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01.10.2019Student Loans

Student Loan Forgiveness Programs

Student loan forgiveness programs have helped thousands of people over the years and at times it can seem too good to be true. Loan forgiveness is a program that under certain circumstances will see students be forgiven for part, or all, of their student loans (meaning they don’t have to pay). There are a number of free government programs set up to help people navigate through the multiple options available, as it can be overwhelming.

To help you with your research, here is a list of options for borrowers with federal student loans. It is worth noting that many of these programs have very strict requirements that can make it hard for people to qualify, however there are income-driven repayment options that we will also explore.

Student loan forgiveness programs

1.     Income-driven repayment forgiveness: There are four income-driven plans available which lets those who qualify cap their repayments at a percentage of their income. When enrolled in this program, your loan balance is eligible for forgiveness after either 20 or 25 years depending on the plan you’re on.

2.     Public Service Loan Forgiveness: a program only available to government and certain nonprofit employees. Those who are eligible can have their loan forgiven after making 120 loan repayments. In order to get the most benefit from this program you need to make your payments while on an income-driven plan.

3.     Teacher Loan Forgiveness: After working for five consecutive years, full-time teachers who work in low-income schools may qualify for Teacher Loan Forgiveness. As part of the program they can have up to $17,500 in federal loans forgiven, however the loan must have been taken out after October 1st, 1988.

4.     Student Loan Forgiveness for Nurses: There are a number of loan forgiveness options for nurses, including: Public Service Loan Forgiveness, Perkins Loan Cancellation and the NURSE Corps Loan Repayment Program. Each have slightly different benefits and qualifications, with the NURSE Corps Loan Program being the most competitive at it pays up to 85% of a nurse’s unpaid loan.

Red Flag Warning - Obama Student Loan Forgiveness:

The Obama Student Loan Forgiveness is not a formal program, so if you come across a company offering it, this should raise immediate red flags. Certain “debt relief” companies use the term for their federal programs which charge people to enroll.

Other Student Loan Forgiveness Programs

There are additional niche forgiveness programs that can also provide assistance:

1.     State-Sponsored Repayment Assistance Programs: this program is open to lawyers, doctors, nurses and teachers to assist them paying off their loans. These programs will pay a certain amount of your loan off each year depending on your job and income.

2.     Military Student Loan Forgiveness and Assistance: available to those in the Coast Guard, National Guard, Air Force, Army and Navy. Those who qualify can receive up to $50,000 in loan support

3.     Additional Student Loan Repayment Assistance programs (LRAPs): there are also loan assistance programs available for public service professionals. This can include health professionals who can qualify for special assistance through the National Institute of Health.

Student Loan Cancellation Programs

1.     Perkins Loan Cancellation: Those with a federal Perkins loan may be eligible to have their entire loan cancelled if they work in public service for five years or more.

Student Loan Discharge Programs

1.     Closed School Discharge: if your school closes for whatever reason, you may qualify for loan discharge. To qualify you need to have been enrolled for 120 days and will still need to make payments during the application process.

2.     Borrower Defence to Repayment Discharge: if you are defrauded by your college then you are eligible for loan relief. The Education Department will determine whether or not you have your loan discharged.

3.     Total and Permanent Disability Discharge: If you’re unable to work due to mental or physical disability, you may qualify for this program in which your loan will be cancelled.

4.     Total and Permanent Disability Discharge for Veterans: This program is strictly for veterans with permanent disability.

5.     Discharge Due to Death: If you die your loan will be cancelled.


Things to Consider

While forgiveness and discharge programs are generally free of charge, there are some items you need to consider:

-       Forgiven loans may be taxable: cancelled student debt is considered taxed income unless you work in certain professions. Make sure you’re aware of the tax implications of all forgiveness programs.

-       Scams: be cautious of any debt relief company that charges you upfront fees. Many are scams and make money through billing students who are already struggling financially.

-       Defaulted loans: if you have a defaulted loan you won’t be considered for a forgiveness program. You will need to look at ways to reduce your debt or consolidating your loans before applying.

There are a number of Student Loan Forgiveness programs available that you may qualify for. Take the time to look through the various options available and be sure to be wary of potential caveats that could cost you significantly.

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