How To Get Student Loans Forgiven
Are you drowning under a load of student debt? Student loan forgiveness programs may be the option youre looking for.
You probably look back on your college days fondly. Sure, you were there to earn the degree that got you the job youre in now, but you managed to get in some fun in between all the studying and essay writing. But then you think about the amount of student loan debt youve got piled up, and suddenly youre not thinking of college that fondly anymore.
If you find yourself waking up in the middle of the night, sweating with anxiety about the size of your student loans, youre not alone. According to a report on student debt published in March of 2014 by The Institute for College Access & Success, 71 percent of all students graduating with degrees from four year colleges in 2012 had student debt, with the average debt load being $29,400.
How To Get Rid of Student Loans
While you may feel like youll be paying off your student loans forever, a number of student loan forgiveness programs exist which you may be able to take advantage of. If youve been wondering, how can I get my student loans forgiven? this article will give you an idea of the types of student loan debt forgiveness programs out there.
Federal Student Loan Forgiveness: Obama Student Loan Forgiveness Program
Military Student Loan Forgiveness Programs
Student Loan Forgiveness Programs for Health Professionals
Student Loan Forgiveness Programs for Other Professions and Occupations
How Often Do Pslf Borrowers Actually Get Forgiveness
But before you sign right up, lets look at what the stats tell us about how often PSLF actually pays off.
Remember we told you that student loan forgiveness almost never pans out? According to a November 2020 Federal Student Aid report on applications throughout the lifetime of the program, a total of 227,382 people have submitted 296,340 applications for their loans to be forgiven through public service.2 From all those 296,340 applications, only 6,493 were approved.
Even worse? That only represents a total of 3,776 unique borrowers who have ever been granted student loan forgiveness. Thats only 1.7%!
It basically never happens.
Hundreds of thousands of borrowers have entered PSLF and taken on low-paying jobsand face it, thats what government and nonprofit work often isonly to have their hopes of loan forgiveness dashed years later. Thats not only deeply frustrating for the applicants, its possible that they could have become debt-free far sooner by either taking higher paying jobs, working the debt snowball method, or both!
Still not convinced you should avoid the PSLF boondoggle? Think about this. Would you believe that some of the rare, lucky recipients of forgiveness have had that prize withdrawn years after the fact? Yes, its true. In 2017, some people who believed their loan balances were forgiven, later received letters of denialsometimes years later.3 Just stay away.
Is There More Student Loan Forgiveness Coming
Part of President Joe Bidens campaign pitch was that he was going to offer some sort of forgiveness to student loan borrowers, but as of April 2021, Biden hasnt sorted that question out.
He told a February CNN Town Hall meeting that Im prepared to write off a $10,000 debt, but not $50,000, but has not followed up on that with any legislative proposal.
Instead, a month later, he asked Education Secretary Miguel Cardon to prepare a report that details a presidents authority to cancel $50,000 in student loan debt without approval from Congress.
According to student loan expert Mark Kantrowitz, the $10,000 cancellation would wipe out all student loan debt for about 14.5 million borrowers. The $50,000 cancellation would erase debt for about 36 million borrowers.
One thing to be aware of is that currently, whatever amount of loan is forgiven is counted as taxable income. That may change as new legislation comes out and possibly changes loan forgiveness programs.
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Things To Consider When Applying For Student Loan Forgiveness
Student loan forgiveness programs can help you save money on student loan repayment in the long run, but there are some pitfalls to watch out for. Here are several factors to consider before pursuing one of these programs.
- Scams are out there. Nearly every industry has its share of scammers, and the student loan industry is no exception. Watch out for debt relief companies that promise to make your loans disappear. They cant do anything that you wouldnt be able to do on your own, but they will charge you money anyway.
- Forgiveness typically does not apply to private student loans. Most forgiveness programs are for student loans backed by the federal government. If you have mostly private student loans, forgiveness programs may be harder to find.
- Some forgiveness programs take a decade or longer to complete. Consider whether participating in a forgiveness program is worth it in the long run with some programs, youll need to make payments for 10 to 25 years. If you have a good income, you might be better off paying off your loans as quickly as possible on your own.
- Student loan forgiveness is not an option if you have already defaulted on your loans. Once you default on your loans, you lose all federal protections and benefits.
Discharge After 20 Or 25 Years In An Income
After 20 or 25 years in an income-driven repayment plan, the remaining debt is forgiven.
- 25 years under Income-Contingent Repayment
- 25 years under Income-Based Repayment
- 20 years under Pay-As-You-Earn Repayment
- 20 years under Revised Pay-As-You-Earn Repayment for borrowers who have only loans for undergraduate school
- 25 years under Revised Pay-As-You-Earn Repayment for borrowers with any federal loans for graduate or professional school
Time spent in an economic hardship deferment counts toward the 20 or 25-year repayment term in an income-driven repayment plan, but not toward Public Service Loan Forgiveness, according to the current regulations.
