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What you need to know about Student Loan Forgiveness

After graduating, the majority of students are eligible for a six-month “grace period” to obtain a job before beginning their federal loan payments, in accordance with the National Student Loan Data System.

But once the time is up, they realize that the situation is much worse than anticipated.

The Office of Consumer Financial Protection, though, reckons a quarter of the U.S. workforce may be entitled to repayment or loan forgiveness programmes, the Associated Press said

Finding out about what loan forgiveness programs you are eligible for may take some legwork, though you might be surprised at the sheer number of alternatives, says Betsy Mayotte, regulatory compliance director for Saltmoney.org, an agency that has wrote “more than 60 ways to get rid of your student loans (without paying them back).

“When we advise people, what we get all the time is that people don’t know that all these options exist, these lower payments, these programs,” Mayotte adds. “They think that either you pay (your student loans), or you get in trouble. And it’s not really like that.

A lot of humanitarian and public sector jobs are qualified for loan forgiveness, Mayotte explains, so “borrowers can follow their passions instead of their bills. So someone who wants to be a public defender, for example, won’t be discouraged by an expensive law degree.

Clearly, there is no way to avoid student loans without debt, since so many federal programs require high qualifications, research, and many fine print. But getting your homework done can pay off, Mayotte adds.

So what’s the first move? Just speak to your loan issuer, Mayotte says. Loan lenders are very familiar to federal programs and can help borrowers figure out what programs are appropriate for their circumstances.

Here are four ways that borrowers can obtain their federal student loans cleared by a variety of government programs.

Source: Freepik

1. became a teacher of public school in a low-income area.

Through the government’s Teacher Forgiveness Program, up to $17,500 of your federal Stafford borrowings or your entire Perkins loan can be forfeited in exchange for five consecutive full-time years as a teacher in selected low-income primary or secondary schools.

2. Joining the military.

From the Army to the National Guard, each arm of the military carries its own student loan forgiveness program. The values of pardoned loans generally vary depending on the level of rank achieved. Those who are interested should contact their preferred branch to find out about their options, Mayotte suggested.

3. Request the Income-Based Repayment Plan.

Nearly everyone should be considering applying for the Income-Based Repayment Plan, said Mayotte. The program matches monthly student loan payments to no more than 15% of their “discretionary” earnings (the amount of money they make that falls above the federal poverty level).

For example, let’s consider a newly graduated student who makes $20,000. 

Since the federal income level within the United States is $11,490, this implies that he earns only $8,510 in “discretionary” income. Under the IBR, he would only have to make payments that were 15% of that $8,510, which is equivalent to about $106 per month.

It is perfectly possible, Maylotte says, that certain new graduates make so little that they are eligible to make $0 payments.

So after 25 years of adjusting these loan payments, the borrower’s outstanding balance is completely forgiven.

4. Obtain a job in public service, public office, or non-profit.

Anyone who has borrowed money under the William D. Ford Federal Direct Loan Program can be a candidate for the Public Service Loan Forgiveness Program. Under this program, full-time public service or nonprofit workers may have the outstanding debt forgiven after successfully making 120 qualified loan payments.

What kinds of jobs are eligible for public service? “Any employment with a federal, state, or local government agency, entity, or organization or with a nonprofit that has been assigned a tax-exempt Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC),” according to the U.S. Office of Education’s federal student aid website.

Some 501(c)(3) tax-paying agencies are still included in the program, although they fall under a particular list of public services, like early childhood education or legal services of public interest.

Keep in mind that laws are constantly changing, some other options might appear and some might not be valid anymore.

Source: Usatoday

Photo: FreePik