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Federal Student Loan Forgiveness

Today, in the United States, there are over 44.2 million students directly affected by the Student Loan Crisis. In total American students are under a debt of $1.52 trillion and this amount grows by $29 billion every quarter. If you are a victim of this has fundamentally flawed system then you can understand how difficult it can be to get out of the shackles of this interest driven market.



Which is why we have attempted to gather as much information about Student Loan Forgiveness Programs as we could and put it all in one place for you. We encourage you to read through and find out if you can meet the qualifications of any of these programs. Because if you do, you might have a way out this sinkhole. Here are the best tips and suggestions we can provide.



 

Do You Qualify?


First things first. Find out which Student Loan Forgiveness programs can you qualify for. Each of these programs has a whole list of specific requirements for you to be able to apply but you might already be on track to qualify for a program and not even know about it.


For example, if you work in public service jobs then you might be eligible for The Public Service Loan Forgiveness (PSLF) program. PSLF requires you to be a full-time employee at a federal, state, or local government agency or 501C3 designated organization.

Anyone with eligible federal student loans can apply for Income Driven Repayment Program. Income Driven Repayment  helps you bring your monthly payments down. Your monthly payment will be based on your income,and family size. Instead of being based on what the lender is asking you to pay. 


Similarly, many people working in education might be eligible for Perkins Loan cancellation program.


 

What Are the Requirements?

Once you have figured out which loan forgiveness program you are eligible for, the next step is to make a list of all the requirements for that specific program. You don’t want to be excluded from the beneficiaries because of a technicality such as a form you didn’t know you were required to submit.


Income Based Repayment (IBR) requires you to make your payments regularly for 20-25 years and update your loan servicers about changes in your income. In order to apply for IBR, you are required to produce a proof of income. There are many different  ways of proving your income. Your income isn't solely based on how many dependents you claim on your income tax. If you are providing for others. They can be considered in factoring your family size, which has a bearing on what your qualifying payment amount will be.  Your payments are based on your discretionary income. For Example:  Your discretionary income is the difference between your actual income and $17,655. So, if you actually earn $20,000 a year, your discretionary income will be $2,345. Your student loan payments would be 10 percent of that, which is $234 a year, or $19.50 a month. If you earn $17,655 or less, your payments are zero. 


To apply for Federal Perkins Loan cancellation program, you must have a Federal Perkins Loan and work in a “qualifying profession”. Teacher Loan Forgiveness program conditions you to have worked as a teacher for five consecutive years and you cannot have loans originated before Oct 1, 1998.


Some programs are only applicable to certain loan types. For example, If you have a PARENT PLUS LOAN you're only qualified for a  Income Contingent Repayment (ICR). However, you still may be qualified for a ZERO DOLLAR payment,  or in most cases a lot less than what your lender may be asking you to pay.


 

How to Apply?


After you’ve met the requirements to apply for a certain program, you need to know how to apply for loan forgiveness. Students that have been struggling to pay their loans need to be proactive. It might seem overwhelming but you need to stay on top of everything otherwise it will keep getting tougher.


  

For some of the loan forgiveness programs, you can apply directly from StudentLoans.gov. You will able to  calculate your savings on the site. 


Other programs haven’t made applying so simple. You are sometimes required to meet and discuss with your loan servicer for your options and figure out which steps you need to take to be able to apply for a loan forgiveness program.


We invite you to read this simple and informative book by Ms. Gail Kelly Anderson, called, “Student Loan Forgiveness 4 Dummies"  Why Pay A Third Party?  It helps its readers grasp the confusing steps to get themselves out of their predicament without having to rely on third parties. They require you to spend even more money paying them just so they can do things for you that you could do for yourself only if you knew what to do.


In Conclusion,


We hope that we’ve cleared some air for you and helped you figure out a game plan to escape the demons of interest added student loans from haunting you for the rest of your life. 


The Student Debt Crisis is crippling the United States economy. We hope that our state representatives will do their jobs and save our youth and parents from this predicament. 

