There are a lot of student loan forgiveness programs out there. Many different types of loans can be forgiven, but not all of them will discharge your debt from your record. In this article, we’ll take you through the most common and best options for those looking to have their student loans discharged.
What are Federal Student Loans?
Federal Student Loans are loans that come from the federal government. Private lenders can issue these, but you must qualify for them through your college or university’s Federal Student Aid office.
What is a Student Loan Forgiveness Program?
Before we get into some specifics, you must understand what a student loan forgiveness program is and how it works.
Most programs offered by federal agencies will forgive some or all of your debt depending on where they fall in the type of loans they cover. For example, if you have a Federal Perkins Loan, there are options to cure any delinquency before forgiving these types of loans.
What Are The Most Common Student Loan Forgiveness Plans?
There are many federal student loan forgiveness programs, and it can be challenging to know which one you qualify for. Your best bet is to start by checking with your college or university’s financial aid office, as they will have the most information on this subject. That said, some of the more common plans include:
The most common is the Public Service Loan Forgiveness Program (PSLFP). This program was created in 2007 under President Bush and extended several times by both Democratic and Republican administrations. It also happens to be one of the simplest ways to get their loans discharged without too much hassle.
The Teacher Loan Forgiveness Program is another common forgiveness plan. It was created by President Clinton and worked similarly to the Public Service Loan Forgiveness Program. To qualify here is that you need to work at least 30 hours per week teaching at an eligible school which must also meet specific criteria.
The Income-Based Repayment Program (IBR) works by offering a new repayment plan tied to your income and family size. It also lowers the amount you have to pay on each payment and extends how long it takes for them to expire. In addition, most loans can either be eliminated or lowered by up 50%.
What are the Student Loan Forgiveness Programs that Discharge Loans:
Now that you are already informed of some standard forgiveness programs. Let’s discuss which plans discharges loans.
There are a lot of student loan forgiveness programs out there. Many different types of loans can be forgiven, but not all of them will discharge your debt from your record.
Forgiveness Programs:
This is one way students who may never see any financial gain in their lifetime can still get some help with paying off their college education costs. The following list details the requirements and benefits offered by each program:
Public Service Loan Forgiveness (PSLF):
This program requires at least ten years within an eligible job field; it completely cancels the remaining balance after 120 payments.
Teacher Loan Forgiveness:
This program requires at least five years of teaching within an eligible school; it offers complete cancellation on the remaining balance after 240 payments or a lump sum of up to $17,500 for those who make less than 120 monthly payments.
Loan forgiveness for nurses and other medical professionals:
This program also requires at least five years in their field with a qualified organization; this program will offer complete loan forgiveness after ten years while employed by such an organization.
Perkins Loans:
Perkin Loans are offered through either your college or university’s financial aid office. It is a need-based student loan that forgives up to 100% of the original amount received if you work in qualifying fields while making nine out of ten consecutive annual contributions each year until all the funds are given back.
Military student loan:
This loan requires at least ten years of honorably serving your country; this will offer complete cancellation on all remaining debt from previous loans received through military programs such as the GI Bill, SCRA benefits, etc.
Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, and Perkins Loan Cancellation are all possible options for those working towards loan forgiveness.
They all offer different benefits and requirements but are still great options to consider.
What is the difference between each student loan forgiveness program?
This is one way students who may never see any financial gain in their lifetime can still get some help with paying off their college education costs. The following list details the requirements and benefits offered by each program:
Public Service Loan Forgiveness (PSLF) requires at least ten years within an eligible job field; it offers complete cancellation on the remaining balance after 120 payments.
Teacher Loan Forgiveness requires at least five years of teaching within an eligible school; it offers complete cancellation on the remaining balance after 240 payments or a lump sum of up to $17,500 for those who make less than 120 monthly payments.
Loan forgiveness for nurses and other medical professionals also requires at least five years in their field with a qualified organization. This program will offer full loan forgiveness after ten years while employed by such an organization.
Perkins Loans are offered through either your college or university’s financial aid office. It is a need-based student loan that forgives up to 100% of the original amount received if you work in qualifying fields while making nine out of ten consecutive annual contributions each year until all the funds are given back.
