Student loan forgiveness is a hot topic these days, but it’s not for everyone. To get student loan forgiveness from the government, you have to pay your loans for ten years or more in some cases and work in an eligible profession. However, some private lenders offer student debt relief programs. This article will show you how to find a program that suits your needs and plan how to repay them before they charge high-interest rates.
What is student loan forgiveness, and why do people want it?
Student loan forgiveness is when borrowers get their federal student debt wiped out. Despite the abundance of options, some people are struggling to repay education loans. The news that they can get relief from this financial burden may bring them new hope and excitement.
Student loans are a big problem for people across the country. Even though student loan forgiveness isn’t available to everyone, this program is an option right now. But first, you have to understand how it works and what your options are before signing up!
One of the ways that borrowers can get their loans wiped out is through Public Service Loan Forgiveness (PSLF). This federal program allows students who work in certain professions or go into critical public service roles to be relieved from education debt after ten years of payments under income-driven plans.
After 120 qualified monthly payments, you will receive credit towards having 100% forgiven on any remaining balance due as long as all other eligibility criteria are met. So keep reading because there may still be hope if you don’t qualify for PSLF!
A student loan debt consolidation isn’t the only option for borrowers looking to get out of debt. If you would like to find other options, you can check out our debt relief services that could help you reduce your interest rates and monthly payments.
The different types of student loans that qualify for forgiveness are
Income-driven repayment plan (IDR)
With this option, your monthly payment amount is determined by how much income you make each month. In addition, it will consider any federal tax exemptions that you receive and what you can afford to pay while getting on track with different repayment plans for the next 20-25 years of your life!
This plan has three main components:
Individuals with low income, unemployed, or working part-time and no longer go to school full time can take advantage of this plan. It is also helpful for borrowers with a high debt outstanding which means they need more flexibility under the current payment system.
This IDR plan has its benefits, but it also comes with some limitations. For example, it doesn’t always provide the most attractive repayment options for borrowers looking to get on track with their student loan payments but doesn’t qualify under these conditions!
Federal Family Education Loans (FFEL) and Direct Loan Consolidation Program
The Federal family education loans are an excellent option for borrowers who want to get on track with their student debt payments under the right repayment plan. In addition, when you consolidate federal loans, it will combine multiple accounts into one new account that makes managing and repairing your credit score easier!
Students must understand how much they owe before consolidating these debts because this can impact future borrowing options under certain conditions.
There is also an opportunity for students to refinance or consolidate their educational debts without having federal direct consolidation loans by taking advantage of private lenders. These companies offer personalized education financing solutions, so be sure to shop around before signing up for any loans!
Private Student Loans or Private Education Loans
These types of student debt can be an alternative solution when federal loan options don’t work out. However, they typically have higher interest rates and may not qualify under lower income conditions while working in public service jobs because they are not under the federal program.
So if you want to refinance or consolidate your debt with a private lender, make sure that it’s under the right conditions so that they will help lower your monthly payments instead of raising them!
How much do you need to make to qualify for forgiveness?
Remember that you need to meet all of the federal eligibility requirements and be enrolled in a qualifying repayment plan for at least ten years before your loans will be eligible for forgiveness. After 120 qualified monthly payments, an application must then be submitted with proof of employment status.
Once this is done, any remaining balance due on your student debt is 100% forgiven as long as you qualify under these terms! That said, there are some important factors that students should consider when deciding whether or not they would like to apply:
What kind of job do I want?
- Public service jobs include those who work full-time (30+ hours per week) inside public safety organizations such as police departments, fire stations, hospitals, etc.
- Teachers and professors are working in low-income schools.
- Government employees: military, postal service, Capitol Police, etc.
- If you work for a 501(c) (19) nonprofit organization that provides public services.
- Also include those who work full-time as an employee of tribal organizations or Indian Health Services providers serving Native American populations.
- Active duty service members in the Army, Navy, Air Force, Marines, or Coast Guard.
- Anyone working at least 30 hours per week for a not-for-profit organization can qualify.
What kind of student loans do I have?
Federal Perkins Loans are eligible to be forgiven after ten years with employment in one of the above fields.
Federal Family Education Loans (FFEL), such as Stafford loans, PLUS Loans, and consolidation loans, are not eligible for federal student loan forgiveness programs.
Private Student Loans may still qualify to be discharged under a personal student debt relief program. However, keep in mind that only federal loans may be eligible for forgiveness if you have both federal and private student loans.
How much do I owe?
The amount you will need to pay back depends on the type of loan that is forgiven and when it was borrowed. If your student debt totals more than $57,500 (this number changes periodically), then you should not expect to qualify for any student loan forgiveness program.
For those who do qualify, the amount forgiven will be taxed as income, and you will need to pay taxes on it accordingly.
How much is my monthly payment?
If your payment under a standard repayment plan for ten years equals more than what’s listed below, then you’re not eligible:
- Federal Perkins Loans: $0.00
- Stafford loans (subsidized and unsubsidized): $0.00
- PLUS loans: not eligible for forgiveness unless the borrower dies or is permanently disabled, in which case any remaining balance due will be forgiven after a five-year waiting period. Consolidation loans are only eligible for forgiveness under the income-based repayment plan.
As you can see, what type of student loans, when they were taken out, and how much is owed will all factor into whether or not a borrower qualifies for federal loan forgiveness programs.
Try out a free Income-Based Repayment calculator to estimate your monthly payment while enrolled on an income-driven repayment plan.
Who won’t be eligible for this plan?
- Private student loans
- Most federal loans, such as Stafford Loans and PLUS Loans, are not eligible for forgiveness. Consolidation loans may be forgiven after a five-year waiting period if the borrower dies or becomes permanently disabled. Only those who have Perkins Loan will see their debt discharged entirely after ten years of full-time employment in public service.
More Info: Borrowers who have multiple federal student loans and consolidate them together may lose the public service loan forgiveness benefit on some or all of their other federal student loans. The Public Service Loan Forgiveness program is designed to forgive a borrower’s remaining debt for working in a qualifying job, so those with pre-existing private student loans are not eligible for forgiveness.
The pros and cons of the new plan
The downside of this plan is that it will not be available to everyone. For example, borrowers with private student loans are ineligible for the program. In addition, some borrowers who have federal loans may lose access to Public Service Loan Forgiveness if they consolidate their loans together after October 2017.
On the other hand, signing up for an income-driven repayment plan is the best way to keep student loan payments affordable, and there are no eligibility requirements.
If you receive loan forgiveness, the forgiven debt is considered taxable income. This could cause a borrower’s tax bill to increase significantly and reduce their refund or even result in additional taxes owed.
The other drawback of having your student loans forgiven is that it will impact your credit score negatively for seven years while impacting your ability to borrow money during that time.
The pros of signing up for this plan are that it will help with student debt relief and allow students to save thousands by enrolling in an income-driven repayment plan potentially.
The cons are that the borrower may lose access to Public Service Loan Forgiveness if their federal loans are consolidated together after October 2017, and forgiveness will result in additional taxes owed. In addition, this plan is only available to those with federal loans, so borrowers with private student loans are ineligible for the program.
This new plan will not be available to everyone, but it is a way for students with federal loans to save thousands by enrolling in an income-driven repayment plan potentially. The downside of signing up for this plan is that it will impact your credit score and ability to borrow money, but the pros are that it will help with student debt relief.