Student Loan Forgiveness: Borrower Defense To Repayment
Biden has cancelled nearly $1.5 billion of student loans for 92,000 student loan borrowers through the borrower defense to repayment rule. This includes $55.6 million of student loans cancelled in July for more than 1,800 student loan borrowers. The good news is that you can still apply for student loan cancellation through the borrower defense to repayment rule. Borrower defense to repayment is a federal rule created during the Obama administration that gives you partial or total student loan cancellation if your college or university misled you or engaged in other misconduct. How do you get this student loan forgiveness? You can apply for borrower defense to repayment by completing a Borrower Defense To Repayment Application through the U.S. Department of Education. The application takes 30 minutes to complete, and you can apply by email, by mail, or through Federal Student Aid. Traditionally, borrower defense to repayment has applied only to Direct Loans, although you can consolidate FFELP Loans or Perkins Loans. Private student debt dont qualify. If you have questions, call the Borrower Defense Hotline at 1-855-279-6207 Monday through Friday from 8 a.m. to 8 p.m.
Student Loan Borrowers Who Are Enrolled In This Plan For Student Loan Forgiveness
Student loan forgiveness wont be available for everyone, but this plan is available now. It wont provide you with immediate student loan forgiveness. However, income-driven repayment plans such as IBR, PAYE, REPAYE and ICR can help you lower your monthly federal student loan payment and get student loan forgiveness after 20 years or 25 years .
Do You Work In The Public Service
Eligibility depends on whether or not you work for a qualifying public service employer. Put it another way, it doesnt matter what you do, just who employs you. Qualifying public service employers include:
Government organizations
Legal services
501 nonprofit organizations
Employers That Will Not Qualify for Public Service Loan Forgiveness:
Labor unions
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You Have Direct Loans And Youve Already Had Some Pslf Employment Certified
If youve already applied for PSLF and had at least some employment certified, the Department will award any additional payments we can without further action from you. If necessary, Federal Student Aid may contact you to ask you to certify additional months of employment. You should look out for an email from Federal Student Aid in the coming weeks to let you know how many additional payments we have preliminarily determined to be qualifying. You dont need to do anything until you receive an updated payment count or other communication from us.
If you know that you have qualifying employment that you have not yet certified with us, we recommend you certify that employment now by using the PSLF Help Tool at www.StudentAid.gov/pslf.
Do I Have To Consolidate Student Loans
If you have Direct Loans and want public service loan forgiveness, you dont have to consolidate student loans. Why? Federal student loan consolidation turns non-Direct Loans into a Direct Consolidation Loan. If you have FFELP Loans or Perkins Loans and want public service loan forgiveness, you must consolidate these student loans into a Direct Consolidation Loan by October 31, 2022. Contact your student loan servicer for more details. When you consolidate student loans, you dont get a lower interest rate. Rather, your new interest rate is equal to a weighted average of your current interest rates increased to the nearest 1/8%.
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Student Loan Cancellation Programs
Perkins loan cancellation. Borrowers with federal Perkins loans can have up to 100% of their loans canceled if they work in a public service job for five years. In many cases, approved borrowers will see a percentage of their loans discharged incrementally for each year worked. The Perkins loan teacher benefit is for teachers who work full time in a low-income public school or who teach qualifying subjects, such as special education, math, science or a foreign language.
Three Rounds Of Forgiveness Covering Nearly 200000 Defrauded Students
Education Secretary Miguel Cardona, who was appointed by Biden, oversaw a round of forgiveness for defrauded and misled borrowers just weeks after he was confirmed by the U.S. Senate. That round, announced in March, wiped out student loan debt of former American Career Institute, Corinthian Colleges, or ITT Technical Institute students who had approved âborrower defense to repaymentâ claims. Those claims can only be filed by alumni of programs the federal government has determined used illegal practices. In all, that round covered more than 70,000 borrowers who owed a combined $1 billion.
This summer, the Department of Education announced a second round of forgiveness aimed at defrauded students, which wiped out student debt held by around 1,800 former students of Court Reporting Institute, Marinello Schools of Beauty, or Westwood College. Similar to ITT Tech and Corinthian Colleges, those schools were also determined to have used deceptive practices.
The fourth round of forgiveness, and third round aimed at âdefraudedâ students, came on Aug. 26. Thatâs when the Department of Education announced it would do another round for former students of ITT. While the initial round only included graduates of ITT, this round expanded it to former students who did not graduate. In total, this round wiped out $1.1 billion in loans held by 115,000 borrowers.
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Do I Have To Be Employed To Get Student Loan Forgiveness
Under the Public Service Loan Forgiveness program, you must be employed to get student loan forgiveness. However, under the limited waiver for student loan forgiveness, you dont have to be employed when you get student loan forgiveness.
Make sure you understand all your options for student loan repayment. Here are some popular ways to save money on your student loans:
Borrower Defense To Repayment Charge
If your school misled you, engaged in misconduct or violated certain state laws, you may be eligible for federal student loan forgiveness.
