If you are struggling to repay your student loans, there may be some good news for you. Several options can help reduce the monthly payments or even forgive part or all of your debt in exchange for work in public service. If this interests you, continue reading to learn about the various programs and how they might apply to you.
What is student loan forgiveness?
The student loan forgiveness program is a plan that allows borrowers to have their debt forgiven. One of its goals is to help students pay for school without having many loans after graduation but still repay them in time.
It is the reduction or total elimination of your student loan debt. There are two types of student loan forgiveness – public service and federal student loan repayment plans.
Federal Student Loan Repayment Plans
If you are not in a federal student loan repayment plan, then most likely, your monthly payment is based on the amount of interest that has accrued. Once you have made it through all 120 prices with an income-based or income-contingent repayment plan for 20 to 25 years, whatever balance remains will be forgiven by Uncle Sam. If you are in an income-based repayment plan, your monthly payment will be approximately $0.
Federal student loans can be forgiven if you work for certain federal, state, or local government agencies, public service non-profits, and 501(c)(s) organizations. The Public Service Loan Forgiveness Program is the most common repayment plan of this type.
No payments need to be made while working in one of these positions (for up to ten years), but after ten years of on-time payments, whatever balances remain will be forgiven.
If you are in an income-based repayment plan, your monthly payment will be approximately $0. However, while working for these organizations, if the total amount is not fully paid off after 20 to 25 years (depending on when borrowed), then it will be forgiven by Uncle Sam.
Public Service Student Loan Forgiveness (PSLF) Program
The Public Service Loan Forgiveness program is for federal student loan borrowers who have made 120 qualifying payments while working full-time at public service or non-profit organizations. “Qualifying payments” are defined as complete, on-time monthly payments made under an income-driven repayment plan or the Standard Repayment Plan.
How does one qualify for this type of forgiveness? What are these qualifications or factors involved?
There are specific criteria you must meet before qualifying for “student” loan repayment assistance. These include:
- Being enrolled at least part-time in college
- Having federal loans with direct payments from your employer
- Working full-time (more than 30 hours/week)
- They are making 120 minimum monthly payments over ten years while keeping up with all other federal loans.
What are some of how someone can qualify for student loan forgiveness?
There are many different criteria that you must meet to get your debt forgiven. Still, there are also exceptional cases where having federal loans or fulfilling specific requirements will allow you to have this benefit. Some examples include: Having a disability and being unable to work, Being a veteran, and retiring from the military after 20 years of service or more.
What should one do if they believe that their loans qualify for student loan forgiveness?
If you think your federal loans meet any of these qualifications, it is recommended to get in touch with the National Student Loan Program (NSLP) directly to discuss what you need to do and what options you have.
How does student loan forgiveness work?
To be eligible for student loan forgiveness, you must meet specific requirements that vary by program and the type of debt incurred (Stafford Loans or Perkins Loans).
Generally speaking, there are two types of programs: those that require a service commitment and those that do not; depending on your repayment plan as well as whether they’re needed to repay federal loans through income-driven plans such as Income-Based Repayment (IBR), Pay As You Earn (PAYE) or Revised Pay As You Earn (REPAYE).
Each has its eligibility criteria. For example, if you have Stafford loans under the IBR plan, your debt will be forgiven after 25 years of full-time employment in public service. However, if you have Perkins Loans under the IBR plan, your debt will be forgiven after ten years of a full-time job in the public sector.
Who qualifies for student loan forgiveness?
Students in financial hardship qualify, but other factors play a role as well. For example, first-time home buyers also have assistance with their down payment or closing costs through specific government programs or grants from non-profits organizations.
Having an open conversation about your current situation will help you determine if you’re eligible and how much money can be forgiven!
Homeownership has long been heralded as part of the American dream, yet many people feel that they cannot afford it due to high real estate prices and low wage growth limiting buying power.
How do I get my loans forgiven?
The best way to start this process is by consolidating your loans. By doing so, you will be taking out one loan and combining it with the others into a new loan, usually at a lower interest rate than what was previously accruing on each student loan!
While many people think that they cannot afford their monthly payments, frequently, if these can be consolidated and streamlined, payment plans are available, making them more affordable for those in financial hardship.
Why consolidate my loans?
Conversion from private to federal or vice versa happens all of the time as students graduate and find better-paying jobs (or lose such opportunities). Private lenders allow borrowers some leeway before switching over; however, there may no longer be any opportunity for forgiveness once converted.
How do you get started with the application process?
If you’re like most people, student loan debt is one of your biggest concerns. There are many reasons someone might be interested in getting some, or all their student loans are forgiven through a government program or private sector lender. However, misinformation is abundant out there about what it takes to qualify and how much effort needs to go into applying.
To kick things off, let’s look at the different ways borrowers can get their student loan balance wiped clean after graduating from college (or dropping below half-time enrollment status). First up, we have Public Service Loan Forgiveness (PSLF), reserved for people who work full-time (more than 30 hours per week) in an eligible job. To be considered, you must also have Direct Loans and be performing at the time of application towards one of these types of employers:
I think it’s important to note that if your employer isn’t on this list, but you’re still working at a non-profit or in public service, you may have luck applying for this type of loan forgiveness via other programs.
Why should I bother with student loan forgiveness when my loans are already in forbearance or deferment?
If you are struggling with your loans, there is no reason not to apply for student loan forgiveness. You can do both at the same time!
Student loan forgiveness is essential because the payments are still due even if your loans are in deferment. However, you can take advantage of student loan repayment plans like income-based repayment plans (IBR) to reduce the payment amount and make it affordable for borrowers.
Is there a deadline to apply for a public service job that will qualify me for student loan forgiveness?
There is no hard deadline. However, you should apply as soon as possible to ensure that your job qualifies for student loan forgiveness since some jobs have specific time requirements. For instance, if you are in the military or a police officer, you must work full-time for at least three years before qualifying for Public Service Loan Forgiveness Program (PSLF).
Other professions may require more extended working periods depending on the company policy and state laws regarding this issue.
How does income factor into my ability to get student loan forgiveness? Does it affect me directly by lowering my monthly payment amount using the IBR plan?
No, we’re talking about two different things here: how much money someone earns and what percentage of their earnings goes to their monthly student loan payment.
The percentage of your income that goes towards paying off loans is called the ‘income-to-debt ratio.’ According to government regulations, you must have an IBR plan with a maximum calculated at or below 20%. This means if someone’s earnings are low enough for them to pay off 20% of it each month on their student loans, they will qualify for public service job forgiveness programs.
Suppose someone doesn’t meet this requirement due to earning too much money. In that case, there are still options available like standard repayment plans and private refinancing, which can reduce payments by extending terms or lowering interest rates, respectively.
Did you know that FAFSA offers multiple ways students can get help affording college? They have a variety of scholarships and financial aid options.
To receive federal student aid, you have to fill out the FAFSA form, which contains questions regarding your income from previous tax periods and additional sources of help such as scholarship opportunities that do not require repayment or work-study programs for part-time jobs on campus. You can learn more about it online at fafsa.gov.
Student loan forgiveness programs are a great way to help relieve the financial stress of paying off college loans. This is possible for borrowers struggling to repay their loans, but there are also other options available that you should explore before applying.
Remember, you do not need excellent credit or an impeccable history with repaying debts to qualify for federal student aid and public service job opportunities that offer repayment plans like income-based repayment (IBR), which can be very helpful.