However, until that happens you have you to figure out a way out of it for yourself. We wish you luck on your search for a relief from the burden of monthly cuts from your paychecks to pay off the debt that was supposed to help you get up on your feet. Instead, it keeps you down still.

Department of Education Government Programs

WHY SHOULD I ENROLL Income-Driven Repayment Plan?

You’ll likely need one of these plans if you’re finding it extremely difficult or impossible to make monthly payments according to the promissory note you signed. If your income is reasonably good, and you want to cut your payments to improve your lifestyle, you’re unlikely to benefit and would probably be ineligible anyway.

The amount you have to pay is assessed on your actual earnings. The calculation is based on your “discretionary income,” which the U.S. Department of Education defines as “the difference between your income and 150 percent of the poverty guideline for your family size and state of residence.”


 Which Plan Should I Choose?

 There are three income- based plans, and all of them cap your monthly payments at the sum that would normally be due under your original loan agreement:

  • Income-Based Repayment plan (IBR plan) – You have to pay 10 percent of your discretionary income, unless your original loan agreement was dated on or before July 1, 2014, in which case you should pay 15 percent.
  • Pay As You Earn Repayment plan (PAYE plan) – You have to pay 10 percent of your discretionary income.
  • Income-Contingent Repayment plan (ICR plan) – The lesser of:

a) The amount you would be paying on a 12-year repayment plan with fixed monthly payments, adjusted according to your income, OR


b) 20 percent of your disposable income.

FOR EXAM[LE: based on a single person living in one of the 48 contiguous states or DC. The federal poverty guideline for 2015 is $11,770, and 150 percent of that is $17,655. Your discretionary income is the difference between your actual income and $17,655. So, if you actually earn $20,000 a year, your discretionary income will be $2,345. Your student loan payments would be 10 percent of that, which is $234 a year, or $19.50 a month. If you earn $17,655 or less, your payments are zero.


If your financial circumstances take a unfavorable  turn midway through, you can update your loan servicer right away. so you can  reduce your payment  more quickly than waiting  for your annual re-certification date. 

What Does This Do to My Repayment Period?

I'm glad you asked. As with all loans, the smaller your repayments, the longer your debt  it takes to rid of them. However, I'm sure we all know you can't squeeze blood out or a turnip. Don't let your debt cause you stress and anguish. 


After all, we can't take out debt with us when it's time to clock out. We all need a little help sometime.


What are the maximum repayment periods for each plan?

  • IBR plan for new borrowers (after July 1, 2014) – 20 years
  • IBR plan for borrowers with loan agreements dated on or prior to July 1, 2014 – 25 years
  • PAYE plan – 20 years
  • ICR plan – 25 years

What if I Still Owe Money at the End of My Repayment Period?


If your income doesn’t go up as quickly or as much as you hope, and you still have a balance at the end of the 20- or 25-year period your plan is supposed to last. This is the really good news: Your remaining outstanding debt is forgiven.

The only downside? The financial benefit you receive when the loan is forgiven may be taxable. However, if that becomes an issue. Talk with  your accountant as she/he may be able to help you. 

What’s the Bottom Line?


As with any loan in the realm of borrowing and lending.  The longer you hold on to debt. The more you pay in interest. Unless you end up getting your student loans forgiven on the back-end 

What are some common issues?


  •  Servicers systematically and illegally failing  borrowers at every stage of repayment.
  • Servicers creating unnecessary obstacles to repayment by providing bad information.
  • Servicers failing to act when borrowers complained.
  • Servicers Illegally cheating many struggling borrowers out of their rights to lower payments. (causing them to overpay for their student loans)
  •  Borrower's submitting annual re-certification application within the period her loan servicer had recommended, and it was the company’s rather than his or her fault that it hadn’t been processed on time. 

Pay close attention to your mailbox, phone calls, and  make sure you set up an online account with your servicing company. Moreover, upload your application you submitted on the student.gov website along with any supporting documents, such as proof of income, public service loan forgiveness applications or any other documents they may asked you for.


Applying for Student Loan Forgiveness could be one of the most gainful decisions you make in your lifeblood.