Federal Student Loan Forgiveness
After graduating from college many people are left with student debts. These debts can be anything from loans to credit cards. Many people who took out student loans tried to get a federal student loan before attempting to get a loan from a private loan provider. Federal student loans not only help you get your college education but they can even help you not have any debt. You may be asking yourself how that is even possible. Most people when they took out their loans thought they would have to pay this money back without a doubt, but that is not necessarily the case. Thankfully there are actually federal student loan forgiveness programs. That does not mean that everyone qualifies but for those that do it can relieve a great financial burden.
Millions of Americans May Qualify for Student Loan Refinancing!
Did you know that you can refinance student loan debt to rates as low as 2.13%? SoFi members save $14,000 on average. No application, origination, or pre-payment fees.
If forgiveness is not an option because you don't qualify one option for reducing your monthly payments is federal student loan consolidation through either a private company or federal.
One big way to give your loans forgiven is volunteer work. The AmeriCorps and Vista who often work together are two places that not only really need your volunteer work but also provide loan forgiveness. They have numerous things a person can do plus depending what you do for AmeriCorps they will even give you a small income for living during your time of service. Not to be left out is the Peace Corps, who also provide great opportunities of volunteer work to receive federal student loan forgiveness. Each of these places provides a different amount of help. The AmeriCorpsoffers up to twelve thousand dollars for a year of service in between student loan forgiveness and living allotment. The VISTA program is ran a little differently without the living allotment and will provide up to four thousand seven hundred and twenty-five dollars if you work seventeen hundred hours in volunteer work for them. Lastly in the volunteer group is the Peace Corps. The Peace Corps can provide up to seventy percent of forgiveness on your federal student loans but they only provide a forgiveness rate of fifteen perfect per year. The biggest benefit of using any of these programs for student loan forgiveness is not only getting your loans paid off or much lower but for the opportunity to really help in the world.
The second way to receive federal loan forgiveness is through working in certain fields. These fields can include the following careers:
- law enforcement
- parole worker
Most of these include at least five years of service in the field and working in a community or area that is in need. The other way to receive federal loan forgiveness in these fields in working in non-profit organizations. The amount you can actually receive varies greatly depending on the state you are working in and even by the college you graduated from. If you are in any of these fields it is important to contact the organization for the field to find out all the forgiveness options that are available to you.
In closing there is just so much money out there that people do not know about. College graduates focus so much on their education that once they graduate they are often left with a pile of bills and no job. Do not let yourself fall into that trap. When graduation is coming or even once you graduate look at all the options of federal loan forgiveness. There are so many and especially upon graduating many have an open schedule that would allow for some great volunteer work to improve their resume and pay of some of that pesky student debt.
Obama Student Loan Forgiveness
If you have never heard of the new forgiveness plan enacted by Obama, it is time for you to learn some more about it. Below, we will go over the plan in detail to ensure that you have a good understanding of what it is and what to expect.
What is this New Plan?
The student loan forgiveness plan by Obama is basically a large change to the way the federal loan forgiveness program works. The plan was designed to help make it easier for students to receive student loan forgiveness on their loans whether or not they are in a qualifying program that offers forgiveness.
What Are the Benefits to Me?
When it comes down to it, the new plan will help you in one of two ways, or maybe even both. The first section of the plan talks about student loan debt forgiveness and it is now written that after students have made 240 qualifying payments, about 20 years of payments, all of their student loans will be forgiven.
Of course, not everyone will qualify under the new plan because you need to make payments on time, in full, and consecutively for the entire 240 payments.
When it comes to other forgiveness programs such as the Public Service Loan Forgiveness program, Obama’s plan states that after the 120 payments have been made, the rest of the loan will be forgiven.
The second change that the Obama plan addresses is the Pay As You Earn program. This plan is designed to prevent students from having high monthly payments due on their student loans. The plan states that a student’s student loan payment cannot exceed 10 percent of their discretionary income. Discretionary income is considered any income that is above 150 percent of the stated poverty line.
