The country’s student loan debt is growing six times faster than the country’s economy and is currently around $1.75 trillion. Loan payments are increasingly becoming a source of concern for students who decide to pursue higher education. Therefore, student loan forgiveness is an attractive option.
Many student loan debtors feel helpless in the face of tens of thousands of dollars. There is widespread support for student loan exemptions among them, but a misconception needs to be clarified about these programs.
The following are things you need to know about student loan forgiveness:
What is Student Loan Forgiveness?
Student loan forgiveness is the process by which federal student loans can be forgiven, canceled, or repaid. In this situation, you don’t have to pay off your student loans in full.
The degree of this exemption varies by occupation and background, among other factors. For example, government and teacher loan forgiveness programs support workers in these areas.
Sometimes, you don’t have to repay the federal loan in full when loan forgiveness applies.
Types of Student Loan Forgiveness
Public Service Loan Forgiveness
The Public Service Loan Forgiveness Program (PSLF) is designed specifically for people working in the public sector of government or non-profit organizations. You may also be able to forgive some or all of the loan by doing certain volunteer work, military service, or medical practice.
To receive debt relief under the public service program, you must first make qualifying payments of $120 (meaning paying the minimum amount on time). These payments must be made while working for a qualified employer with tax-exempt status. You qualify after ten years of work and ten years of monthly payments (120 payments).
Potential positions include nursing, government, police, fire, and social services. Only payments made after October 1, 2007, will be considered for eligibility determinations.
Teacher Loan Forgiveness
Suppose you teach five years of full-time schooling at a low-income elementary, high school, or educational service institution. In that case, you may be eligible for a waiver of up to $17,500 in direct loans or loans for the FFEL program.
You may not receive the same eligible payments or service period benefits for the teacher and government loan forgiveness. However, a limited PSLF waiver temporarily removes this restriction for individuals who previously received teacher loan waivers.
Difference between Forgiveness, Cancellation, and Discharge
Although forgiving, canceling, and discharging credit have similar meanings, there are subtle differences. Loan forgiveness or loan cancellation are terms used when you no longer need to make loan payments because of your job. For example, this could be a teacher loan forgiveness or a public sector loan forgiveness.
On the other hand, loan discharge refers to qualifying loans that are permitted due to other circumstances, such as full and permanent SoFi private student loan withdrawal due to disability or if the school from which the student loan was received is closed. Depending on these circumstances, repayment remedies may vary.
How to Apply For Loan Forgiveness
First, you need to contact your credit servicer if you think you are eligible for some credit. If you have a Perkins loan, don’t hesitate to get in touch with the loan servicer appointed by the college or institution that issued the student loan.
When contacting your credit service provider, ensure you discuss what your loan payment will be during the loan forgiveness review period. Depending on the type of forgiveness requested, the type of loan, or the lender, payment may or may not be required during the review period.
If your student loan exemption application is approved, you will be covered in full or part of your loan payments. For some types of layoffs, qualified payments already made will be refunded, and the default loan will no longer appear in your credit report.
However, if the loan forgiveness request is denied, you must continue making the same qualified payments previously required for the loan. Monthly payments must comply with the terms agreed in the promissory note signed on the original loan. Talk to your servicer about your repayment plan and try to recover your defaulted loan from default.
Although student loan forgiveness might seem complicated, it is an excellent tool for student loan receivers considering a career in public service. It would be best if you considered all the relevant factors to determine your eligibility for student loan forgiveness.