“student Loan Default Prevention: Early Intervention And Financial Education” – How can people get rid of their student loan debt and when is loan forgiveness an option? Statistics show how deep in student loan debt American college graduates are, and the sums can be alarming for individual borrowers. Fortunately, students may be able to take advantage of income-based repayment plans and forgiveness for public service employees to ease their debt burden.
Only direct loans made by the federal government and Stafford loans, which were replaced by direct loans in 2010, are eligible for forgiveness programs.
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If you have other types of federal loans, you may be able to consolidate them into one direct consolidation loan, which can give you access to additional income-driven repayment plan options. Non-federal loans through private lenders and loan companies are not eligible for forgiveness.
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In 2020, borrowers with federal student loans who attended for-profit colleges and sought loan forgiveness because their school defrauded them or violated specific laws suffered a setback when then-President Donald Trump vetoed a bipartisan resolution that would have repealed new regulations that it is much more difficult to access loan forgiveness. The new, more burdensome regulations entered into force on 1 July 2020.
In August 2022, the Biden administration, along with the U.S. Department of Education, approved $32 billion in student loan debt relief for more than 1.6 million borrowers with applications open in October. However, in November 2022, federal courts issued orders blocking the student loan forgiveness plan. On June 30, 2023, the Supreme Court ruled that the Biden administration did not have the authority to cancel up to $20,000 of federal student debt per borrower.
For federal student loans, the standard repayment period is 10 years. If a 10-year repayment period makes your monthly payments unaffordable, you can enter an income-driven repayment program (IDR).
Income-driven programs extend payments over a term of 20 or 25 years. After that term, assuming you’ve made all your qualifying payments, whatever balance is left on the loan is forgiven. Historically, payments have been based on your household income and family size, and they will typically be capped at 10%, 15% or 20% of your discretionary income, depending on the plan. As part of the SAVE plan, undergraduate loan payments will be limited to 5% of discretionary income.
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Below are the four types of IDR plans offered by the US Department of Education, along with the repayment periods and monthly payments of each:
An IDR plan can be a good option for people in low-paying careers who have large amounts of student loan debt. Eligibility varies among plans, with some types of federal loans ineligible for repayment under all but one plan. In addition, you will need to recertify your income and family size annually, even if neither has changed from one year to the next.
Applying for an IDR requires you to submit an income-driven repayment plan request, which can be completed online or via a paper form, the latter of which you must request from your loan servicer. You can either choose a specific IDR plan by name or ask your loan servicer to place you on the income-driven plan you qualify for with the lowest monthly payment amount.
If any of the loans you want to include in an IDR plan have different loan servicers, you will need to submit a separate request to each of them.
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To determine your eligibility for specific plans and calculate your monthly payment, you’ll need to provide either your adjusted gross income (AGI) or documentation of alternative income. If you filed a federal income tax return in the previous two years, and your current income is substantially the same as that reported on your most recent return, then you will use your AGI. If you cannot meet one of these criteria, alternative documentation of income will be required.
Student Loan Forgiveness for Teachers can allow the forgiveness of up to $17,500 in Federal Direct and Stafford student loans (but not Parent Undergraduate Student Loans (PLUS) or Perkins loans). Teachers must have taught and taught at an eligible low-income school or educational service agency for five complete and consecutive academic years.
Even if you were unable to complete a full academic year of teaching, it can still be counted towards the required five academic years if:
Qualified teachers have at least a bachelor’s degree and full state certification, and no certification or licensure requirements have been waived on an emergency, temporary, or provisional basis, with additional qualifications varying depending on whether or not they are new to the profession.
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Only full-time science and math teachers at the secondary level, as well as special education teachers at the elementary or secondary level, are eligible for $17,500 in forgiveness. Forgiveness is limited to $5,000 for other full-time elementary or secondary education teachers.
If you had an outstanding balance on a Direct Loan or an FFEL on October 1, 1998, or have had one since then, you will not be eligible for the program. Additionally, only loans made before the end of your five academic years of qualifying teaching service will be eligible for Education Loan Forgiveness.
You may qualify for both the Education Loan Forgiveness and Public Service Loan (PSLF) programs, but you cannot use the same years of teaching service to meet the eligibility requirements for both programs. So you’ll need 15 years of teaching service to qualify for both programs, in addition to meeting all the specific requirements to earn each type of pardon.
Once you have completed your five full and consecutive years of qualifying education, you only need to submit a completed application for education loan forgiveness to your loan servicer.
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If any of the loans you want forgiven under the Education Loan Forgiveness Program have different loan servicers, you will need to submit a separate form to each of them.
The application’s certification section will need to be completed by the chief administrative officer of the school or educational service agency where you undertook your qualifying teaching service, which means you will need to send the form to them before you can submit it.
If you have a full-time job with a US federal, state, local, or tribal government or with a nonprofit organization, you may qualify for student loan forgiveness. You will need to make 120 payments, which do not have to be consecutive, under a qualifying repayment plan to qualify.
This option is not for the recent graduate as it takes at least 10 years to earn. Additionally, you will need to either have a federal direct loan or consolidate your federal loans into a direct loan.
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Unfortunately, this program is full of controversy. The US government created the PSLF program in 2007, and when the first borrowers became eligible for forgiveness in 2017, almost all of their applications were denied, often on technicalities. In some cases, borrowers found that their loan servicers misled them about their eligibility for the program.
Temporary Extended Public Service Loan Forgiveness (TEPSLF) may be able to help you if your Public Service Loan Forgiveness (PSLF) application was previously denied.
On October 6, 2021, the Department of Education announced temporary changes to the PSLF program that allowed borrowers to receive credit for past payments regardless of the payment plan or loan program and regardless of whether payments were made on time or in full.
Many of the previous requirements for PSLF have been dropped as part of the change, with two key requirements remaining:
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The waiver also allowed active duty members to count deferment and forbearance toward PSLF. The last major change involved in this update is that the US government reviewed denied PSLF applications for any errors and allowed borrowers to have their PSLF determination reconsidered.
Applying for PSLF involves a four-step process, each of which requires using the online PSLF Help Tool:
For the final step, send the completed form, along with your employer’s certification, to MOHELA, the US Department of Education’s federal loan servicer for the PSLF program. If MOHELA is already your loan servicer, you can upload your PSLF form directly to their website. Additionally, you can fax or mail the form based on the address provided on the US Department of Education website.
The Closed School Discharge is a federal student loan forgiveness program for borrowers whose schools close during enrollment or within 120 days of withdrawal. This applies to several types of federal student loans.
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To be eligible, borrowers must meet certain criteria, including closing the school while enrolled or within 120 days of withdrawal, not completing their program of study at the closed school, not credits earned at the closed school after ‘ transfer to another institution, and not a completion of a similar program at another school through tuition agreements or other means.
Automatic dismissal can take place if the Department of Education is notified of a school’s closure. If borrowers are eligible but have not received an automatic discharge, they can apply for loan forgiveness by contacting their loan servicer for the necessary application forms and instructions. In most cases, they will receive the dismissal application through the Department of Education.
Total and Permanent Disability Discharge is a program for borrowers with a total
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