Student loan forgiveness is a popular issue, with 70 percent of debtors expecting the government to provide considerable relief for their student debt in a 2021 study. Indeed, the Department of Education has offered over 600,000 borrowers over $12 billion in student debt forgiveness since the start of the Biden administration, as well as extending the pause on monthly payments for most federal loans through August 31, 2022.
While widespread student loan forgiveness is still a pipe dream, there are hundreds of repayment aid programs already in place. Here’s the latest on student debt forgiveness, as well as where you may get help with your payments.
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What is Student Loan Forgiveness and How Does It Work?
When your lender forgives a portion of your student debt, this is known as student loan forgiveness. It’s similar to debt settlement for credit cards.
- The lender agrees that you are not required to return the entire amount borrowed.
- To be eligible for student loan forgiveness programs, you must meet specific requirements.
- You may be required to agree to work in a specific professional path or geographic location, for example.
To put it another way, student loan forgiveness isn’t a given. And not all student loan forgiveness programs are created equal. Student loan forgiveness programs won’t erase your debt instantly, but they may make it easier to manage – or even eliminate it – after a specified number of years of payments. Borrowers who work in public service, education, health care, and other sectors for a set length of time are eligible for several federal and state-based forgiveness programs.
Forgiveness of Public Service Loans (PSLF)
People who work in public service can benefit from the Public Service Loan Forgiveness program, which is available in a range of disciplines. It’s less about your job title and more about the company you work for in this program. There are several occupations that qualify for PSLF that you may not have considered.
You may be eligible for loan forgiveness after making 120 payments. Payments do not have to be made in a certain order, but they must be done on a qualified repayment plan.
Forgiveness under the Income-Driven Repayment Plan
With an income-driven repayment plan, student loan forgiveness is also a possibility (we explain in greater detail below).
- IBR (Income-Based Repayment) sets your monthly payments at 10 to 15% of your discretionary income.
- Payments are made for 20 or 25 years, depending on when the loans were taken out. Any leftover loan debt is then forgiven.
- Your payments under the Pay As You Earn Program are limited to 10% of your discretionary income. It has a payback period of 20 years.
- The payback time for graduate school loans has been increased to 25 years under the Revised Pay As You Earn program.
- Income-Contingent Repayment means you pay the lesser of 20% of your discretionary income or the amount you would pay on a set 12-year repayment plan.
Cancellation of a federal Perkins loan
If you work as a teacher, you may be able to get up to 100% of your federal Perkins loans forgiven. You must teach math, science, or any other needed subject in a low-income school or work in special education to be qualified.
Teachers who meet the criteria can have their loans canceled over a five-year period. A percentage of your loans can be forgiven after each year:
- 15% during the first and second years
- For the third and fourth years, the percentage will be 20%.
- For the fifth year, 30% is expected.
There’s a chance that other vocations will be phased out as well. Borrowers who served in the military, firemen, or librarians, for example, may be eligible to have a part of their loan forgiven.
How can I have my student loans forgiven?
You must recertify your plan every year by completing an income-driven repayment plan application to be eligible.
Maintain contact with your loan servicer and stay on top of your recertification. If there is still a balance at the conclusion of the payback period, this will assist you to get student loan forgiveness.
The disadvantage of this form of student debt forgiveness is that you would have to pay taxes on it. If the amount forgiven is taxable income, you should begin saving for taxes right away.
Borrower defense to repayment may also qualify your debts for student loan forgiveness. This applies to borrowers who can show that they were deceived or given false information by their schools.
Misinformation about educational programs or financing is a possibility. Your debts may be forgiven if the school engages in illegal behavior.
Conclusion
While student loan forgiveness might be complex, you can now easily get out of it. Student Loans Resolved has made it easier than ever before. “Student Loans Resolved” can answer all of your questions throughout the procedure, avoiding any potential misunderstandings. From your eligibility status to student loan settlement or payment reduction, they provide all of the necessary information.
Also read: Every Student, Parent Should Ask About Campus Safety