The Nursing Assistance Loan Repayment Program (NALRP) is offered by the state and federal government to those who have a degree in nursing or are enrolled as advanced nurse practitioners. The program provides up to one year of repayment for each qualifying service event but can be renewed if you continue working within a designated health professional shortage area.
Military student loan forgiveness requires at least ten years of honorably serving your country; this will offer complete cancellation on all remaining debt from previous loans received through military programs such as the GI Bill, SCRA benefits, etc. This option may also include active duty family members that qualify under certain circumstances.
What is a student loan discharge, and how does it work in the U.S.?
Discharging student loans happens in one of three ways: death, disability, or closed school. Loan discharge can also occur if the institution you are attending closes down while you are enrolled.
Who qualifies for a student loan discharge in the U.S?
Every U.S. student loan borrower is eligible to have their loans discharged through any of the following methods:
Death: Death relieves the obligation on your part in repaying the loan, so you cannot pass this debt onto anyone else if it is an unpaid balance when you die.
You can also release a co-signer from being responsible for remaining balances still due after one’s passing. However, your estate will then be unable to collect or receive compensation for repayment beyond what has already been paid out at the time of death once all taxes and debts associated with your property are settled within probate proceedings.
Closed School: This happens when a school goes out of business and does not award degrees. The students that were still attending at this time will be able to get all of their federal money back through what’s called “closed school discharges.”
The same applies to those who had transferred schools up until around 180 days before closing its doors.
Disability: A disabled person unable to maintain gainful employment may get relief from their student loans through the Social Security Administration (SSA). This is considered a total disability and may last for five years or more.
How to get your student loans discharged if you’re not eligible?
There are still ways to get your student loans discharged if you’re not eligible through other means.
Bankruptcy: If the borrower has made at least seven years of payments, or half of their loan repayment period, whichever is greater, then they may be able to have the remainder forgiven by filing bankruptcy. The rules depend on where you live and your creditors since most lenders will fight such a discharge in court.
Closed School Discharge: This happens when a school goes out of business and does not award degrees. All federal money paid toward this particular educational program can be returned to the government as tax debts, except that it must happen within 120 days after leaving the institution.
Dismissal of a Loan: If the borrower’s loan goes into default which means missed payments, they can have it dismissed or canceled by doing one of three things.
Repayment Assistance Plan (RAP): This is a repayment plan for borrowers experiencing financial hardship. Suppose you have not defaulted on your federal student loans and filed for bankruptcy before.
In that case, it might be possible for this option to help temporarily lower monthly bills or cut them out entirely if the circumstances warrant such adjustments in payment amounts when trying to qualify under RAP’s strict guidelines that require proof from lenders.
Debt Relief: Debt relief companies may claim they can get rid of debts with one phone call but don’t fall for this deceptive business practice which can be costly and not as beneficial as they advertise.
What are the best ways to lower your monthly payments on federal loans?
The best way to lower your monthly payments on federal loans is by consolidating them into a single charge with the Department of Education or through Income-Based Repayment plans. This can decrease monthly payments significantly if your financial situation warrants this option.
Debt relief companies may claim they can get rid of debts with one phone call but don’t fall for this deceptive business practice since those services will come at a cost upfront and have credit cards frozen by banks if borrowers do not immediately pay up.
Instead, free services are available online at the government’s website to help borrowers understand different repayment plans and their benefits. In addition, other information related to student loans may help provide more options for those trying to avoid defaulting on these debts or dealing with debt collectors looking for outstanding payments.
Is there hope for people with private loans that are past due or defaulted on yet still want their debt forgiven by lenders or servicers of those loans?
There are types of loans that can be extremely hard to get out from under, especially if you have been delinquent for so long.
There is no standard way of getting these private student loans discharged or forgiven by lenders since it varies on a case-by-case basis and depends upon the circumstances around why someone didn’t pay off their debt sooner.
If they believe there was an error in how much money was borrowed, that may qualify them to receive some repayment plan, which will vary by lender, but this option isn’t always available either.
In most cases where people’s income level warrants such change(s) with paying back what they owe, including interest rates applied over time. In addition to that, more likely what will happen is loan consolidation programs through federal agencies can be an option if their financial situation is dire enough where they are at risk of defaulting on these loans.