If you are eligible, you may be able to have all or part of your federal Direct Loans forgiven, or you could be reimbursed for the money youve already paid toward your loans. In order to qualify for borrower defense, you can apply through the online application on the Federal Student Aid website. You may need to submit extra electronic documentation during the application process, so review the required documentation before applying.
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Student Loan Forgiveness Vs Student Loan Discharge
Although their end results are similar, student loan forgiveness is not quite the same as student loan discharge, which immediately stops the borrower’s obligation to repay the debt. In some cases, a discharge may also entitle a borrower to receive a refund of payments previously made on a loan.
In general, federal education loans may be eligible for discharge under certain circumstances beyond the borrowers control. Most loans can be discharged in the following situations:
- permanent disability or death of the borrower
- closure of the school during the time of study
- falsification of the loan qualifications by the school
- use of identity theft on someone else’s part to secure the loan
- failure of the school to refund required loans to the lender
“Circumstances beyond the borrower’s control” do not include things like having to drop out of college before graduating or being unable to find a job after graduation.
Such circumstances do include a school engaging in illegal recruiting tactics, such as guaranteeing the student a well-paid job upon graduation, or other sorts of misconduct as grounds for a loan discharge.
How Does This Work
Its called Public Service Loan Forgiveness.
If you work in the public service, a little-known government program called Public Service Loan Forgiveness could allow you to have all of your direct federal student loans forgiven, tax-free. Public Service Loan Forgiveness isnt a payment plan, like Income-Based Repayment or Pay As You Earn its a separate program that incentivizes a career in the public service.
To qualify for the program, you need to make 10 years of qualifying on-time payments toward your federal student debt. You must be working in the public service at least 30 hours a week beginning after October 1, 2007. After you make your 120th on-time payment, the U.S. Department of Education forgives your remaining federal student loan debt.
Many people using PSLF are also enrolled in an income-driven repayment plan to reduce their monthly payments until their debt is forgiven.
When Was Public Service Loan Forgiveness Created?
Congress created the program in October 2007 through the College Cost Reduction and Access Act of 2007.
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What Happens After Student Loan Cancellation
In general, according to the IRS, debt that is canceled before the full loan amount is repaid will be taxed like income. In other words, if you have $50,000 of debt discharged, your taxes will be treated as if you received an extra $50,000 in income on top of your normal earnings that year.
Recent changes lasting until 2025 have ensured that student loan discharge due to death or total permanent disability are not taxable, and some legislators are working to expand this coverage to all cancellation. For now, however, income tax is due on most cases of student loan cancellation.
Borrowers who can prove their insolvencythat their assets are worth less than the amount owed in taxesmight be exempt from paying the income tax associated with student loan debt cancellation. To understand whether this might be the case for you, speak with your tax preparer.
Finally, if you qualify for other types of forgiveness or discharge, speak with your student loan servicer. It will direct you to the appropriate forms to fill out. Once your loan is canceled, you will no longer see it on your credit report, and it will not show up in your servicers online loan portal.
Private Student Loan Forgiveness Facts And Statistics
Forgiveness of private loans is rare. There is no current legislation regulating any kind of debt cancelation or forgiveness among private companies. Under certain circumstances, however, private loans may be forgiven on a case-by-case basis. There is no available data regarding how many loans or how much debt has been forgiven by private lenders over the years, and no entity collects such data.
- 7.7% of outstanding student loan debt comes from private loans.
- In the wake of COVID-19, some legislators promote private student loan forgiveness as a method of debt relief.
- In July of 2020, the U.S. House of Representatives passed a bill to cancel up to $10,000 in private loans for each borrower.
- The Coronavirus Aid, Relief, and Economic Security Act, while providing some relief in the form of deferred payments and collections, does not specify cancelation of any loans.
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Where Can I Go For Additional Help
To learn more about the program and how to qualify, check out the PSLF Reddit group, which Mayotte moderates, or the Institute of Student Loan Advisors’ website. Additionally, the institute is hosting a webinar with the Consumer Financial Protection Bureau on these changes in the first week of November.
And StudentAid.gov has a wealth of information on the changes. There should also be more guidance coming in the weeks and months ahead.
Student Loan Forgiveness Statistics
Report Highlights. Full or partial student loan debt forgiveness is possible under certain circumstances, but most people who are eligible dont know they qualify. Further, the rate of application rejections rises each year, and up to 43% of applications have yet to be processed.
- 0.3% of student loan debt is eventually forgiven.
- 0.7% of eligible borrowers will eventually benefit from student loan forgiveness.
- 6.7% of eligible student borrowers apply for loan forgiveness.
- $95.45 per indebted student borrower is the rate at which the federal government forgives student loans.
