Federal Perkins Loan Cancellation
Federal Perkins Loans have a separate forgiveness program because your school is the lender, not the federal government. To apply, contact the financial aid office at the school that administered your Perkins Loan and request the application forms. You need to be a full-time employee in a qualified career.
Qualifying Perkins Loan Forgiveness Jobs:
- Soldier in hostile fire or imminent danger pay areas
- Law enforcement or corrections officer
- Nurse or medical technician
- VISTA or Peace Corps volunteer
- Librarian with a masters degree
- Attorney employed in a federal public or community defender organization
- Employee for public or nonprofit organization that serves high-risk children and their families from low-income communities
- Staff member for educational component of the Head Start program
- Staff member for a state-licensed or regulated pre-kindergarten or child care program
- Professional provider of early intervention services for the disabled
- Speech pathologist with a masters degree
- Special education teacher for children with disabilities in public, other nonprofit schools or educational service agency
- Teacher in a field designated by the state as teacher shortage areas
- Teacher in a designated educational service agency that serves students from low-income families
- Faculty member at a tribal college or university
Qualifying For A Defense To Repayment Discharge
There are four major ways to prove that your private student loan debt should be considered invalid, and thus forgiven under the Borrowers Defense to Repayment Program:
Again, Borrowers Defense to Repayment discharges involve a complicated process, but one that you can complete entirely by yourself, and which people with a background in research, writing and especially law will probably want to do on their own.
Private Loan Forgiveness & Tax Liabilities
No matter what path you take toward forgiveness, one thing youll need to plan for is the impact of that forgiveness on your annual tax returns.
The key point here is that whatever amount of money you end up getting forgiven will have to be declared to the IRS as part of your taxable income for the year.
Its a bummer, because this can get expensive quickly, but whenever you receive any sort of debt forgiveness benefit, the IRS requires that you count that benefit as taxable income.
The way it works is that you end up having to pretend like you made the amount of money that you got forgiven, and youll have to pay whatever percentage of taxes you pay for your regular income on that forgiven amount.
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How Much Will I End Up Owing In Taxes
As an example, if you had $10,000 in debt forgiven, youd need to add that $10,000 to whatever you made for the year, report that to the IRS, then pay a percentage of the $10,000 in taxes. For most people, thats a significant amount of money, since it could be 25%, 30% or even more.
Using the same numbers as above, your tax bill on the forgiven amount of money could end up being $2,500, $3,000, or more, and whats worse is that the bill will come due all at once.
To find out exactly how everything works, make sure to visit my page about Student Loan Forgiveness and Taxable Income Laws.
I think this tax liability issue is going to devastate so many Americans that Ive created a new website specifically to help people with their tax-related problems, called Forget Tax Debt.
On Forget Tax Debt, I cover all sorts of tax concerns, from Avoiding IRS Phone Scams to signing up for the IRS Fresh Start Program, offering the same sorts of information I provide here, but specifically related to tax issues.
If youre having trouble with taxes, please be sure to visit Forget Tax Debt here.
New York State Get On Your Feet Student Loan Forgiveness Program
The New York State Get on Your Feet Student Loan Forgiveness Program is designed to help recent New York State college graduates focus on establishing their careers and starting life out on a sound financial footing. A graduate will be eligible to receive an award equal to 100 percent of his or her monthly federal income-driven repayment plan payments for 24 months of repayment.
To qualify you must:
- Graduate from a New York high school or receive a New York State high school equivalency diploma
- Graduate from a college or university headquartered in New York on or after the 2014-2015 school year
- Earn less than $50,000 adjusted gross household income
- Enroll in the federal Income Based Repayment plan at 10% of discretionary income, the Pay as You Earn plan, or the Revised Pay as You Earn plan, and current on your repayment obligations
- Continue to live and work in New York
- Apply for the program within 2 years of graduation
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Parent Plus Loan Repayment Plans
The fastest and easiest way to reduce monthly payments for a Parent PLUS Loan is to simply change your Federal Student Loan Repayment Plan to one that offers better repayment terms.
And while that obviously isnt as good as earning complete forgiveness, at least this could make your loan affordable in the short-run, giving you some breathing room to afford other things.
Unlike the Deferments and Forbearances listed above, changing your Repayment Plan doesnt pause your loans, but restructures how you pay them off, sometimes giving you more total time to make the payments, sometimes setting payments based on income, or sometimes giving you smaller payments now in return for larger payments in the future.
