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Here is some information about student loan forgiveness, including how to apply and what happens if you are approved.
Status of Student Loan Forgiveness
The U.S. Department of Education’s (ED) website indicates that approximately 4 million borrowers have had their federal student loans forgiven under the Public Service Loan Forgiveness program. A borrower may use a combination of income-based repayment plans and forgiveness programs to pay back a loan without paying interest while at the same time making payments. However, the total amount repaid over 10 years cannot exceed $57,500. There are some conditions that qualify borrowers for loan forgiveness including employment in public service and military service. Another condition includes having no outstanding debt to any government agency including accrued interest or fees on a Federal Direct Subsidized or Unsubsidized Stafford Loans. In addition to these requirements, borrowers must meet certain financial eligibility criteria. You must file for a discharge when you enter repayment period 6 or 7 years after entering repayment. If you entered repayment prior to June 30, 2007, you must wait until July 1, 2020 before filing for a discharge. You must submit documentation of employment in public service to the lender to obtain a discharge. You can request a copy of your report card before the first day of class. Some schools mail copies directly to the school registrar. Other schools may offer the option to request a copy online. Most colleges and universities provide students with access to their official transcript upon graduation. Transcripts reflect information about grades earned in classes taken at both the undergraduate and graduate levels. Transcripts give detailed information about grades received within specific courses and credits earned at each level. The college or university where you attended classes will issue your official transcript. Many institutions post transcripts online. Transcripts are provided free of charge.
How to pay off student loans:
This video answer the basic question about how you should go about paying off student loan debt. There are two ways we can go about paying our debts. We can either pay them off completely or put them off while still making interest payments
Status of Student Loan Forgiveness
How does the student loan debt forgiveness work?
The Department of Education (ED) offers three types of repayment options for federal loans: Income-driven Repayment Plan (IDR), Graduated Repayment Plan (GRAD), and Public Service Loan Forgiveness Program (PSLF). A borrower may choose any combination of these plans, meaning that borrowers have flexibility in structuring their payments. Under PSLF, eligible borrowers generally pay nothing on their federally held student loans while employed full time in public service for at least 10 years. In order to qualify under this program, a borrower must make 120 monthly payments (with interest accruing during the entire period of forbearance) on their loans before May 15th each year starting in 2007. After this date, no payments are due from borrowers in the program if they continue making payments on their loans. If a borrower stops making payments after entering the program, their remaining balance becomes fully forgiven after 20 years.
What type of loan forgiveness is offered?
Under IDR, borrowers are given two options: income contingent repayment plan or standard repayment plan. Under the standard repayment plan, borrowers are responsible for paying back their loans over a fixed number of years based on their original undergraduate academic degree. Borrowers who do not complete graduate school are often required to repay their loans until reaching either 25 or 30 years.
Under the Income Contingent Repayment Plan (ICRP), borrowers are given several payment choices depending on different factors. ICRP includes six repayment option categories. Each category is designed to accommodate different financial situations and provides borrowers with a set amount of money each month to pay toward their loans. The first four categories require borrowers to pay between 15% and 25% of discretionary income towards their loans. The fifth repayment category requires borrowers to pay 20% of discretionary income towards loans. The sixth category is reserved for borrowers who are unable to pay anything towards their loans. While borrowers may use any combination of the repayment categories, borrowers must select the same category each month and cannot switch categories mid-month. Depending on how much money a borrower makes and whether he/she chooses to apply for additional loan forgiveness, some borrowers could see their total loan balance wiped out completely.
How many borrowers currently receive loan forgiveness?
In 2012, approximately 1.9 million borrowers were enrolled in the IDR and GRAD programs. As of 2014, approximately 2.1 million borrowers are enrolled in the program. Of those, roughly 1.05 million received loan forgiveness in 2012.
Does the loan forgiveness affect credit scores?
Borrowers receiving loan forgiveness under the Federal Family Educational Loans (FFEL) program are still responsible for repaying the loans under the terms of the original promissory note. However, the forgiveness of the outstanding principal balances under the FFEL program does not cause a change in the borrower’s credit score.
When will borrowers need to start making loan payments again?
After enrolling in the program, borrowers are allowed 12 months to enter repayment. Upon entry into repayment, borrowers are required to begin making monthly payments to their lender. Once borrowers are in repayment, they are subject to the same standard rules of all other borrowers. The difference is that borrowers in the IDR and PSLF programs do not have to pay off their loans until they retire or leave the public service profession.
Status of Student Loan Forgiveness
Student loans have been the bane of the American economy since they were first introduced at university level. However, things may be changing for the better. Congress recently voted to allow certain borrowers to have their student debt wiped away if they are enrolled in public service employment or working full time while attending school.
The bill was approved earlier this year and now President Obama must sign the bill into law before the deadline expires in 2014. This means that any student who works full-time and attends school on a federal loan should be eligible to have the balance forgiven.
This could mean thousands of people being relieved of their debt burden, and many students will certainly take advantage of this offer. More than one million Americans have already taken advantage of a similar program and there’s no telling how many more will do so once the law changes.
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