Pursue A Career In Public Service
If 20 to 25 years sounds way too long to wait, consider pursuing Public Service Loan Forgiveness, or PSLF. This program requires you to work for a qualifying employer in the public service sector.
Even better You wont be taxed on the amount forgiven, said Miranda Marquit, my former colleague and senior writer at Student Loan Hero. However, she added, You do have to spend 10 years at a nonprofit or government job. This can mean lower pay for those 10 years.
And though the Donald Trump administration has proposed significant cuts to both IDR and PSLF in the budget proposal and PROSPER Act, any changes would only apply to new borrowers as of July 1, 2019. In fact, 2018 is the first year borrowers have been eligible to have their loans forgiven under PSLF and at least one person already has had his loan forgiven.
So if youve been working a low-paying job as a public servant while paying off your student loans, you could be rewarded with a tax-free gift from Uncle Sam.
Sometimes You Can Get Rid Of Your Student Loans Altogether
Updated by Amy Loftsgordon, Attorney
Student Loan Relief During the Coronavirus Crisis
Most federal student loan payments are suspended, and interest is waived, through May 1, 2022, due to the COVID-19 national emergency. Collection actions, wage garnishments, and Treasury offsets, like tax refund offsets and Social Security intercepts, for defaulted federal student loans are also paused during this time.
Also, the American Rescue Plan Act of 2021, which President Joe Biden signed into law on March 11, 2021, includes a provision exempting all student loan forgiveness after December 31, 2020, and before January 1, 2026, from federal taxation. Federal laws generally treat any forgiven student loan debt as a taxable event for the borrower unless they were forgiven for specific reasons, like the death or disability of the borrower . The American Rescue Plan Act makes student debt forgiveness tax-free until January 1, 2026. The tax exemption under this law applies to direct federal student loans, Federal Family Education Loans , and private student loans.
Under some circumstances, you can get rid of your student loans altogether through loan cancellation. To cancel your loans, you must meet one of the conditions that allow you to do so.
In this article we discuss three of those methodscancellation due to school closure, false certification, and unpaid refund.
Student Loans Are Leaving People Paralyzed Terrified And Overwhelmed
Every single year, another million student borrowers default on their debt.5 The student loan crisis is getting out of control.
Every day, I talk to someone who’s got $100,000 or $200,000 or $250,000 in student loan debt, says financial expert and nationally syndicated radio host Dave Ramsey. 100% of these people are completely emotionally overwhelmed. They’re paralyzed. They’re terrified. They do not know what to do.
Dave continues, They were led down this path by a set of values put on them by a series of guidance counselors and parents who weren’t thinking, educators who were out of control, and a congress who continues this ridiculous student loan debacle. And here they sit, trapped. And they dont know what to do.
Dave paints the bigger picture of what this means for them: Who they were supposed to becomethey can’t . Because they’re walking around with this 400-pound ball over their head, and they’re trying to balance that and live a life.
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Tax Breaks For Education
Depending on your income, the expenses you incur, and other factors, you may also be eligible for a tax credit or deduction for a portion of your costs. The American Opportunity Tax Credit offers a maximum annual credit of $2,500 for the first four years of higher education.
The Lifetime Learning Credit offers an annual credit of up to $2,000 for undergraduate, graduate, and professional degree courses, and there is no limit on the number of years you can claim it.
The interest you pay on a student loan may also qualify for a tax deduction. Note that if you’re eligible, you can take a student loan interest deduction as an adjustment to income, even if you don’t itemize deductions on your tax return.
The American Rescue Plan passed by Congress and signed by President Biden in March 2021 includes a provision that student loan forgiveness issued between Jan. 1, 2021, and Dec. 31, 2025, will not be taxable to the recipient.
We Owe $191000 In Student Loans And I Need To Go Back To School Rob
Myself and my wife are both out of college. I went to a private university, big mistake as my mother tried to tell me, and now between the two of us we are about $191,000 in debt to student loans.
Do You Have a Question You’d Like Steve to Answer? .
Thanks to my grandmother, when she passed away she left me enough to pay off any credit card debt we had. I make $40,000 a yr and she makes about $21,000 a yr. We just moved to Virginia for me to get this job. The pay will go up over the next few years as I move up but right now we are behind on almost all the payments.
We pay $1535 a month in rent. I know it is a house payment but it is normal rent around here. We dont have cable or internet. It is a choice we made to not have another bill. Our car insurance runs us $120 a month and the student loans payments are over $2000 a month.
