If you are a federal student loan borrower then you may be eligible for various student loan forgiveness programmes under special circumstances. You could have your study abroad loan forgiven, cancelled or discharged depending on your situation. Do note that these forgiveness programmes are not the overnight solution for your debt woes. However, they can help you in erasing all or part of your outstanding balance. In this article, you will learn everything about student loan forgiveness programmes, right from the definition, types of programmes to the limitations. Read till the end of the article to find out if you qualify for a particular programme due to your job or other circumstances.
What Is Student Loan Forgiveness? | Student Loan Forgiveness Definition
Student loan forgiveness is a release from having to repay some or all of your federal student loans that had been borrowed to pay for post-secondary education. The terms forgiveness, cancellation, or discharge of your loan mean nearly the same thing but are used in different ways.
If you’re exempted from making payments on your loans due to your job then this is called forgiveness or cancellation. Discharge is when you’re no longer required to make payments on your loans due to other serious circumstances, such as permanent disability or the closure of the school where you received your loans.
It is important to remember that in all the other cases where you do not qualify to have your loans waived off by any of the student loan forgiveness programmes, you are responsible for paying the debt. Whether or not you complete your education, or find a job in the domain you studied, or are happy with the education received, you have to repay the amount. None of the reasons listed above is a concern for any of the authorities.
List of Student Loan Forgiveness Programmes
Following is a list of the types of Student Loan Forgiveness programmes. It also contains summaries that will help you quickly figure out whether or not you qualify for these programmes.
Public Service Loans Forgiveness (PSLF)
Available For: All Federal Direct Loans
As the name suggests the PSLF programmes help individuals who are working for the common public. If you are employed by a government or a non-profit organisation that caters to the community then you may be able to receive loan forgiveness under this program. Public service jobs and a range of other jobs qualify for this program. Here it is more about the organisation you work for than the job description.
PSLF forgives the outstanding balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for an authorised employer.
Teacher Loans Forgiveness
Available For: Direct Loans and FFEL programmes
If you are a teacher full-time for five consecutive academic years in a low-income elementary school, secondary school, or educational service agency then you may be eligible for forgiveness of up to $17,500 on your Direct Loan or FFEL programme loans.
Closed School Discharge
Available For: Direct Loans, FFEL programme loans, and Perkins Loans.
You are eligible for this programme if your school shuts down while you are enrolled when you are studying or soon after your withdrawal.
Forgiveness with Income-Based Repayment (IBR)
Available For: Direct Loans, FFEL programme loans, and Perkins Loans (if consolidated)
Technically, IBR isn’t a forgiveness programme but you can get your loans forgiven here. Through IBR, your student loan payments are capped at 10% or 15% of your income. After making consistent payments under IBR for 20 or 25 years (depending on when you borrowed the sum), any remaining loan balance will be forgiven.
Another very similar one of all the student loan forgiveness programmes would be PAYE (Pay As You Earn). These two forgiveness programmes differ only in the tax on forgiven balance income. The latter treats your forgiven balance as a taxable income.
You can also check out Income-Contingent Repayment (ICR) and Revised Pay As You Earn (REPAYE) student loan forgiveness programmes which work on similar lines.
Federal Perkins Loan Cancellation and Discharge
Available For: Only Federal Perkins Loans
Depending on your employment or volunteer service you may be eligible to have all or a portion of your Perkins Loan cancelled. Under this program, you can also have your loans discharged in certain specific conditions. It also includes Perkins Loan Teacher Cancellation.
Total and Permanent Disability Discharge
Available For: Direct Loans, FFEL programme loans, and Perkins Loans.
In case you are totally and permanently disabled then you may qualify for a discharge of your loans and/or you may receive Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligation.
Discharge Due to Death
Available For: Direct Loans, FFEL programme loans, and Perkins Loans.
The entire loan amount will be discharged in case of the death of a borrower.
Discharge in Bankruptcy (Rare)
Available For: Direct Loans, FFEL programme loans, and Perkins Loans.
If you declare bankruptcy then you can have your federal student loan discharged.
Borrower Defense to Repayment
Available For: Direct Loans
You will be eligible for discharge of loans under this programme if you took out the loans to attend a school and the school failed to do something related to the educational services that the loan was intended to pay for.
A few other Student Loan Forgiveness Programmes are:
- False Certification Discharge
- Unpaid Refund Discharge
- Student Loan Forgiveness For Nurses
- Military Student Loan Forgiveness And Assistance
- Additional Student Loan Repayment Assistance Programs (LRAPs)
Student Loan Forgiveness Limitations
Here are some limitations of student loan forgiveness programmes.
- Only federal direct loans qualify for loan forgiveness. You can’t avail it for private loans.
- These programmes aren’t an option for defaulted loans. You’ll need to use consolidation or rehabilitation to get defaulted federal student loans in good standing before they’re eligible for forgiveness programmes. Defaulted federal loans are eligible for discharge programmes.
- The forgiven loan is taxable unless the beneficiary was required to work for a specific employer or profession to qualify for loan forgiveness. The income-driven loan repayment is subject to taxation.
Hope you are now clear about everything related to Student Loan Forgiveness Programmes.
FAQs
1.Why is student loan forgiveness a bad idea?
Student loan forgiveness is a bad idea because the plan is costly, regressive, arbitrary, and fundamentally unfair to those who avoided or repaid education debt.
2.How can I get student loan forgiveness?
The application for student loan forgiveness is short and simple and easy to complete. To apply online, you must provide your full name, Social Security number, date of birth, and email address. While you are not required to enter your AGI in the application, only those who meet the income requirements may apply. Only a limited number of candidates will be contacted and asked to provide proof of income, according to the US Department of Education.
3.What is student loan forgiveness?
Borrowers who receive student loan forgiveness are relieved of the obligation to repay a portion or all of their federal student loan debt. These borrowers borrowed money to pay for their post secondary education.
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