Abolishing student loan or Student Loan Forgiveness sounds too good to be true but this can actually happen if you know the various factors on which it depends. The borrowers of student loan may be eligible for various programs such as cancellation, forgiveness, repayment and discharge programs. But the qualification for these programs depends upon various factors such as what kind of loan you have taken, your profession , where you live etc. Before jumping directly to know about the student loan forgiveness, one must know what Federal loan he have because every Federal Forgiveness program has got a different eligibility criteria and may be only applicable or available on certain types of Federal Student Loans. So let us first have a look on what are the different types of Federal Student Loans:
- Federal Perkins Loans: Perkins Loan is available for those students who are exceptionally financially weak. This loan is offered to undergraduate, postgraduate and professional students.
- Direct loans: This loan is offered to graduate or professional students , parents of the students are also the part of this program. This type of loan is generally known as Stafford Loan or Direct Stafford Loan. One may have subsidized or unsubsidized direct loans. These loans are provided to students under William D. Ford Federal Direct Loan program.
- Federal Family Education Loans: These loans are not available for new students since 2010. Federal Family Education Loans included PLUS loans, subsidized and unsubsidized loans and also FFEL consolidation loans.
You can always have different loans under various categories. Its is not a necessity that one must have loans under the same type to get the loan forgiveness. It is nothing like all or nothing opportunity. If you are not sure about what type of loan you have then, US departments suggests logging into My Federal Student Aid from where one can review the loan names. If there is written “Direct” in the title, then it’s a part of William D. Ford Federal Direct Loan program. Private student loans are not eligible for Federal cancellation and forgiveness programs.
Now let us discuss about the eligibility criteria of Federal Student Loan forgiveness Programs:
- Every type of Federal Student loan is eligible for different student loan forgiveness programs. Direct loans are eligible for PSLF (Public Service Loan Forgiveness). But Perkins and Federal Family Education Loans are only eligible for loan forgiveness program if they have been consolidated into Direct Loan under Direct Consolidation Loan Program.
- In additions to these, one must complete 120 monthly payments while working under a qualifying employee. Once you make these qualifying 120 payments then rest of the money of your loan will be forgiven.
- Qualifying employers are generally state, tribal, local or federal government( but not government contractors). You are also eligible for forgiveness program is you are full time AmeriCorps or Peace Corps volunteer.
- You are eligible for these forgiveness loans if you work full time under or with these qualifiying employers. Here full times mean working 30 hours per week .
- The 120 payments which you need to pay to get qualified for this forgiveness programs need not be consecutive. Also if lump-sum payments are made after complete AmeriCorps and Peace Corps , then it can be counted as upto 12 of PSLF (Public Service Loan Forgiveness) payments whereas before completing your AmeriCorps Or Peace Corps only one monthly payment is counted among the 120 payments.
- Payments made under the Defense Student Loan Repayment Program of U.S. department could also be counted as multiple payments.
- Switch to the income-driven plan , so that there will be loan balance left to be forgiven. If you do not switch to this plan, then there will be no loan balance left to be forgiven while you make payments under 10-year standard repayment plan. So PSLF will be beneficial to those who make small monthly payments under the income-driven plan rather than making payments under 10-year standard repayment plan.
- One important point to remember is that payments must not be carried if you consolidate the loans. However you may want to consolidate Perkins and FFEL to Direct Loans to make them eligible for PSLF but do not consolidate Direct loans if you have already applied for PSLF (Public Service Loan Forgiveness).
Student Loan Forgiveness Programs
This process of having your debt forgiven is not automatic. If you want to begin the PSLF process, then firstly you are required to fill and submit the ECF which is known as the Employment Certification Form. Them the department will confirm your eligibility criteria and your employment status. Its upto the department of Education to decide whether to pass your loan for the forgiveness program or not. Even if your lawyer says you are doing everything right, always keep a copy of all your documents and the payments that you made. Several cases have come up against the lawyers that they have misled the borrowers in the process of qualifying for PSLF, so always do keep copies of the papers and payment histories. One cannot think that if he has made all his 120 payments then he need not apply for the PSLF application. After you make 120 payments to qualify for PSLF (Public Service Loan Forgiveness), you still need to apply for PSLF application form. You can never assume that you application will be approved. It is totally upto the Department of Education whether to approve your application or not.