“Check this out, all right. I’m the President of the United States. We only finished paying off our student loans about eight years ago. That wasn’t that long ago.” – President Barack Obama, April 2012

For those of you in school, or the 20% of Americans who are paying off your ridiculous student loans, your ears may have perked up over the course of last year’s election campaign. “Student Loan Reform…Loan Forgiveness after 20 years…Income-Based Repayments,” these are the buzz phrases that get a man re-elected, right? Well, believe it or not, the media and the campaigns weren’t making things up this time; you might actually get a break on your student loans. Let’s see how this Student Loan Forgiveness Act of 2012 may help you.

While this student reform act is often referred to as Obama’s, the bulk of it was first proposed back in 2007, but finally got its legs from the President’s recent modifications. He lowered the minimum payment from 15% of income to 10% of income, and reduced the required number of years before forgiveness from 25 years to 20 years. This new bill will also cap interest rates and convert some borrower’s private loans to public. Before getting too caught up in the numbers, I’ll tell you what they mean.

Back in 2007, during the days of the Cost Reduction and Access Act, this income-based repayment (IBR) idea was introduced. Now, in 2012, it is being set as a way to help borrowers pay back their loans based on their current income (get it, IBR). So if you make $100K a year, you pay 10% a month, but if you make $20K a year, you still only pay 10% a month.

The best part is that eligibility is quite simple. You merely have to be a U.S. citizen, and make the minimum payments without defaulting for 10 years (120 minimum payments required for loan forgiveness). This means you are required to pay a total of 10% of what you borrowed, and the rest will be forgiven. Obviously, these new regulations only apply to public loans (Direct Loan, Guaranteed Federal Loan, etc.), so most of you with private loans will have to take things up with Sallie Mae and Wells Fargo. These regulations also apply to loans taken out as early as 2008, as long as the student also took a loan out in 2012.

Unfortunately for those of you schemers out there, you can’t just pay 10% in your first few years out of school, and then ask for loan forgiveness. This isn’t for entrepreneurs and would-be billionaires. This is for the schoolteachers in small-town Middle America, and all the other professionals who choose family, community, or good deeds over large fortunes. It’s also for those of you forced to choose between making a loan payment and taking sick kids to the doctor.

As for the college kids right now, you can bask in the comfort of the capped interest rate, at 3.4%, and continue studying and partying and making questionable social, morale, and financial decisions.