Our bank account ends every two weeks in the hole and it feels like it is impossible to get ahead. We talked about bankruptcy but it is not an option with student loans. I need to go back to school for about 2 to 3 semesters to finish my degree and then I would be making more.
Problem is the company will reimburse me AFTER I pay for it Any advice in the right direction would be helpful and if you do hear about any of the wonderful FREE gov funds do please send some my way. Thank you for your time and god bless you for the work you do!
Nothing specific just any good advice from someone who has been there before me.
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Fortunately College Doesnt Have To Be A Debt Sentence
If youre stuck in the Debt Zone, but youre really not excited about living under the immense financial and psychological weight of student debt, then I have good news for you. Theres still a way for you to earn a bachelors degree debt free.
The secret isnt to find free money somewhere else to cover the immense cost of college. The secret is to make college affordable by cutting out the extras and focusing on exactly what you need to graduate. Thats what we do at Accelerated Pathways.
Every day, we help students who are stuck in the Debt Zone find more affordable paths to their bachelors degree. Our students are able to:
Compare their best college options to find the best one that fits their life and budget
Take classes that wont break the bank
Pay for college one course at a time
Choose online classes with the flexibility to fit around a full-time job or other life priorities
You remember that $30,000 loan we talked about earlier? Thats how much we can help students save by lowering their overall costs, removing the need to take out loans altogether.
Interested in learning more about how Accelerated Pathways can help you escape the Debt Zone, pay for college in cash, and graduate debt free? Check out our website to learn more.
*An estimation of your principal loan payment and your monthly interest payment.
**The attached reference contains political opinions unique to the author, not endorsed by Accelerated Pathways.
Student Loan Rates Are Rising
Apply for a private student loan and lock in your rate before rates get any higher.
Some of the strategies here arent that different from those geared toward incoming freshmen straight out of high school, but there are others that offer special advantages for older adults who are going back to school.
Here are five tasks to tackle that can help you get your best deal on higher education:
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How Interest Piles Up During Residency
In addition to the interest rates on your loans, your repayment costs will depend on how long it takes you to pay back your loans. Residency can add three to seven years to your repayment timeline.
During residency, many medical school grads make only partial monthly payments on their loans or no payments at all. Here are a few things to remember when it comes to interest:
- Most loans will accrue interest during residency. With the exception of need-based subsidized loans taken out as an undergraduate, federal and private student loans continue to accrue interest during residency.
- Payments might not cover total interest. If your loans are in deferment or forbearance or you enroll in an income-driven repayment plan like Revised Pay As You Earn , your monthly payments may not cover the interest you owe.
- Interest could capitalize. Some or all of the unpaid interest you owe could capitalize when you finish your residency meaning it will be added to your loan balance.
Below, you can see how interest could pile up during the six-month grace period that comes with most federal student loans after graduation as well as during your three years of residency.
This table assumes that youll request mandatory forbearance after your grace period and make no payments on your loans during residency.
|Months in forbearance|
If I Have An Unpaid Student Loan Can I Get Another One To Go To School Again
Many students choose to continue with higher education after they finish their undergraduate degree or return to school to finish a degree after some time off. In most cases, you will be able to get new student loans even if you are still working on paying off student loans from your previous education.
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Be Proactive During Residency
Residents typically dont earn enough to make full payments on their student loans. If this applies to you, consider:
- Requesting a mandatory forbearance: This will let you temporarily pause your payments during residency. Just keep in mind that your loans will continue accruing interest during forbearance.
- Signing up for an IDR or graduated repayment plan: Under an IDR plan, your payments will be based on your income, while a graduated repayment plan will start off with low payments that increase every two years. Making payments under either of these options could help keep your interest from wildly accruing.
Going Back To College When You Have School Debt
So you’re thinking about going back to college. There’s just one problem: You’re still paying off your first go-round. Should you wait until you pay off your school debt in full before you go back? Or is it a better idea to go back to school even if you’re carrying some school debt?
If you still have student loan debt, you’re not alone. According to the latest report from the Federal Reserve, 22 percent of American adults carried some outstanding school loan debt in 2017. The total U.S. student loan debt hit $1.56 trillion in 2020, and more than 10 percent of it is in arrears, according to Bloomberg, meaning that the borrowers have been unable to pay it back on timeor at all.
Further Reading: College for working adults: things to consider.
