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Student Loans Forgiveness Programs – Eligibility and More

You have been working and paying down your Student Loan! Tick!

Your day to day is going great and you are meeting your financial obligation monthly. Tick!

The problem is you are not seeing any inroads or making any dents to that massive amount of Debt you are obligated to pay, for your Studies. That is definitely not a tick, it is tiresome and weary to have to see from month to month.

What do you do or what could you be forced to do due to unemployment to an unfortunate accident that affects you physically.

Well , there are Student Loans Forgiveness programs available to Federal Loan Holders you if you meet the specific eligibility requirements. Again, this is a huge topic with so much information out there it is difficult to know where to start.

Let’s have a look at some more common questions around Debt Forgiveness.

The differences between Debt Forgiveness, Debt Cancellation, and Debt Discharge?

You often hear these terms in most conversations around Federal Debt or Federal Loan Forgiveness. So what’s the difference you are asking? In reality there is no difference. The terms are used to describe one and the same thing…you are resolved of paying your debt.

If you’re no longer need to make payments on your loan due to the occupation you hold, then this is termed loan forgiveness or loan or cancellation.

If you’re no longer required to pay on your loans due to other circumstances, such as a total or permanent disability or the closure of the school where you received your loans, then is termed a loan discharge.

Available Loan Forgiveness Programs – Do you fall into these buckets?

There are several Loan Forgiveness programs available  with each of these categories being applicable to one or more types of Student Federal Loans. Let’s take a look.

  • Public Service Loan Forgiveness or PSLF

This category of forgiveness can be applied to Direct Loans, Federal Family Educational Loans and Perkins loans.

I have listed the High Level Eligibility Requirements you will need to meet in order to progress with an application of this type.

You will need to:

– work for a government agency or for certain types of nonprofit organizations;

– work full-time for that agency or organization;

– have Direct Loans (or consolidate other federal students loans to qualify);

– repay your loans on an income-driven repayment plan; and

– make 120 qualifying payments.

  • Teacher Loan Forgiveness

This category of forgiveness can be applied to Direct Loans and Federal Family Educational Loans

In order for you to be considered eligible you would have needed to have taught for five complete and consecutive academic years in a low-income school or educational service agency.

Additional qualification requirements are also needed to be considered for this Loan forgiveness of up to $17,500 on your Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Loans.

What about a Direct Consolidation Loan or a Federal Consolidation Loan? Well you may be eligible for forgiveness of the portion of the consolidation loan that repaid an eligible Direct Subsidized Loan, Direct Unsubsidized Loan, Subsidized Federal Stafford Loan, or Unsubsidized Federal Stafford Loan.

  • Perkins Loans

This category of forgiveness can be applied to Perkins loans only.

What are the eligibility requirements?

The good news is that you can qualify for cancellation of up to 100 percent of a Federal Perkins Loan if you have served full-time in a public or nonprofit elementary or secondary school system in one of the below positions.

  • A teacher in a school teaching students from low-income families;
  • a special education teacher. This would include teachers of infants, toddlers, children, or youths with disabilities; or
  • a teacher of mathematics, science, foreign languages, or bilingual education, or in any other subject of expertise which the state education agency identifies as having a shortage and/or requirement for in that subject or field.

It is important that you can confidently present the fact that you have undertaken these duties. The Eligibility for teacher cancellation is based on your actions and not your Title.

Basically, you can’t fake it by having a title, you need to show true action and activity of the required duties in that position that qualify you for this type of forgiveness.

Importantly, you must be directly employed by the school system. Federal Perkins Loans for teaching in post secondary school cannot be canceled! If that’s you, sorry about that.

  • Total and Permanent Disability Loan or TPD

This category of forgiveness can be applied to Direct Loans, Federal Family Educational Loans and Perkins loans.

If you’re totally and permanently disabled, you can potentially qualify for a discharge of your federal student loans and/or Teacher Education Assistance for College and Higher Education (TEACH) Grant service loans.

You need to complete the relevant paperwork and submit your TPD discharge application. Along with the application you will also need to include documentation which illustrates that you meet the requirements for being considered totally and permanently disabled.

This documentation or proof can be submitted from three sources. Each of these has their own documentation requirements, which I won’t go into here.

  1. The U.S. Department of Veterans Affairs (VA)
  2. The Social Security Administration (SSA)
  3. A physician which details you disability

Nelnet is the Federal Government partner that handles the TPD process. All the paperwork is submitted to them and they will work closely with you during your application process.

  • Closed School Discharge

This category of forgiveness can be applied to Direct Loans, Federal Family Educational Loans and Perkins loans.

This is likely the least complex process of the Forgiveness programs to undertake.

Basically, If your school closes while you’re enrolled or soon after you withdraw, you may be eligible for discharge of your federal student loan.

Like all the Forgiveness programs, it too has its own eligibility requirements.

You may be eligible for a 100 percent discharge of your William D. Ford Federal Direct Loan (Direct Loan) Program loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans if you were unable to complete your program because your school closed

In addition to the school closure you also need to meet these basic eligibility requirements;

  • You were enrolled when your school closed;
  • You were on an approved leave of absence when your school closed; or
  • Your school closed within 120 days after you withdrew.
  • Unpaid Refund Discharge

This category of forgiveness can be applied to Direct Loans and Federal Family Educational Loans.

If you leave the school after receiving a loan, your school is required to return part of your loan money.

If the school did not return the portion of the loan that by law they needed to, then you may be eligible for a partial discharge of your Direct Loan or FFEL Program loan

You will need to confirm with the school how refund policies apply to federal aid or your federal loan.

Obviously, only the amount of the unpaid refund will be discharged, not your entire loan. That would be you dreaming if you though that was the case 🙂

Federal Loan – You do have Student benefits

Student Loans Forgiveness programs can certainly not be under appreciated. You as a Federal Loan Student do have multiple options in terms of loan forgiveness and discharge depending on your situation.

If you do not realise it, you have a ton to be grateful for as a federal loan student. Do not give these benefits up easily and really think about them carefully. You may not want to forego these benefits especially when you start thinking about consolidating your loans (as discussed in a previously post)

You need to make super sure that consolidation does not affect your eligibility to these programs. Be wary and get it all in writing if you are unsure.

Ultimately, there are some great options when it comes to Federal forgiveness although you hope you never have to use them, but it is nice to know they are there.

Good Luck with it all

Gordon

 

Editorial Note: This content is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the financial institution

Gordon

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