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Tag: student loan forgiveness

  • Navigating Student Loan Forgiveness Programs: What You Need to Know

    Navigating Student Loan Forgiveness Programs: What You Need to Know

    Navigating Student Loan Forgiveness Programs: What You Need to Know

    Student loan forgiveness has been the talk of many news outlets lately, especially with President Biden’s plan’s fate resting in the Supreme Court’s hands. If the Supreme Court deems the plan constitutional, then millions of borrowers are set to be forgiven of up to $20,000 in student loan debt. If not, or if a decision is not made by June 30th, then payments will be set to resume in October 2023. Either way, it’s important to know all the options available to you, especially if you cannot afford your payments. 

    Types of Loan Forgiveness 

    Before we dive into the different programs available, we should first discuss the types of loan forgiveness. You may hear the terms loan forgiveness, cancellation, or discharge and assume they all mean the same thing. While they are similar in the sense that you do not need to repay some or all of your loan with these terms, they do have some differences. Loan forgiveness or cancellation often indicates that you do not need to continue making loan payments because of something related to your job. On the other hand, loan discharge typically means that you are not required to make loan payments because of other circumstances, like your former school closing. 

    Income-Driven Repayment Forgiveness 

    Many student loan forgiveness programs have specific requirements to be eligible for them. For example, income-driven repayment (IDR) forgiveness has income requirements. If you enroll in an income-driven repayment plan, your loan payment will be maxed out at a certain percentage of your monthly income. After 20 to 25 years of payments, your remaining debt is eligible for forgiveness. This type of forgiveness would be ideal for those who have big loan balances compared to their income. 

    Forgiveness for Teachers 

    Some teachers may be eligible for Teacher Loan Forgiveness if they’ve worked full-time in a low-income elementary or secondary school for at least five consecutive years. To qualify, teachers must have a federal Direct or Stafford loan that was taken out after October 1, 1998. Qualified teachers can have up to $17,500 forgiven depending on the subject they teach. This program is ideal for teachers who do not have a lot of student loan debt and who do not qualify for the more generous Public Service Loan Forgiveness program. 

    Public Service Loan Forgiveness (PSLF) 

    Certain government workers with federal student loans may qualify for public service loan forgiveness. This can include firefighters, teachers, nurses, military personnel, religious workers, government workers, and even some nonprofit workers. To qualify, you must have made at least 120 payments, or 10 years’ worth, while working for the government. There are some temporary policies in place with PSLF due to COVID-19, so you should check with your loan provider about your specific situation. 

    Perkins Loan Cancellation 

    Some borrowers may have a Perkins loan, which are subsidized loans for low-income students. While this loan program does not exist anymore, borrowers with this loan can still seek cancellation for existing loans. Borrowers with Perkins loans who worked in public service for five years may be eligible for student loan cancellation.  

    School Closure Discharge 

    If your school closes permanently, you may be eligible for loan discharge. To qualify, you must have been enrolled or have left within 120 days of the closing date. If you received a degree from the school, you do not qualify. 

    Total and Permanent Disability Discharge 

    You may qualify for loan discharge if you become totally and permanently disabled, whether it’s mentally or physically. This also includes any parent who took out a loan and becomes totally and permanently disabled. Proof of your disability will be required to apply for this discharge.  

    Other Types of Loan Discharge 

    You can also become eligible for loan discharge in the case of a borrower’s death, including the student of a parent borrower. In some rare cases, student debt can be discharged in bankruptcy. Borrower defense to repayment allows student debt to be discharged if your school did something or failed to do something related to your student loan. False certification discharge may allow your loan to be discharged if your school incorrectly gives you a loan when you are not eligible for one.  

    What if I’m not eligible for student loan forgiveness? 

    Although there are several programs available, you may find that you are not eligible for any student loan forgiveness program. If this is the case, it might be time to start looking at your repayment options. This is especially true if you already find yourself having trouble affording your payments. Debtmerica Relief has over 16 years of experience in providing relief to our clients whose debts have become too much to handle. If you need help with debt, give us a call at 800-470-8155 for a free consultation. 

  • Pros & Cons of Student Loan Consolidation

    Pros & Cons of Student Loan Consolidation

    pros and cons of student loan consolidation

    Student loan forgiveness is still up in the air with multiple lawsuits attempting to block the passage of Biden’s order to cancel up to $20,000 per borrower. Now it seems it might be best to consider alternative actions in case the courts continue to block loan forgiveness. One option is student loan consolidation, which essentially combines multiple student loans into a single bill with one monthly payment. Because consolidation cannot be undone, it’s best to know the pros and cons of this action before doing it. 

    Pros of Student Loan Consolidation 

    The biggest advantage and most common reason for student loan consolidation is that it’s much easier to manage repayment. It’s not uncommon for borrowers to have several loans that make each payment amount and due date difficult to keep track of. Federal student loans can be consolidated with a single federal loan or privately through another financial institution by refinancing. 

    Consolidating student loans can also allow more time to pay off the loan as well as lower your monthly payment. This is because higher loan amounts can be repaid over longer terms, which then leads to lower monthly payments. Currently, the amount of time you have to pay off your loan depends on your loan amount. As of now, the lowest term length is 10 years for loan amounts less than $7,500 while the longest term is 30 years for loan amounts of at least $60,000.  

    Another advantage is that you can change your loan service provider when consolidating. Typically, when you obtain a federal student loan, the service provider is assigned to you. If you consolidate your loans, you get to choose which of the nine available providers you want to work with.  

    Perhaps one of the best advantages is that consolidation can access repayment plans only available to certain loans. For example, older loans like Federal Family Education loans and Perkins loans can become eligible for income-driven repayment plans or Public Service Loan Forgiveness if consolidated. If you already receive federal benefits like forbearance, income-driven repayment, and hardship relief, you can retain these benefits if you consolidate. This is a huge plus since this would not be an option if you privately refinanced with a bank.  

    Cons of Student Loan Consolidation 

    It’s important to keep in mind that student loan consolidation is not all good. While extending your loan term may sound like a good idea since it’ll result in a smaller monthly payment, it will also mean more interest in the long run. In addition, any outstanding interest you already had on the loans that you consolidate will become part of the principal balance once you consolidate. Higher principal balances will accrue higher interest. 

    On that note, the new interest rate on your consolidated loan will likely be higher since it is calculated by taking the weighted average interest rate of all loans you are consolidating. The rate is then rounded up to the nearest one-eighth of a percentage point. This can subtly or drastically increase the amount of interest paid over the life of the loan.  

    While in some cases, consolidating can help you gain benefits, in others you may lose benefits. For example, sometimes loan consolidation will disqualify interest rate discounts, principal rebates or loan cancellation benefits that were included in the terms of your original loans. It’s important to check with your service provider before consolidating to ensure that you won’t lose out on benefits.  

    Debt Relief for Student Loan Borrowers 

    Deciding to consolidate your student loans should come with careful thought and consideration of all factors. It might be worth consolidating if you have old loans that currently do not qualify for loan forgiveness, if you have a hard time keeping track of payments, or if you have a large amount of student loan debt. On the other hand, it might not be the best decision if you don’t have many student loans or a high balance, if you qualify for loan forgiveness, or if you’re close to meeting the requirements for loan forgiveness. In any case, if you are required to pay student loans it’s important to always make your payments on time and in the correct amount to avoid any financial consequences. Debtmerica Relief has over 16 years of experience in providing relief to our clients whose financial burdens have become too much to handle. If you need help with debt, give us a call at 800-470-8155 for a free consultation.