In addition to the Standard Repayment Plan, which is the default for Parent PLUS Loans, and requires paying off your debt in 10 years, there are also two other easily accessible Plans, called:
- The Graduated Student Loan Repayment Plan
- The Extended Student Loan Repayment Plan
Lets go through the details of how each of these Repayment Plans work next.
Have Other Questions About Student Debt
I built this website to help people Get Rid of Student Debt Without Paying for It, and over the past decade Ive developed over 100 detailed Guides covering all the different parts of the repayment process.
To help you get rid of debt as quickly as possible, make sure to look at some of my other Guides, which cover the best ways to handle both Federal and Private student loans.
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The Corinthian Colleges Student Loan Forgiveness Program
When Corinthian Colleges shut down , tens of thousands of students across the country were left with tons of debt, and no chance for completing their degrees.
As a result, protests erupted across the country, with thousands of former students publicly demonstrating that they would refuse to pay back their loans, and this sparked a bit of a panic across the student loan industry, and Congress.
Fortunately, the United States Government, the Corinthian Colleges company, and the student loan servicers came together to produce whats commonly called the Corinthian Colleges Student Loan Forgiveness Program, which provides a route for having your Corinthian-related public and private loans forgiven.
For details on how to use the Corinthian forgiveness program, make sure to visit my page about it here.
Options For Federal Student Loan Discharge
If you meet any of these conditions, the government will cancel the remainder of your federal student loans. Youll have to apply for student loan discharge and keep paying your loan until the right agency approves your application.
However, note that canceled loans may still count as taxable income. Even though you wont have to pay back your student loans, you might have to pay taxes on the discharged balance. However, taxes have been waived on student loan cancellation until at least 2025 as part of the American Rescue Plan.
Here are seven options for making your student loans go away:
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Student Loan Disability Discharge And Your Credit Report
If you receive a student loan forgiveness disability discharge, your credit report should state that you no longer owe the debt.
However, the Consumer Financial Protection Bureau has said that your credit report could keep your federal loans on the report during the three-year monitoring period . On your report, you may see the notation assigned to government before the mention eventually falls off.
The simple act of the debt being forgiven could also change your credit score. After all, your credit mix and amounts owed two of five will be affected by the discharge. Of course, youd probably rather have your education debt forgiven if it only means a temporary and likely insignificant drop to your credit score.
Alternatives To Parent Plus Loan Forgiveness
No matter the packaging for the scheme, these forgiveness come-ons rarely pay off for borrowers. A much better plan is to get intentional with your money and focus on becoming debt-free as fast as possible.
How? Here are some steps.
Those steps are way more practical, and far more likely to help than waiting on a faraway hope of forgiveness. Focus on paying your debt off quickly, and youll leave your Parent PLUS Loan behind in no time.
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Borrowers Defense To Repayment
Now, it is time for one of the most asked programs- Borrowers Defense to Repayment. This program is special in multiple aspects. There is no other alternative that can serve the same purpose. Borrowers Defense to Repayment cancels student loan debt accumulated as a result of schools misleading actions. In other words, if you enrolled in an educational institution as if you were influenced by lies, misleading info, and incorrect data, you can reject making payments.
In some cases, the universities present false job replacement rates the enrollment advisers lie about the true cost of education or the quality of curriculum only to attract the students. In this case, the reasoning is that if you are not going to benefit from the education, you should not pay the debt accumulated for it.
It should be noted that this program can be accessible if the borrower faced fraud only from the school. Most borrowers are interested in whether they can apply to BDR if the loan servicer misled them. No, you cannot file an application against the loan servicers actions through the Borrowers Defense to Repayment.
The Aequitas Capital Student Loan Forgiveness Program
Aequitas Capital was a massive Hedge Fund that got involved in student loan lending by combining forces with Corinthian Colleges, but in a really immoral way the school and hedge fund colluded to scam tens of thousands of Americans out of nearly $200,000,000 in crummy educational services.
Fortunately, 12 State Attorneys General and the Consumer Financial Protection Bureau launched lawsuits against the now bankrupt Hedge Fund, and are in the process of reaching a settlement agreement that will see that $200 million returned to the borrowers who were scammed by Aequitas.
To find out exactly whats going on with the case, and to get an idea of whether or not you might qualify for the benefits, and how to apply for them, please visit my page about the Aequitas Capital Student Loan Forgiveness Program.
