I'll break it down (I'll use NCSU's Cost of Attendence as an example since I am all too familiar with it):
In order to be eligible for federal financial aid for college, one must complete a Free Application for Federal Student Aid (FAFSA). On this application you put down pretty much all of your and your parents' financial info (if you're under 23), and after you submit it you get an Expected Family Contribution (EFC), which is essentially what you are expected to pay out of pocket (you can estimate how much your EFC is by going
here)
As an example, for a household of 4 people who's annual income is $60K and has no other assests, tax deductions, etc., this student's EFC would be $9,209. This is the amount that is expected to be financed directly by the student and his family. How is this done? Either through cold, hard cash or by loans:
For federal loans, there's Perkins, Stafford, and PLUS loans.
A Perkins loan is usually reserved for students who are in greeat financial need, and an undergraduate student can borrow $5500 max a year not to exceed a $27500 lifetime total.
The maximum a freshman can borrow via an unsubsidized Stafford loan is $5500 for an academic year ($3500 for subsidized).
As for PLUS loans, unless you're over 23 or a grad student, these are generally only available to the parents of the student. This type of loan has no limit as it is based solely on the parents' credit history (so if your parents have a horrible credit history you're screwed here).
1 academic year for in-state undergraduate students @ NCSU costs $17,727 for tuition, r&b, books, meals, etc. So let's do some math:
$17,727 - $9,209 = $8,518 that your family is not expected to pay directly. I'll come back to this later.
As for the $9,209 that your family is expected to pay, let's assume you were to get an unsubsidized Stafford loan:
$9,209 - $5,500 = $3,709 left to pay after a Stafford loan.
Now if your parents have good credit then you can get them to pick up the remaining $3,709; else you'll have to find another way to pay (if you do find one let me know).
Now back to the $8,518 figure from earlier. This is the amount that you are NOT expected to pay out of pocket. This is where it can get tricky. Depending on how much financial aid and grant money your school has available, you school may give you a little or a lot to pay towards this $8,518 figure. In adition to this there are a few federal educational grants thats you may be eligible for (see
here). Usually what I have seen though is a lot of people participate in Work-Study programs (you work x hours a week and your wages go toward paying off that $8,518.)
Here's the problem with Obama's student loan reform; if you can't meet your financial obligations via federal programs (whether it be through grants, Work-Study, loans, etc.), it's da
mn near impossible to get a private student loan now, which makes it much harder to pay for college (although it does stop a lot of the predatory lending practices by certain companies *cough*Sallie Mae*cough*)
Also, in regards to the whole "your debt is forgiven after 10 years" - the only way it would take >10 years to pay off federal student loan debts would be if you had some astronomical amount of debt and a horrible salary and only made the minimum payments based on said salary.