At least some of this problem can be attributed to lending practices that encouraged students to take out the maximum amount they qualified for. WGU has studied this issue in depth and has even created the Responsible Borrowing Initiative to help students make smarter choices when it comes to loans and other forms of financial aid as they look to complete their degrees.
So, what does all of this mean for you?
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How Much You Need To Repay
Verify your loan or line of credit contract to figure out the following:
- the total amount you owe
- the interest rate that will be applied to your debt
- how youll repay your debt
- how much youll pay
- how long it will take to pay back your debt
Contact the organization that provided your student loan or line of credit if you dont have the information listed above.
What If I Cant Make The Student Loan Payments After A Loan Consolidation Or Rehabilitation
A common problem faced by students who have recently consolidated or rehabilitated their loan is meeting the monthly payments while they are still in school. Many borrowers who go back to school can only get part-time jobs which may not be enough to finance their living expenses and cover their loan payments.
If you feel that you are having a difficult time meeting your monthly loan payments, do not just ignore them and let them go into default again. Because you already have rehabilitated or consolidated your loan, it is now out of default. This makes you eligible for loan deferment.
A loan deferment allows you to postpone your monthly payments towards your student loan but not everyone is eligible for loan deferment.
Some of the considerations that will get you approved for a student loan deferment are the following:
- You are attending school at least half the time
- Youre unemployed
- You are receiving state or federal assistance. Ex: Temporary Assistance for Needy Families or Supplemental Nutrition Assistance Program
- Your monthly income is less than 150% of your states poverty guidelines.
- You are on active military duty or in the Peace Corps.
- You are undergoing cancer treatment
When you get approved for a loan deferment, you can stop paying the loan for up to three years. This does not mean, however, that your loan is forgiven. Your loan does not go away yet and you still have to pay the loan after the deferment period.
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What If Student Loan Default
If the defaulted student loan is held by the U.S. Department of Education, collection costs are 17.92% of your loan amount. For example, if you owe $10,000, you’ll owe an additional $1,792 in…
Q: What is student loan default? Student loan default is what happens when you fail to repay your student loan debt. For federal student loans, you default when you after 270 days of missed payments. For private student loans, you typically default/become delinquent when you miss a single payment.
How To Negotiate A Student Loan Settlement
Once you default on your federal student loans, the U.S. Department of Education is often willing to settle your Federal Family Education Loan Program , Direct PLUS Loans, and Perkins loans.
To negotiate a federal student loan settlement:
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Youre Not The Exception
Everyone thinks theyre the exception. Everyone thinks student debt happens to other people. Everyone thinks theyll get the scholarship, the grant, the endowment, or some other magical solution that will send them to college on someone elses tab.
And its true, some students are the exception. But youre better off assuming you arent one of them.
First off, most scholarships arent enough to cover all your college costs. Not only are these awards difficult to attain, but the vast majority of them are a few hundred to a couple thousand bucks. Now, $1,000 isnt a bad haul, but youll need 99 more of those if you want to cover your $100,000 bill entirely in scholarships.
So unless youre so smart, so unique, or so good at sports that colleges want to pay you to attend their school, its highly unlikely youll be able to go to college on scholarships alone.
But what about financial aid? Thats free too, right?
Yes and no. Some financial aid is free moneyspecifically the Pell Grant or a school-sponsored, needs-based scholarship .
But heres the thing about grants and needs-based scholarships: if you make over $50,000 a year, you dont stand a chance of getting them. The more money your family makes, the less the government and schools want to help you.
And the rest of your financial aid options? Those are just loans. Not free at all.
The Arguments For And Against Restarting Payments
The pause may have reshaped the public’s understanding of the student loan crisis.
“We’ve learned a lesson here that doesn’t go away just because we turn student loan payments back on,” says Mike Pierce, executive director at the Student Borrower Protection Center. “And the lesson is: The government does just fine without our money.”
The federal system used to rely on payments from borrowers to issue new student loans, he notes but that isn’t the case today. “Since 2020, the government has done just fine without taking money from student loan borrowers,” says Pierce.
But not all experts believe in student loan cancellation or extending the repayment pause. For Beth Akers, a senior fellow at conservative think tank American Enterprise Institute and a staff economist at the Council of Economic Advisers under President George W. Bush, resuming payments could help prevent tuition costs from ballooning.
“It puts in place appropriate incentives so that we don’t have a ballooning of the student loan crisis and rampant tuition inflation,” Akers says. “Institutions are willing to charge any price, because students won’t have to pay it anyway.”
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