Student Loan Forgiveness: What to Know

By Brittany Hawes on June 21, 2018

In a world where gigantic student loans are taken out by millions of students in need, learning all you can about student loan forgiveness and student loan debts should be something that every student makes an effort to do. Did you know that student loans are the one thing that nearly every college student walks away with upon graduation? To put that in perspective, according to StudentLoanHero.com, Americans owe more than a trillion dollars in student loan debt. That’s 44.2 million students in debt and an average monthly student loan payment of $351.

It’s easy to say that most college students will graduate with some form of student loan debt. It’s more common for a graduating student to have student loan debt during the commencement ceremony than it is to have a great job lined up for you. It’s a sad but true thought. The price of earning an education in the United States is high, especially for low-income families where financial aid in the form of Pell grants and scholarships are simply not enough to ensure graduation.

Even with all of that being said, financial loans are necessary for some students. When you’ve just received your degree, having a giant student loan debt hanging over your head (like those cartoon rain clouds that follow people around) can really put a damper on things. A lot of students find themselves unable to make payments on student loans once it comes time to start sending money. When this happens, there are certain things that might happen to your loan. In certain circumstances, your student loan debt may be forgiven or cancelled.

Of course, this doesn’t mean that you can tell the collectors that you’re unable to make payments and your debt disappears. There are certain situations a person has to be in so that they’ll qualify for student loan forgiveness.

student loan forgiveness

Image via Pixabay.com

What is Student Loan Forgiveness?

Student loan forgiveness is when the borrowing party is no longer under any obligation to pay a portion or the full amount of the loan they took out because of certain circumstances that are relevant to the borrower’s current status. The loan provider will work out a payment plan with you which will result in the clearing of your student loan debt, either in a portion or the full amount.

Student loan forgiveness will not be issued if a party does not finish their education. It will also not be issued if you are unsatisfied with your education or are unable to find a job related to your area of study. If you took out a private loan, those loans will not be able to qualify for any kind of student loan forgiveness. If you’re looking for help with repaying your private loans, take a look at this refinancing tool. It will provide you with savings estimates based on the numbers you input. After getting an estimate, you can decide for yourself if refinancing is the right thing to do with your student loans.

How do I get Student Loan Forgiveness?

In order for a borrower to qualify for student loan forgiveness, they must meet at least one of a number of requirements. To determine if you qualify for a student loan forgiveness, you will need to contact your loan provider and ask what steps you should make to put in an application for student loan forgiveness. They will happily walk you through the steps of finding the right loan forgiveness payment plan for you. However, if you have a Perkins loan, you should get in contact with your school and ask about student loan forgiveness. The most important factor of finding out if you’ll qualify for student loan forgiveness is the repayment plan you’ve chosen.

Below is a list of the kinds of student loan forgiveness programs that are available to students who have taken out state loans to aid them in their educational endeavors. In each of them, I will explain what they are and who should apply for them. You should read through each of them carefully and decide which one will work best for you and your situation. If you’re lucky, you may be able to combine different plans to optimize your chances of student loan forgiveness.

1. Public Service Loan Forgiveness (PSLF)

Public Service Loan Forgiveness works like this: you make 120 payments and whatever is left of your debt after those payments are forgiven. If you start making payments on your student loan debt every month right out of college while doing this repayment plan, you’ll have your entire loan paid off within 10 years! That’s a great chance, considering that there are people well into their fifties who are still working off their student loan debt.

This repayment plan is generally offered to full-time employees working under a qualifying employer. It’s important to see if you and your employer qualify for this repayment plan right away so that you’re not making payments that won’t count towards your 120 payments needed to have the remaining portion forgiven.

Employers who are usually qualified for this kind of repayment plan are tribal, local, state, and federal government groups and tax-exempt, non-profit organizations. If you are a volunteer with the Peace Corps or AmeriCorps groups, you may also qualify for student loan forgiveness with a Public Service Loan Forgiveness repayment plan.

If you have taken out a direct loan and fit the other criteria listed above, you may qualify for the Public Service Loan Forgiveness repayment plan.

Student Loan Forgiveness

Infographic by Brittany Hawes

2. Teacher Loan Forgiveness

To take advantage of the Teacher Loan Forgiveness repayment plan, you need to be a teacher working at a school for at least five consecutive years. The school must be a school that qualifies for this kind of repayment plan, so it’s important to check with your employer and see if your school offers this kind of repayment plan during the application process. Also, you’ll need to be a highly qualified teacher, which means you’ll need a teaching license or a teaching certificate of the state.

