Student Loan Forgiveness: The Most Complete 2020 Guide.

· 5 min read

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Towards the end of 2018, the American students' loan had stockpiled to nearly $1.6 trillion. The Federal Reserve Bank of New York further states that the current number of over a million defaulters is likely to shoot up by 40 by the year 2023. This defaulting by students mostly results from unsatisfying career life, contrary to what one may have expected. There has also been an increase in the number of students seeking their post-graduate studies abroad on a scholarship basis to avoid the huge loans pile up.

If you already have a loan piled up your back, you may have had some level of hopeful reprieve build when presidential candidates Elizabeth Warren and Bernie Sanders each made a proposal to scrap America’s student loan debt. These two proposals are beautiful in their offers. While Warren’s proposal promised up to $50,000 for those with less than $100,000 annual income, Sander was even more generous. He proposed forgiveness for every student loan borrower no matter the income.

Loan forgiveness is not entirely a daydream. Your loan is potentially forgivable, partially or fully. These programs, however, are granted on certain terms. Meeting these terms spelled on specific programs could see you being freed from the student loan. There are also student loan repayment plans such as Loan Repayment Assistance Programs (LRAPs) and Loan Repayment Programs (LRPs). These programs could see you either lower your monthly payment or save money on interest or better yet qualify for loan forgiveness.

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Below is a list of student loan forgiveness options:

  • Public Service Loan Forgiveness (PSLF)
  • Federal Income-Driven Repayment Plans
  • Different states offer different student loan forgiveness programs. Alabama is one of the four (4) states that do not have student loan forgiveness unique to them. In these states, you can still access various Federal Student Loan Forgiveness programs such as the Teacher Loan Forgiveness and the Public Student Loan Forgiveness programs.

    Student Loan Forgiveness plans can also be classified by one’s profession, with the high featuring professionals being lawyers, military nurses, doctors, and other healthcare practitioners, and volunteers among others.

    Public Service Loan Forgiveness (PSLF)

    This program gives you the highest hope of having your student loan forgiven. It was announced by President Obama. Nothing good comes easy. To qualify for this program, you need to make 120 payments which are equivalent to 10 years in public service. You also need to have a qualifying loan, and not just any loan. There is also no limit as to how much of the loan can be forgiven and the forgiven amount is not taxable. This makes PSLF the best program in this category. There are however stringent hoops to jump through to apply for PSLF.

    Federal income-driven repayment plans

    Income-driven repayments plan make loans inexpensive as your income is capped monthly at a rate of 10% to 20%. The forgiven balance is usually taxable in the year which its forgiven. Another attractive attribute of this program is that it’s not for student loans only. The four income-driven plans (REPAYE, PAYE, ICR, and IBR) have different structures as detailed below.

    Revised Pay as You Earn (REPAYE)

    Anyone with qualifying federal loans is eligible for this plan. With this plan, your payments are set at 10%of your discretionary income. The balance is also forgiven after the repayment period. The repayment period is usually 20 years if you do not have any graduate school loans but otherwise 25 years. There is no limit as to the amount that can be capitalized and the government pays 50% of pending interests on subsidized loans after the first three (3) years. If you’re married, your spouse’s income will be taken into account when calculating the tax.

    Pay as You Earn (PAYE)

    The repayment period for the PAYE plan is always 20 years. On a PAYE plan, the spouse’s income will not be taken into consideration if you file tax returns separately. A major disadvantage of this plan is that if your income rises to a point where you no longer qualify for PAYE, the amount of pending unpaid interest that can be capitalized falls to 10% of your loan balance as at the time you entered the plan.

    There are three requirements you need, to qualify for PAYE:

    • 1. You need to have received a federal loan on or after 1st Oct 2007 and had no existing federal loans at the time.
    • 2. You also must have been disbursed a loan on or after 1st Oct 2011 or consolidated on or after that date.
    • 3. You also need to have a partial financial hardship, such that your PAYE payment would be lower than if it were on the standard repayment plan.
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    Income-Based Repayment (IBR)

    For an IBR plan, your monthly payment is usually capped at 10% or 15 % if you are a new borrower or not, on or after 1st July 2014. You are also required to recertify your income and the size of your family each year. A new borrower based on the date 1st July 2014 will have a repayment period of 20 years while those that are not new borrowers on that date have a repayment period of 25 years. After the repayment period, the loan is forgiven regardless of the student loan type you could be having.

    Income-Contingent Repayment (ICR)

    ICR is designed to fit students whose careers do not attract high salaries, especially in public service. In this plan, a borrower’s monthly income, the borrowed amount and the family size are all taken into consideration. Depending on the changes in the borrower’s family size and annual income, the monthly settlement is fine-tuned accordingly.

    If you opt for this plan, you should be comfortable parting with 20% of your discretionary income. This is the highest percentage of the four PSLF income-based plans. However, it is your best bet if you have a parent plus loan. This is because after consolidating into a Direct Consolidation plan, you only require 10 qualifying years on ICR. Since this plan needs you to remit 20% of your unrestricted income, it would be of good help if you have a Parent Plus loan exceeding $50,000.

    Normally, ICR plans have a repayment period of 25 years, after which whatever the balance on your loan is forgiven.

    Student loan forgiveness by profession

    Teachers

    This category has the most options regarding student loan forgiveness. One of the most prominent options is the Federal Perkins Loan cancellation program.

    Even though this program expired in 2017, some graduate borrowers still are on this plan. A peculiar thing about this program is that a borrower makes the loan application through the school which means that should you wish to apply for loan forgiveness, you’ll need to do it through your school. This also means that the amount you qualify for will be mainly dependent on the career you are pursuing.