The payment pause and interest waiver counts toward the 20 or 25-year forgiveness.
Time spent in other deferments or forbearances does not count toward the 20 or 25-year forgiveness. Likewise, periods of delinquency and default does not count toward loan forgiveness. Any payments made on a defaulted loan, whether voluntary or involuntary, do not count toward the 20 or 25-year forgiveness period.
The forgiveness will be automatic. Borrowers do not need to apply for the 20 or 25-year forgiveness, but must continue repaying their loans until they are notified that the remaining balance has been forgiven. Any excess payments will be refunded to the borrower.
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New Student Loan Forgiveness Expansion For Public Service Workers
Secretary Cardonas tweet was specifically referencing the Bidens administrations new expansion of the Public Service Loan Forgiveness program. PSLF provides federal student loan forgiveness for borrowers who commit to public service careers, working full-time for public or nonprofit organizations. Under new changes that the administration announced in October, the Education Department is temporarily easing some of the confusing and complex rules governing the PSLF program, which will allow thousands of additional borrowers to become eligible for loan forgiveness.
According to the Department, officials have already determined that 30,000 borrowers will receive at least $2 billion in student loan forgiveness under the PSLF program expansion. The Department expects that thousands of additional borrowers may benefit as well in the coming months as they take certain steps such as consolidating their FFEL loans through the federal Direct loan program, or certifying their public service employment. The Department has suggested that an additional $2.82 billion in student loan forgiveness, on top of what has already been enacted, could be delivered to borrowers as the temporary PSLF waiver program continues to gain traction.
Before We End The Guide
Let us once again remind you that Student Loans Resolved is ready to lend a hand whenever you need it. We understand that several programs of student loan forgiveness during Coronavirus mentioned above might confuse you. Each program has its own eligibility requirements, benefits, and drawbacks. Hence, borrowers usually face a challenge: Which program is the most suitable?
As a debt expertise company with years of experience, we can advise you to get third-party help. The debt specialists like those we work with in Student Loans Resolved have the required know-how to analyze your financial conditions and suggest the best options. Besides, they will help you in every step, from the evaluation of alternatives till the end of the application process. Contact us now to maximize your chance of eliminating student loan debt.
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Make Sure Youre Enrolled In An Eligible Loan Plan
The PSLF program was created to forgive direct loans on income-driven repayment plans for public sector employees who made 120 on-time payments. Whew. Thatâs a lot to keep track of in order to be eligible for debt relief.
âIf any one of those things went wrong, they werenât getting their forgiveness,â Randy Lupi, regional vice president of Equitable Advisors, tells Fortune. But now the overhaul gives borrowers another opportunityâLupi calls it a corrective actionâto ensure theyâre on the right track for loan forgiveness.
If any of your loans are through the Federal Family Education Loan or Perkins Loan programs, then itâs time to consolidate your loans, or switch, to the Direct Loan program. FFEL and Perkins loans donât count toward your 120 qualifying payments needed to eventually be forgiven through the PSLF program.
Borrowers must make the change by the end of October 2022. For now, under the immediate PSLF overhaul, borrowers who have made payments on FFEL and Perkins loans can fill out a limited waiver in order to have all of their student loan payments count toward PSLF. Theyâll then have to carry out the full consolidation, though.
âThis is a call to action,â Lupi tells Fortune. â really need to take a hard look at their loan situation right now. Itâs a very good opportunity for anyone thatâs in the public sector and any nonprofit to go ahead and try to reapply and see if they can get credit for some of those past payments.â
Make It A Priority To Avoid Missing Payments
Whether or not you believe you qualify for student loan forgiveness, it’s important to continue to make your monthly payments on time every month to avoid potential damage to your credit score. Remember that you’ll receive all of your payments back if you qualify for forgiveness, as long as they were made after the effective date of your disability determination.
While you’re at it, monitor your credit regularly to make sure no other issues pop up that could threaten the health of your credit.
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What To Do If The Education Department Doesn’t Own Your Loans
Having private loansor federal loans that aren’t owned by the Education Departmentdoesn’t mean you can’t get relief if you’ve been affected by the pandemic.
Under a state-led initiative, residents of California, Colorado, Connecticut, Illinois, Massachusetts, New York, New Jersey, Vermont, Virginia, and Washington are eligible for relief on student loans not held by the Department of Education. In these 10 states, you can get payment relief if your loan servicer is one of these companies:
Other companies may be participating as well. This state-led payment relief is less generous than what’s available through the CARES Act, but it’s better than nothing. You can:
- Request temporary forbearance for 90 days
- Get relief from late fees
- Get relief from negative credit reporting and debt collection activities, including wage garnishment
Although interest may still accrue, it will not be capitalized .
Senators Demand Answers From Cfpb Head After Student Loan Watchdog’s Resignation
Frotman served three years as the CFPB’s student loan ombudsman and head of its Office for Students and Young Consumers. A fierce watchdog for student borrowers, Frotman and his team reviewed thousands of complaints about the questionable practices of student loan companies.
