of a difference in the net amount of money I would lose were I to go to expensive Columbia instead of Indiana, even though Columbia would cost me at least twice as much. Can this be right? Also, is a position as a public university professor considered to be public service?

[murpstud]

It really won't mean much for anyone. It allows for more pell grants to be handed out over a few year span, but only about $400 more per student, all-the-while tuition rates will continue to rise from 3-7% each year. Do the math, status quo.

[2400]

TvS -- there is information on the loan forgiveness programs on the FAFSA website. You can also call them up and ask questions -- I've always gotten helpful answers from the FAFSA folks. I can tell you that your loans have to be federal direct loans. So...this law does not apply to private loans. I believe that working as a professor counts as public service. I'm pretty sure I saw a list of professions on the website noting what exactly is considered public service.

I have federal loans and am hoping to take advantage of the loan forgiveness program since I will be going into a public service profession. But...I agree..it does seem too good to be true!

[zerolife]

i agree with murpstud. Tuition should go down rather than encourage people to borrow more under more favorable terms. Haven't we learned anything from the recession?

[tem11]

There are some catches. The major one is that in order to even qualify for income-based repayment you have to make below a certain amount of money and they use your family income if you're married, not just yours. I have a lot of undergrad debt, but since my husband makes a decent income I'm ineligible. Google "IBR calculator" to get a good idea of your monthly payments.