    Apart from teachers, other groups eligible for this program are nurses, firefighters law practitioners, and medical personnel. All these groups can have their loans forgiven after merely 5 years of service.

    As a teacher, you may qualify for Teacher Loan Forgiveness if you carry a Federal Direct or Federal Stafford loan. A major downside of this program is that it doesn’t forgive all of the remaining loan balance. For example, if you have been working full-time in a low-income institution, you might be surprised to realize that only $5,000 of the remaining loan balance will be forgiven. This excludes mathematics, science, and special education tutors. These teachers qualify for up to $17,500 of their loan balance for forgiveness.

    Teachers also qualify for the PSLF. This comes as an advantage since Teacher Loan Forgiveness does not cancel all the remaining loan balance. It’s worth noting that you may not be eligible for the two programs at the same time. The only way would be to first meet the conditions of the teacher loan forgiveness and then start afresh for the PSLF. This equals a total of 15 years, 5 for Teacher Loan Forgiveness and the other 10 for the PSLF.

    stuloan

    Working in Public Service?

    Student loan forgiveness after 10 years or 120 payment


    See if you qualify for this program by giving us a call today!

    Nurses

    NURSE Corps Loan Repayment Program is the most popular federal student loan forgiveness program for nurses. The first thing however is applying and being accepted into the program. After that, you only need to agree to work in a location or a health facility with an acute shortage of nurses, for three years, after which up to 85% of your loan can be forgiven.

    An added advantage of this program is that it pays off your federal taxes so that you are free from student loan forgiveness tax which is a nightmare for many.

    Doctors

    There are mainly three programs for doctors as seen from the Association of American Medical Colleges directory. These are the Indian Health Service (HIS), Military doctors and the National Health Service Corps.

    IHS

    The Indian Health Service will offset $40,000 of your student loan balance if you agree to work in one of their facilities for not less than two years. IHS will also continue paying off more of your student loan, should you agree to prolong working with them. By this, you can be able to cancel out your entire loan if you work under IHS for long enough. The IHS also pays off 20% of taxes resulting from their payments.

    Military doctors

    The Navy’s Health Professions Loan Repayment Program is the most attractive program for military doctors. Under this program, you can have up to $40,000 of your student loan paid off should you agree to serve at a certain area deficit with skills.

    The Army offer has a few student loan repayment plans that can pay up to $250,000 but this is mainly for high-level medical staff.

    National Health Service Corps

    This department offers the Service Loan Repayment Program under which doctors and dentists who are at their final year in school can enjoy up to $120,000 off their loan debt. To qualify for this program, you also need to agree to work in a facility endorsed by the NHSC for at least three years. This loan repayment is not taxable.

    Lawyers

    The Department of Justice has very attractive loan repayment programs for their workers. Once admitted into the program, the DOJ will pay off $6,000 a year up to $60,000 if you agree to a three-year term and have a federal student loan exceeding $10,000. Public defenders and state prosecutors also qualify for John R. Justice Student Loan Repayment Program which also pays off a maximum of $60,000 with yearly payments of $10,000.

    stuloan

    Working in Public Service?

    Student loan forgiveness after 10 years or 120 payment


    See if you qualify for this program by giving us a call today!

    Getting out of default and stop wage garnishment.

    If you haven’t kept up with your student loan, it is highly probable that you could be in default. Typically, when you do not make a payment on your loan for over 270 days, your loan student loan is placed in default. This means that after 270 days without payment, your loan is transferred from a student loan servicing company, and now you have to deal with a collection agency. Wage garnishment is your next nightmare. Here, a court order is issued to your employer asking them to remit a certain amount of your income to the collection agency till your loan debt is fully settled. This is not to mention that your credit score will be highly undermined.

    If you are already in default, there are ways, though tough, through which you can get out and stop the garnishment.

    Normally, there are three ways through which you could see yourself out of default. These are:

    • Paying off the loan in full
    • Loan consolidation
    • Loan rehabilitation

    Paying off the loan

    This option is the most unlikely for any defaulter because the loan would not have been in default in the first place. Once you pay off the loan, you not only get out of default but also you won’t have the loan bothering you anymore.

    Loan consolidation

    Loan consolidation is the process of combining all of one’s federal loans into one single loan. The resultant loan is known as a consolidation loan and has a fixed interest rate. Defaulting on a federal loan will normally require you to first make at least three payments consecutively and on time before consolidation.

    Loan rehabilitation

    Loan rehabilitation is usually a one-time opportunity to get your loan out of default. The first step is usually to contact the collection agency after which you will agree on the payment amount. This amount will not go below 15% of your discretionary income. A signed rehabilitation agreement will then follow and then you can start making your payment as per the agreement. Something worth noting is that that your payments are very likely to be higher due to the added costs.

    After the loan(s) have been rehabilitated avoid defaulting again.

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    Attended a For-Profit College?

    You May Qualify for Borrowers Defense to Repayment Student Loan Forgiveness


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    Getting help from a student loan adviser:

    Getting help from a student loan adviser is advisable for a number of reasons. Services that a student loan consultant can provide include:

    • Developing a repayment strategy that is suited to your financial situation
    • Explain student loan jargon in a way that is understandable
    • Help you modify repayment plans if your life plans change
    • Do research for you and talk to lenders to save you time

    Seeking professional help can keep you out of financial hardship and relieve the stress of handling student debt. Just be careful. To be safe, do your research and seek out help rather than responding to solicitation.

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