The way this repayment plan works is that you’ll receive an amount of money which will be how much your loan is forgiven. Teachers of secondary schools can expect up to $17,500 in loan forgiveness. Eligible loans include subsidized and unsubsidized federal Stafford loans, as well as subsidized and unsubsidized direct loans.

Unfortunately, PLUS loans and Federal Perkins loans are not qualified for the Teacher Loan Forgiveness repayment plan. However, if even some of the loans you took out are from the qualified loan types, you’ll be able to use the Teacher Loan Forgiveness repayment plan for those loans (but only those loans).

3. Pay As You Earn Forgiveness (PAYE) and Revised Pay As You Earn Forgiveness (REPAYE) Plans

The Pay As You Earn Forgiveness repayment plan can be summarized by its acronym. As you work and earn money, if you are part of the Pay As You Earn Forgiveness repayment plan, you will be putting some of the money that you earn towards your loan. This plan was introduced to the United States in 2011 by the then President Barack Obama in response to the growing anxiety of students and a nation wallowing in substantial debt and the fear of inability to repay loans.

Under the Pay As You Earn repayment plan, qualified employees’ payments will never exceed more than 10% of that particular employee’s salary. However, interested parties must demonstrate significant financial distress, to the point where the person knows that there is no way that they’ll be able to pay off their loans.

The PAYE repayment loan forgiveness plan will only work towards a few specific loans. These loans include the Willian D. Ford direct loans, Graduate PLUS loans, subsidized and unsubsidized direct loans, and direct consolidation loans.

The Revised Pay As You Earn repayment plan took out the financial duress requirement and instead allowed for anyone to apply, thus removing limitations to those who still need help, regardless of earning a slightly higher salary than the Pay As You Earn minimum.

The cool thing about both the PAYE repayment plan and its revised version is that you will not pay more than 10% of your salary on either. Also, even if you begin to earn money later down the road, your payments will remain the same amount as when you first signed into the plan.

4. Nurse Corps Loan Forgiveness Plan

The Nurse Corps Loan Forgiveness Plan is exclusively for nurses that work in an area in which there is a high demand for medical attention. The kind of nurses that are qualified for this forgiveness plan are licensed registered nurses, advanced practice registered nurses, or a nurse faculty member with a debt that qualifies for the forgiveness program.

The forgiveness program for nurses asks that those who wish to participate in the repayment plan work for at least two years in an area that truly needs more medical attention for its residents. In exchange, the program will pay for 60% of the total student loan debt you have. It gets even better. If you stay for an additional year as a nurse in the high-need area, working hard and saving lives, you are then qualified to get an extra 20% taken off of your remaining student loan debt. That is in addition to the 60% that has already been removed from your debt. Not only will you be knocking down your student loan debt a size or two, but you will also be helping out a community of underserved people who don’t have regular access to a doctor or nurse because of financial limitations, small population, and/or other reasons.

5. Income-Based Repayment (IBR) Forgiveness

The Income-Based Repayment Forgiveness repayment plan can be used on a wide variety of loan types, making this repayment plan one of the most versatile forgiveness plans I’ve seen. The types of loans that are covered with the Income-Based Repayment Forgiveness plan are subsidized and unsubsidized direct loans, subsidized and unsubsidized federal Stafford loans, PLUS loans, and consolidation loans that do not include loans made to your parents.

As the name suggests, the amount of money you pay will adjust according to changes made in your salary, family-size, and other factors that could affect your income. Your monthly payments can either be 10% or 15% of your discretionary income, but will never be higher than what you might pay if you were to do a standard ten-year repayment plan.

In order to qualify for this student loan forgiveness plan, your debt must be higher than what you’re able to pay or what your income suggests you’ll be able to pay towards your student loan debt. Keep in mind that you will be obligated to make payments for 20 years (for new borrowers after July 2014) or 25 (if you don’t meet the previously stated requirements) with this payment plan.

The cool thing about the Income-Based Repayment Forgiveness plan is that all debt that remains after the allotted 20 or 25 years will be automatically forgiven. You won’t have to pay another cent towards your student loan debt after you’ve reached your final payment!

Student loans don’t have to have a cut-and-dried payment plan. Know that there are options that you can take to cut back on how long and how much you will have to pay. No one wants to look back and realize that there were options you could have chosen to make your student loan repayment a lot easier! Check all of your options twice. When you feel ready, contact your school or your loan provider and see which student loan forgiveness plans you may qualify for.

Thanks for reading!

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