Obama expands student loan forgiveness to ALL educators

The Obama administration has expanded the student loan forgiveness program, which previously only went to educators in high risk communities, to all educators and in fact, all public servants.

If you make payments for ten years, the rest of your debt is forgiven.

This is coupled with another program, Income Based Repayment (IBR) that will dramatically reduce payments for most borrowers and forgive their loans after 25 years. PLUS loans are not eligible.

The Department of Education has put up an IBR calculator, so you can see how much your payments will go down. I owe a little over $100,000, and my monthly payments are about $729. I originally only owed about $50,000, but it was so difficult to make the payments regularly until the last couple of years that my debt doubled.

Running my numbers through the IBR calculator, my payments dropped to $450, so I'll end up paying $54,000 more. Under the old system, I would have paid $218,000 more, so I'll save three-fourths. I've already paid $18,000, so I'll still end paying a more than my original debt--but not four times more.

This will definitely have a "trickle up" effect in my case. I'll be able to make a down payment on a house that much sooner, and others will likely do the same or get a new car or appliance sooner than they otherwise would have, which will help get the economy moving again.

For more information, read the Department of Education press release.

Here's the application for IBR if you're repaying your loans directly to the Department of Education. If you have a federally guaranteed loan you're repaying to a bank, contact your lender.

The application for loan forgiveness hasn't been posted yet.

Here's the actual regulation change for forgiveness.

PS: I would like to take credit for this since I wrote a letter asking the Obama administration to do it, but when I read the reg, the change was in the pipe before that.