Student loan debt is increasing every year across all age groups.
As graduates head out into the workforce, many find that they cannot find jobs which will allow them to pay off their loan via the borrowing terms.
More and more people are turning to student loan forgiveness measures. There are many different cases, and while all borrowers’ situations are different, most borrowers can find a solution that works for them.
These tips will help you and your loan servicer craft a student loan repayment program to ease the burden of student debt if you’re experiencing financial hardship.
Student Loan Forgiveness | A Way Out Of Student Debt
Defining Student Loan Forgiveness
Student loan forgiveness is a circumstance where federal student loans backed by the federal government are partially canceled. This program can discharge or forgive the loan.
Government-backed loans include Federal Perkins Loans or Direct Subsidized Loans, a direct loan program by the federal government.
If you have a public service sector job, you have a good chance of getting federal student loan forgiveness. Almost all federal student loans from the federal government require repayment with interest, even though the interest rates are usually more reasonable than those from private student loans.
Qualifying For Student Loan Forgiveness
Federal Direct Loans can also be waived if the student enters a repayment program called Public Service Loan Forgiveness. It is a very useful student loan forgiveness program for those who are financially insecure.
If you borrowed through the Perkins Loan, the FFEL program, or federal student loans, it is possible to consolidate the loans into one Direct Consolidation Loan. Then, the federal student loans can be forgiven if you qualify for the Public Service Loan Forgiveness.
According to the federal government, to qualify for the PSLF program, you must enter a qualifying public service sector job. You must work under a local, federal, or state organization which qualifies as a tax-exempt nonprofit or other government agency under the 501(c) section of the tax code.
But, this is an extremely under-utilized law, and it is estimated that almost a fourth of all Americans who attended college qualify for this, and yet hardly anyone knows to try this loan repayment approach.
Other Qualified Careers
You don’t have to work for the government of a nonprofit to qualify for this kind of loan repayment program. Borrowers can go into military service in any branch of the U.S. military as well.
You can use other strategies, including applying to switch your loans over to an Income-Based Repayment Plan. This is an income-contingent repayment plan that takes into account how much you make. This will redo the terms of your loan to fit your current income.
You can get interest rates that are proportional to your income, have less monthly loan payments, and possible student loan forgiveness for parts of your loan.
Depending on how little you make, some borrowers may qualify for $0 for their monthly student loan repayment. The forgiveness comes in once you have made these proportional loan payments to your loan servicer regularly for many years.
If you don’t pay your federal loans via the established monthly payments, which are proportional to your income after 25 full years, the loan is forgiven in full.
Depending on how much you initially borrowed, this repayment program may not be useful to you. But if you borrowed a lot, you might not have to pay back half of it! It just depends on your initial loan amount and how much your monthly income is over the years.
Student Loan Forgiveness for Public School Teachers
If you choose to become a public school teacher, even though it is not a nonprofit or a government agency, you still qualify for teacher loan forgiveness if you work in a public school.
Under the Teacher Loan Forgiveness Program, if you work in public school employment for five consecutive years, you can get your full Perkins loan paid off and up to $17,500 worth of Stafford Loans.
It is worth noting, however, that the teacher loan forgiveness does not apply as a blanket statement to all public schools. It aims to help low-income public schools who are in need of teachers. There are many of these schools (usually elementary or secondary) scattered throughout each state, and they often change.
The Dave Ramsey Show talks about the pros and cons of student loan forgiveness in this video:
Student loan forgiveness is a great way to alleviate yourself of the debt you accrued throughout your education. If you can’t exactly fork out the cold, hard cash to pay them off, this is a good way to start.
While not all of these student loan forgiveness programs may apply to you, it’s still an alternative way to get yourself out of debt. Consult with your loan servicer to see if you are eligible for this type of loan forgiveness, or if there are other options for you to lighten the financial load.
Do you have any tips on student loan forgiveness? Let us know in the comments section.
Editor’s Note – This post was originally published in January 2017 and has been updated for quality and relevancy.