But What Really Changed?
If you were unfamiliar with the Obama plan or the plan that it replaced, then you may not even realize that there have been changes made. The first change is the 240 payments. The previous threshold was 300 payments, which was 25 years, so it has been lowered by five years.
Also, the plan change includes allowing students to clear the rest of their loan under the PSLF plan as opposed to receiving just a set amount of money.
Are There Eligibility Requirements?
There are a couple of eligibility requirements for both benefits within the plan. To qualify for the student loan forgiveness, we mentioned above that you must make all 240 payments on time and consecutively. You cannot choose the amount you pay and must pay each monthly amount in full.
For the Pay As You Earn program, you will need to prove that you have some type of financial hardship that would prevent you from paying all of your student loan bills. Also, you must be a newer borrower and all loans should have been taken out on or after October 1st, 2007.
If you are interested in any of these programs, it is important that you speak with your student loan servicer, as they can help you apply and tell you if you qualify.
Public Service Loan Forgiveness (PSLF) Program
You have probably heard about the Public Service Loan Forgiveness program, also referred to as PSLF, but you may not know what it really means. Below, we will go in depth a bit to help you better understand just what it is.
The PSLF program is designed to forgive any remaining balance on your student loans once you have made a total of 120 qualifying payments under a qualified loan repayment plan, and while working for a qualified employer full time. Wow, sounds exhausting, right? It really isn’t too complicated to understand, so let’s break it down even further.
Qualifying Employment and Hours Worked
Depending on the type of forgiveness you seek, you will need to study what is considered qualifying employment. Your loan servicer will have a list of places, but typically, it includes working for any non-profit organizations, government organizations, and other agencies that provide public services to residents. For example, becoming a Peace Corps member would qualify you for the employment part.
Under the program, a full-time work week is one where you work at least 30 or more hours. If you work any less than the 30 hours, you will be considered a part-time employee, so it is important to ensure you maintain full-time status.
Another thing to keep in mind is that you may count multiple jobs towards the full-time hours worked. For example, if you work 20 hours at one job and 15 at another, this would meet the 30 hours per week threshold.
Are All Payments Considered Qualifying?
No. In fact, there are some guidelines that determine whether or not a payment will be considered qualifying. Since you do have to make 120 payments, you will realistically be paying your student loans for about 10 years BEFORE the loan forgiveness kicks in.
A qualifying payment is:
· Made while you are employed full-time with a qualifying employer
· Made after October 2007
· Is the full amount on the bill
· Is not more than 15 days after the due date
· Made under a qualifying repayment plan, which includes the income-based plans and the 10-year standard
Tips for Receiving Public Student Loan Forgiveness
One thing that many students do not realize is that to receive student loan forgiveness, you must make 120 payments, which is equivalent to 10 years of payments. If you are on the standard 10-year repayment plan, you will have a very small balance, if a balance at all to forgive. Therefore, it is recommended that students on a 10-year repayment plan discuss an income-based payment plan with their loan servicer, if they plan to qualify under the PSLF program.
Another thing to keep in mind is that you will not automatically receive forgiveness and you MUST apply for it once you have made the qualifying payments. Some students miss out on the opportunity because they do not know that they must apply.
Lastly, always make sure that you make your payments on time and within the guidelines; otherwise, you may have to restart your payment count, which would extend the length of how long you have to pay.
If you are interested in public service loan forgiveness, speak with your loan servicer provider today to learn more about it.
Total and Permanent Disability and Discharge
If you are not familiar with the Federal Student Loan Forgiveness for Total and Permanent Disability and Discharge, we will go over some more information about it below. The name of the program is usually shortened to just TPD discharge and may be referred to as such. Ready to learn some more about the program? Let’s go.
What is the TPD Discharge?
