The United States is going through a student debt crisis. Current outstanding student loan debt has reached $1.76 trillion, and an average student graduates with $38,000 in debt.
This debt is almost impossible to get rid of – even if you declare bankruptcy! But it is possible to have it forgiven thanks to special programs. Some of them allow you to go on an income-based repayment plan (after a certain period, the unpaid part is forgiven). Others reward you for working for the public good.
Even if you’re still in college, it’s not too early to think about student debt forgiveness. However, all programs come with strings attached, so you’ll need to adjust your plans for the future if you want to become eligible for one.
It may take some time to wrap your head around the programs’ conditions. For example, “Would I need to do my homework on EssayPro to make time for it?” Well, it’s a good idea. And once you offload your homework and have more time on your hands, here are six programs you should look into.
1. Public Service Loan Forgiveness (PSLF)
The U.S. government is ready to reward those who work in the public sector – this is what this program is for. It motivates those with student debt to spend ten years working for the government at any level or for a non-profit. Once the ten years are up, the rest of your loan will be canceled.
You can qualify for PSLF if:
- You’re working full-time for a government or non-profit organization;
- You’ve made 120 monthly payments under a repayment plan (that amounts to 10 years);
- Your loan falls under the Direct Loans category.
2. Teacher Loan Forgiveness
Low-income schools constantly lack teaching staff. To encourage new teachers to work in such schools, the Fed has implemented this program for teachers who move to low-income neighborhoods. But be warned: it can forgive only up to $17,500 in federal student loans.
You can count on this program if:
- You teach in a low-income elementary or secondary school or educational service agency;
- You’ve been teaching there for five full years in a row;
- You’ve taken a Direct or FFEL Loan.
Here’s a small catch: you can’t combine Teacher Loan Forgiveness with the PSLF and receive help from both. You have to choose either one of them. Each program has its pros and cons:
- PSLF doesn’t have a cap for the amount to be forgiven, but it takes twice as long to fulfill the eligibility criteria;
- Teacher Loan Forgiveness takes only five years, but you have the $17,500 cap.
3. Perkins Loan Cancellation
If you took out a Perkins Loan from the Fed to finance your studies, there are multiple ways you can have a part of it canceled. In most cases, you can have up to 100% of your student debt forgiven over five years at the following rate:
- 15% of the loan in the first and second year;
- 20% in the third and fourth year;
- 30% in the fifth year.
Here are some of the full-time occupations that will make you eligible for this program:
- Nurse/medical technician;
- Law enforcement or corrections officer;
- Attorney in the public sector;
- Peace Corps or AmeriCorps VISTA volunteer.
You can find the complete list and the employment duration requirements on the studentaid.gov website.
4. NHSC Student To Service Loan Repayment
If you’re a medical, nursing, or dental student, the chances are that your financial situation is even direr than that of most other students. After all, this type of education is one of the most expensive.
But if you’re ready to invest three years of your time working for the good of an underserved community, you can get up to $30,000 annually from NHSC to repay your debt.
You’re eligible for the Student to Service program if:
- You’re a U.S. citizen, and you study in the United States (studying abroad disqualifies you);
- You’re in your last year of studies;
- You qualify for federal employment;
- You agree to spend three years working full-time (40 hours/week, 45 weeks/year) at a site located in a Health Professional Shortage Area and approved by NHSC.
If you still haven’t gotten rid of your debt at the end of those three years, you can request to sign a one-year continuation service contract. Of course, there’s no guarantee you will get one, but if you do, you’ll get an additional up to $30,000 from NHSC.
5. Revised PAYE (REPAYE)
If your current payment plan is too hard on you, or you’re not sure you’ll pay everything off in 20-25 years, this program might be a good option. First, it recalculates your payments to be ten percent of your discretionary income. Then, the rest of the loan will be canceled after 20 years (for undergraduate studies) or 25 years (for graduate studies).
You could apply for REPAYE if you took a Direct Loan from the federal government. There are no other criteria. For example, imagine you are on an athletic scholarship and working towards an undergraduate degree in business administration. Yes, you’ll qualify for REPAYE!
Be warned, though: the amount that’s forgiven might be taxable as any other income. Plus, if you’re married, your spouse’s income will be considered when calculating the monthly payment size.
6. Income-Based Repayment (IBR)
This is another federal repayment plan with a cancellation option by the end of it. For example, if you got your loan after July 1, 2014, you’d have to pay 10% of your discretionary income to repay it for 20 years. If you took it before, you’d have to pay 15% of the income for 25 years. After that period is over, the rest of your debt will be canceled.
To qualify for IBR, your debt has to be high compared to your income. There are several catches, however:
- if you’re married and file taxes together with your spouse, their income will be taken into account as well;
- You might be required to pay income tax on the part of the debt that was canceled;
- You have to provide information on your family and income situation every year, even if there are no changes.
5 Cases You Can Get Your Federal Loan Discharged
Discharge is different from forgiveness or cancellation. It doesn’t depend on where and in which capacity you work and has nothing to do with a repayment plan. Loan discharge happens if you:
- Are enrolled or have just graduated from a school that closed;
- Have become seriously and permanently disabled;
- Have declared bankruptcy (but that works in very few cases);
- Were falsely deemed eligible for a loan by the school;
- Had your identity stolen and a loan taken in your name without your consent.
As you can see, there are few chances you can qualify for a discharge. Still, if one of those cases applies to you, look into it and apply if you’re eligible.
As you can see, there are many student debt repayment programs. Yet, they all come with one big catch: you must have taken the money from a federal program. So, if you went to a private loan provider, your options are close to none.
Apart from that, you’ll need to make some tradeoffs if you want to have your student debt forgiven. Whether it means working for the government, moving to a specific location, or potentially paying income tax on the amount canceled, there’s always a catch.
But it may be worth it all in your case. Just make sure you read the fine print before signing anything!
This article is originally on Arrest Your Debt.