Student loan debt statistics are rising steadily since the turn of the century, reaching the $1.4 trillion mark in 2016. Getting a student loan seems like the logical thing to do for any aspiring professional.
However, when all is said and done, student loan repayment is not as easy as it sounds. Many people are sitting with unpaid student loans. Today we’re going to explain how you can get your student loans forgiven.
Almost 60% of the students that choose to attend college each year rely on the student loans in one form or another. This is primarily because higher education is not funded by the government as much as it is done in rest of the developed world.
These loans usually fall into 3 categories that include federal student loans, federal student loans made to parents, and private student loans made to parents or students.
Federal Reserve records show 40% of the student debtors in the $100,000 to $150,000 range while “The Economist” reported over 7 million debt defaults in USA in 2014.
Student debt and subsequent debt defaults seem to be as real an issue as global warming. Recent research and studies speak of negative impacts of this debt burden on the life of students as it goes on to interfere with their career choices, delays home ownership, causes depression and anxiety.
Now there may not be a magic wand out there that could eradicate the debts in a snap, but there are ways that people can get their student loans forgiven.
Student loan repayment tips
- So first things first; start by putting together a budget to accommodate a loans repayment plan. This will allow you to locate expenses that can be cut down.
Word of advice: it is easier to cut back on expenses when you’re fresh out of college, compared to later, when you get accustomed to living on limited means.
- Work extra to pay off more of the debt in a month. This might entail taking up a part time job or working overtime to earn more to put towards the debt payment.
- The debt burden holds back your progress in life, therefore the sooner it is jettisoned the better.
Having established that, there are student loan forgiveness programs out there that can be of assistance in getting rid of the student loan:
How do you qualify for public service forgiveness?
This program was established in 2007 and allows professionals employed in the public service sector to have their federal student loans waived after 10 years of timely payments.
This includes twelve payments per year, 120 payments altogether. The payments don’t necessarily have to be consecutive either.
- For one to be considered for the forgiveness plan, the person has to be a full employee of the federal, state or local government agency or of one of the charitable or non-profit organizations that are designated 501(c)(3).
Under this program, most direct loans are qualified including:
- Direct subsidized and unsubsidized loans
- Direct consolidation loans
- Direct plus loans
Read also
How To Pay For College Without Going Broke
2. Income Based Repayment (IBR)
Although, not exactly intended to be a typical forgiveness program, the Income Based Repayment program can be utilized for this purpose also.
Using this program, student loan repayment threshold capped at 10% to 15% of your disposable income. After consistent payments for a 20 to 25 years period, the balance remaining shall be forgiven.
On a side note, the loans that are forgiven thus can fall under taxable income under the current tax regime. The IBR payments must be lesser than those of the standard repayment plan.
It is most suited for borrowers who expect to remain in a low paying profession or industry and have a high debt burden.
How do you apply?
This would simply require filling out and submitting an application form accompanied by documentation showing records of income and tax returns.
Forgiveness Using Pay As You Earn (PAYE)
It is similar in nature to the Income based repayment (IBR) since it’s also not intended to be a loan forgiveness program by design. However, much like IBR, it can be utilized as a tool for that purpose.
The program allows the borrower to cap the monthly repayment at 10% and by the end of the 20 years, whatever balance is remaining, can be forgiven.
The forgiven balance can be considered as a taxable income, just like it is with the IBR.
The monthly payments must be less than what they are under the 10 year standards plan. Payments are based on income and the family size, and have to be made consistently over a period of 20 years.
Loans that qualify
- Direct subsidized and subsidized loans
- Direct grad PLUS loans
- Subsidized and subsidized FFEL Stafford loans, if consolidated
- FFEL loans made to grad students, if consolidated
- Federal Perkins loans, if consolidated
- Direct consolidation loans, unless they repaid parent PLUS loans or FFEL loans made to parents.
Federal Perkins Loan cancellation
The Perkins loan cancellation and discharge program allows a specific percentage of the student loan to be forgiven after each year of debt service. Over the years, you can effectively get up to 100% of your loan amount cancelled.
Do you qualify?
Perkins loan cancellation is quite popular with those from the teaching circles. Professionals from education sector qualify for it, such as librarians, speech-language pathologists, or other academia.
Other qualifying occupations include law enforcement officers, firefighters, public defenders, nurses, and service volunteers. Military personnel might also qualify.
How do you apply?
Getting in touch with the loan services and school’s students loan office, they may help you issue you with Perkins loan cancellation forms.
What is an Income Contigent student loan?
Income contingent repayment allows adjusting the monthly repayment amount against the income. It allows repayments to be either lower of 20% of the disposable income or what one is liable to pay on a 12 year plan. Twenty five years of timely payments later, the balance is be forgiven.
ICR may not be the most economical when it comes to lowering monthly payments, however this seems to be the only income based option available to the recipients of the Parent Plus Loans.
Those with a Parent plus loan can always apply for this program by first consolidating their loans.
Anyone with eligible federal student loans is eligible for ICR.
How do you qualify?
All those who are eligible for student loans can apply. It allows forgiveness on the following loans:
- Direct subsidized and unsubsidized loans
- Direct PLUS loans made to grad students
- Direct consolidation loans
- FFEL Stafford loans, if consolidated
- FFEL loans made to parents, if consolidated
- Parent PLUS loans, if consolidated
- Federal Perkins loans, if consolidated
Career-based Options for Loan Forgiveness
There are several student loan forgiveness schemes out there that are exclusively available to professionals based on their line of work. Following are some examples of such programs.
Are student loans forgiven for teachers?
To be eligible, one must have been working in a school for five consecutive years.
The loan amount to be forgiven can vary based on certain variables such as the subjects taught by the teacher.
Usually elementary school teachers can get up to $5,000 of their loan forgiven while the ones teaching mathematics, science or are involved in specialized education can have up to $ 17,500 of their loan amounts waived.
What qualifies you for student loan forgiveness?
- State certification as a qualified teacher
- 5 years of service as a full time teacher
- Shouldn’t have loans borrowed before 1 October 1998
- Must not be a defaulter
Do nurses qualify for student loan forgiveness?
- There are two types of programs available to professional nurses in the USA for nursing school debt. One at the federal level and the other is at state level.
One of the state level loan forgiveness programs is the NURSE Corps Loan Repayment Program.
- Under this program, nurses that are serving in the area of critical shortage and under-served communities for two years can get up to 60% of their student loans forgiven.
- To be eligible, one must be a registered nurse, nurse practitioner, or a nurse faculty member.
To sum up, there are a numerous ways available to students and young professionals to pay get their student loans forgiven and do away with the impeding burden.
The US government might not spend on the education sector as much as the rest of the developed world and not subsidize higher education, but not all is lost.
With all the aforementioned loan forgiveness programs available, students can plan their way out of the debt burden and pursue their coveted goals with utmost focus.