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Consider Student Loan Refinancing
Refinancing gives you the chance to adjust your monthly payments and choose new repayment terms, often between five and 20 years.
You could qualify for a lower interest rate than you have now, thereby saving money on your loans. And if you refinance multiple loans, you can combine them into one single loan to simplify repayment.
Before you shop for student loan refinancing options, note that refinancing federal loans turns them private. As a result, youll lose access to federal forgiveness programs and repayment plans, which proved especially helpful while the coronavirus pandemic squeezed the economy in 2020 and 2021. If youre comfortable with this sacrifice, however, consider refinancing as a way to restructure your debt and potentially save money on interest.
Should I Still Make Payments
Most federal student loan borrowers don’t have to pay their bills until January, and during that time interest is suspended.
Since $10,000 in student loan forgiveness is the proposal most likely to turn into reality, Mayotte said she sees nothing wrong with people who owe under that amount redirecting their usual payments to savings, “earning a little interest on them, then seeing which way the wind is blowing” as we near closer to the winter.
“If it looks like we’re no closer to forgiveness, pay the funds then,” she said.
Even if you owe more than $10,000, it can still be wise to take advantage of the government’s pause on student loan payments.
You can use the extra cash to wipe out high-interest credit card debt, for example, or to build up your emergency savings.
Teacher Loan Forgiveness Program
Student loan forgiveness for teachers is neither generous nor easy to qualify for. Teachers can have up to $17,500 of their federal direct and Stafford student loans forgiven by teaching for five complete and consecutive academic years at a qualifying low-income school or educational service agency. Loans that were issued before October 1, 1998, are not eligible.
You must be classified as a highly qualified teacher, which means having at least a bachelor’s degree and having full state certification. Only science and math teachers at the secondary level, and special education teachers at the elementary or secondary level, are eligible for $17,500 in forgiveness. Forgiveness is capped at $5,000 for other teachers.
You can qualify for both teacher and public service loan forgiveness , but you can’t use the same years of service to be eligible for both programs. So you’d need 15 years of teaching service to qualify for both programs, along with meeting all the specific requirements to earn each type of forgiveness.
Be Aware Of Growing Interest
For both of these options, its important to note that your interest will still accrue. Be mindful of how this could affect the total cost of your loan. So while your payments may be lower or put on pause, interest will continue growing. This can have a snowball effect on your student loan balance.
Weve listed Sallie Mae and Discover, two of the top private student loan lenders, but deferment options vary by lender. If you have private loans with a different lender, get in touch ASAP to see what, if any, deferment options are available.
If you want to pursue deferment, talk to your lender about the process. Be sure to calculate how much it can add to the cost of your loan.
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Should You Refinance Your Student Loans
Borrowers with high interest student loans may be interested in refinancing through a private lender. Refinancing a student loan can result in a lower interest rate and better repayment terms, particularly for student loan borrowers who have good credit and fairly high income.
But refinancing federal student loans via a private student loan carries some risks, including a loss of consumer protections , as well as access to federal loan programs like income-based repayment and loan forgiveness. And refinancing federal student loans now carries even more risks than normal. Thats because federal student loans covered by the CARES Act currently have a 0% interest rate until at least September 30, 2021 borrowers are simply not going to get a lower rate from a private lender.
Furthermore, if President Biden does determine that he has authority to cancel student debt through executive action, his authority would be limited to federal student loans only. Once a borrower refinances their federal student loans through a private lender, that refinanced loan cannot be re-converted into a federal student loan. So refinancing these loans now could ensure that you would not qualify for any student loan forgiveness.
How To Qualify For The Medical Loan Forgiveness Program
According to the government, “
if you have a permanent disability that will substantially reduce your earning capacity for your expected lifetime and you are unable to repay your student debts without incurring exceptional financial hardship.” The criteria to for medical loan forgiveness so that you can get some or all of your student loans forgiven is strict and many do not qualify: a) you have a permanent disability that is expected to substantially reduce your earning capacity for your lifetime, b) you are experiencing financial hardship, c) you have exhausted the maximum number of months of Interest Relief that you are eligible to receive. In cases of federal loan forgiveness for people with a disability, the rules are: “you have a permanent disability and you are experiencing exceptional financial hardship repaying your Canada Student Loan due to your disability, you may qualify for the Permanent Disability Benefit which allows for the reduction of your loans.
One can find many examples of just how difficult it is to qualify student loan disability relief in Canada
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