Since 2011, the CFPB has handled more than 60,000 student loan complaints and, through its investigations and enforcement actions, returned more than $750 million to aggrieved borrowers.
In the spring of 2017, Frotman and his team investigated thousands of complaints about a range of issues and found a disturbing pattern with PSLF:
Borrowers would notify their loan servicers of their intent to enroll in the program, then make it years into the repayment process before being told they didn’t yet qualify because they had the wrong loan, the wrong repayment plan or the wrong employer.
Sometimes servicers would be aware of a borrower’s status as a public servant active-duty military, for example but not tell the borrower about the possibility of PSLF. For borrowers who needed to consolidate their loans to qualify for forgiveness, Frotman found, a process that should have taken 30 days often took much longer. Servicer employees appeared undertrained, uninformed and prone to a litany of paperwork mistakes.
Krainin was told she could consolidate her loans and qualify for PSLF, but doing so would reset her countdown to loan forgiveness from four years back to 10.
The lucky 1 percent
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Public Service Loan Forgiveness
If you work a full-time job for a U.S. federal, state, local, or tribal governmentor a not-for-profit organizationyou could be on your way to student loan forgiveness. You’ll need to make 120 payments, which don’t have to be consecutive, to qualify.
This option isn’t for the recent graduate because it takes at least 10 years to earn. You’ll need to have a federal direct loan or consolidate your federal loans into a direct loan.
This program has been plagued by problems. The government created the PSLF program in 2007, and when the first borrowers became eligible for forgiveness in 2017, a significant controversy emerged. A year after the first round of borrowers gained eligibility, almost all of their applications had been denied. Many borrowers were being denied the forgiveness they had earned over technicalities. Some discovered their loan servicers had misled them about their eligibility. As of June 2021, only 5,500 borrowers had gotten their loan balances discharged under the program.
Temporary Expanded Public Service Loan Forgiveness might help you if your Public Service Loan Forgiveness application was denied. TEPSLF grants qualifying borrowers the forgiveness they were denied under PSLF, but only until the program runs out of funds.
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.
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Total And Permanent Disability Discharge
You can qualify for a Total and Permanent Disability Discharge of your federal student loan debt if you’re 100% disabled.
You have three options to prove that you are totally and permanently disabled:
Nelnet is the loan servicer responsible for administering the TPD process. You can apply for a TPD discharge at disability discharge.com.
If I Qualify What Steps Do I Need To Take
Changes to the loan forgiveness program will take place in two parts.
The agency will first loosen some of the rules that had prevented eligible borrowers from discharging their loans, via a limited waiver. The government, for example, will allow payments on any of a person’s loans to count toward the total number required for forgiveness.
The Public Service Loan Forgiveness waiver will be available to borrowers who have direct loans, Federal Family Education Loans and Perkins Loans.
Parent PLUS loans are not eligible under the limited waiver.
The department said it would automatically credit borrowers who already have direct loans and have proved they work in an eligible field. Others who haven’t enrolled in the program or have ineligible federal loans will have to apply for forgiveness, which may require them to consolidate their loans. Borrowers will have until October 2022 to apply.
To find out more about loan consolidation, visit StudentAid.gov/Manage-Loans/Consolidation.
The Education Department also plans to review all Public Service Loan Forgiveness applications that had been denied and to give federal employees automatic credit toward forgiveness.
Other changes will come about more slowly via regulations made by “rule-making,” a lengthy and complicated bureaucratic back-and-forth between the government and other stakeholders.
For more information, visit StudentAid.gov/PSLFWaiver.
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Military Student Loan Repayment Assistance Programs
Even if you do not qualify for full or partial discharge of your student loans due to your military service, there are a number of programs that can help you with repayment.
Repayment assistance can lower your monthly payment, decrease the total amount you repay over time, or offer some forgiveness after a certain length of time.
Consider This Before Getting Excited
We understand that forgiveness of a minimum of $10,000 is exciting news. Reducing the debt by that amount can be helpful for some borrowers. However, this issue is still subject to discussion. For example, the administration needs to decide whether the forgiveness will be taxable or not if it ever gets Congress approval.
Making the debt forgiveness subject to taxation can be devastating for some borrowers. Goldman Sachs suggested that the tax can be as high as 20%. It means 20% of the benefit received will be returned to the government as tax payments.
It is understandable that borrowers might not be able to meet the additional tax on their income. However, they have to otherwise, the Internal Revenue Service can add interests and late payment fees to the original amount.
Yet, it is still unclear whether the student loan forgiveness during the Coronavirus pandemic will ever be accessible or taxable. In all cases, borrowers should be ready for different scenarios. For example, they can set aside some money to pay taxes, if they are subject to. Additionally, borrowers can search for alternatives, which we will discuss in the subsequent sections.
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