Related reports include Student Loan Debt Statistics | College Enrollment Statistics | How Do People Pay for College? | Average Time to Repay Student Loans | Average Cost of College | Student Loan Refinancing
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Other Types Of Loan Forgiveness:
In addition to Teacher Loan Forgiveness, there are three other types of loan forgiveness for which you may also qualify: Perkins Loan Forgiveness, Public Service Loan Forgiveness, and State Loan Forgiveness for Teachers. Check out our articles on each of these topics.The following are examples of careers and organizations that qualify:
Tips For Student Loan Forgiveness
As I mentioned earlier, the ways to get student loans forgiven depend in large part to what kind of student loan you took out. For instance, there are specific student loan forgiveness programs for teachers, such as the Perkins Cancellation for Teachers. The first step to qualify for federal student loan forgiveness is to consolidate your qualified loan. You can read more about each of the federal forgiveness program for student loans on the U.S. Department of Educations website.
List of student loan forgiveness programs:
- Standard Repayment Plan
- Pay as You Earn
- Revised Pay As You Earn
- Income-Sensitive Repayment Plan
If you work in public service, you may qualify for the Public Service Loan Forgiveness Program. Under this plan you must work in public service and have made 120 qualifying monthly payments under one of the above-mentioned repayment plans while working full time for a qualifying employer. At the time this blog was written, the Dept. of Education issued the following alert on its website:
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What Is Teacher Loan Forgiveness
In a nutshell, teacher loan forgiveness is a program that allows certain teachers to earn forgiveness of their student loans in amounts of $5,000 or $17,500 after five consecutive years of teaching in a qualified low-income school. Additionally, full loan forgiveness could possibly be available after another ten years. If you qualify for teacher loan forgiveness,, you could earn substantial, if not full loan forgiveness just by doing what youre already doing. Talk with our loan forgiveness specialists to see if you qualify!
Student Loan Forgiveness Programs
Income-driven repayment forgiveness. The federal government offers four main income-driven repayment plans, which allow you to cap your loan payments at a percentage of your monthly income. When enrolled in one of these plans, your remaining loan balance will be eligible for forgiveness after 20 or 25 years, depending on the plan. These plans are most beneficial for those with large loan balances relative to their income. Only 32 borrowers have received loan forgiveness through income-driven repayment forgiveness, according to the National Consumer Law Center. This forgiveness was made tax free retroactive to Dec. 2020 through the end of 2025, as part of the March 2021 American Rescue Plan. However, most borrowers will not qualify for forgiveness through income-driven repayment until the early 2030s.
Public Service Loan Forgiveness.Public Service Loan Forgiveness is available to government and qualifying nonprofit employees with federal student loans. Eligible borrowers can have their remaining loan balance forgiven tax-free after making 120 qualifying loan payments. In order to benefit from PSLF, youll need to make payments while enrolled in an income-driven repayment plan. Otherwise, on a standard repayment plan, the loan would be paid off before youre eligible to benefit from forgiveness. Only 2% of borrowers have been approved for PSLF as of Nov. 2020.
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Who Is Eligible For Student Loan Forgiveness
The government previously restricted eligibility for the Public Service Loan Forgiveness program to only certain types of federal student loans and specific repayment plans.
However, through October 2022, borrowers who have made 10 years worth of payments while in a qualifying job such as positions in federal, state or local governments, a nonprofit organization or the U.S. military will now be eligible for loan relief no matter what kind of federal loan or repayment plan they have.
Past loan payments that were previously ineligible will now count, moving some borrowers closer to forgiveness. That is expected to especially help those borrowers with Federal Family Education Loans.
Among other changes, the department will allow military members to count time on active duty toward the 10 years, even if they put a pause on making their payments during that time.
Student Loan Forgiveness For Dentists
If youre a dentist who works for the government or a qualified nonprofit, you might qualify for loan forgiveness.
Student loan repayment assistance may also be provided to dentists who agree to work in areas where there are not enough dentists, or who provide care to underserved populations.
Here are some great options for student loan forgiveness programs for dentists:
- PSLF: Dentists working for the government or qualifying nonprofits may be eligible for 100% forgiveness after making 120 monthly payments in an income-driven repayment plan.
- The National Health Service Corps Loan Repayment Program : Up to $50,000 in loan repayment in exchange for two years of service at approved sites that provide free or discounted services to Medicare beneficiaries and others.
- NIH Loan Repayment Programs: The National Institutes of Health offers eight Loan Repayment Programs that provide up to $50,000 a year in student loan repayment assistance to dentists and scientists with medical degrees who perform biomedical or biobehavioral research.
- State-based dentist loan forgiveness: To attract and retain dentists, many states provide student loan forgiveness.
Learn More: Dental School Loan Repayment Guide
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Pay More Than The Minimum
If you want to ditch your loans as fast as possible, consider paying more than the minimum each month. Youll need to notify your loan servicer and specify that you want your overpayment to go toward the principal of your loan balances and not toward your next payment, but youll save money over time as you pay less and less interest each month.