The TPD discharge is a program that removes your responsibility to pay for your student loans when you are considered disabled. The loans that qualify under this program include:
· Federal Perkins Loans
· Federal Family Education Loan Programs
· Teacher Education Assistance for College and Higher Education Grants
· William D. Ford Federal Direct Loans
Before the loans will be forgiven, you will need to prove that you are considered either totally or permanently disabled. Once you have turned in the proper documentation, the Department of Education will determine whether or not you qualify to have your loans forgiven.
Do I Need to Prove My Disability?
As mentioned briefly above, you will need to provide documentation that you are disabled and there are three ways that you can do so.
1. The first way to prove your total or permanent disability is to show that you are currently receiving social security disability insurance or supplemental security income. You will need to ask for a certified letter and then submit it to the Department of Education as proof.
2. If you are a veteran and you have been injured in a service-related incident and are now disabled, you can submit documentation from the Department of Veteran Affairs showing your disability and receipt of benefits.
3. You can submit a certification letter from your physical therapist or physician that you are permanently or totally disabled. It is important that your physician lists that you are unable to participate or engage in any type of substantial activity due to your disability.
Applying for a Disability Discharge
Before you apply for a disability discharge, make sure that you do in fact qualify and make sure to gather all of the documentation you need. Once you are ready, you can fill out an application and then submit the application along with your forms of documentation.
Once your application is received by the correct agency, your total and permanent disability servicer will contact your current student loan servicers and have your loans placed on hold for up to 120 days. You will not receive any collection activity on these loans during that time and it will provide you with the time you need to apply for and receive an answer to your application.
If your request is approved, you will no longer have to make payments on your student loan account and any payments made after the determination of your disability date will be returned to you.
If you are ready to apply or you would like more information, speak with your loan servicer today.
Dangers of Student Loan Forgiveness
If you thought the idea of having your loans paid off was exciting, it is and something you should look into, especially when it comes to the Public Service Loan Forgiveness plan. Before you get too excited though, let’s talk about some of the dangers of student loan forgiveness.
Danger 1: Failure to Submit the Documentation
Many students do not know that you have to APPLY for student loan forgiveness once you meet all of the requirements. Some students assume that the forgiveness will automatically be applied to their account and this is not the case. In fact, if you do not apply for it, you could be completely disqualified and you may not even receive the payoff you worked so hard for.
If you are approaching your 120th payment, make sure that you have the paperwork on hand and ready to turn in.
Danger 2: Missing a Payment
Did you know that missing a payment could disqualify you from the program? Yes, that is right. In fact, there is no hardship option that allows you to pay at another time and you must make 120 qualifying payments, which are no later than 15 days past the due date. Even if you mail your payment in and the mail is held up, if the deadline passes, you will disqualify yourself. It is important that you always make your payments on time and before that time, if you can.
Danger 3: Not All of the Loan is Forgiven
Many students think that no matter what their loan balance is, it will be forgiven. This is a BIG misconception and one that can land you in deep water if you are not paying attention. Most student loan forgiveness programs have a cap on the amount of money you will receive for forgiveness. For example, if the program only allows you to receive $15,000 as the forgiveness amount and you owe $25,000, you will still owe $10,000 after the forgiveness, so plan accordingly.
Danger 4: You Must Claim the Forgiven Amount as Income
When you have your loan forgiven, the amount forgiven is claimed as income on your tax return for that year and you must pay taxes on it. As an example, if you had $10,000 forgiven and you make $40,000 per year, the amount you must claim on the year your loans are forgiven is $50,000.
This can be a problem for some students because it may mean that they need to pay taxes out of their pocket on the amount.
Danger 5: Switching Jobs Can Disqualify You
Lastly, if you switch employers or you cut back your hours, you may disqualify yourself for the loan forgiveness program. It is important that you review all documents and make sure that if you do switch employers, you do so correctly.
Student loan forgiveness is a big help for many students, but there are rules that need to be followed and of course, some dangers that come along with qualifying for the program. If you have any questions about your status or how to apply for the program, speak with your student loan servicer today.