Student Loan Forgiveness: How to obtain a Student Loan Forgiveness

This article contains valuable and comprehensive information about student loans, student loan forgiveness, and various types of loans available to students. Also, more details on Public Service Loan Forgiveness and loans for teachers and nurses will be discussed in this guide.

Education is the bedrock of today’s society and it is acquired at a steep price. The financial status of students in a tertiary institution is quite different and yet some may have a greater passion to attain the best academic achievement.

Taking out loans has left so many students owing huge debt.

However, millions of American students are about to have their loans cleared y the Biden administration. The Biden-Harris Administration plans to deliver debt relief to more than 30 million Americans according to a recent statement released by The White House.

According to an article published by CNN, the Biden administration will be using existing student loan forgiveness programs to cancel another round of student loan debt. The Biden administration will spend about $7.4 billion to cancel student debt for over 277,000 borrowers.

The best student loan is a federal-issued loan attached with fixed or lower interest rates. Also, private student loans are offered by private lenders consisting of banks, state loan agencies, union credits, and other financial institutions.

What Is a Student Loan?

Loans given to students are monetary aid to help students go through college. A student loan is organized to help students pay for essential fees and items in college. Tuition, supplies, books, and living expenses of students can be taken care of with this loan.

According to Southern New Hampshire University, a student loan is money students can borrow either from the U.S. Department of Education or a private organization. The intent of taking this loan is to pay for college and repay the organization that provided the loan with interest.

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Types of student loans available

Currently, student loans in the United States are offered by two major lenders which are Federal student loans and private student loans.

Federal Student Loans are offered by the government of the U.S. while private student loans are offered by state loan agencies, banks, credit unions, and other financial institutions.

Federal loans

The U.S. government implemented the Federal Student Loans to aid students financially through college. It is highly recommended to use federal loans as they are attached with additional benefits and are less expensive than private loans.

There are a few considerations a student must look out for when applying for a loan.

Below are the advantages attached to a federal loan.

Federal loans are fixed and they have lower interest rates
Getting a loan without a cosignatory
A possibility of a student loan forgiveness: this involves working in a certain profession like teaching or public service to repay the loan
Flexible repayment schedules, such as extended repayment and income-driven repayment
A repayment schedule that commences six months after a student graduates from school

The four types of federal student loans for college

Direct Subsidized Loan

Undergraduates with financial needs can take advantage of the Subsidized Stafford loans made available to them. The Subsidized Stafford loans enable students not to pay interest on any amount borrowed.

Direct Unsubscribed Loan

Undergraduate and graduate students have Unsubsidized Stafford loans made available to them irrespective of their financial needs. The Unsubsidized Stafford loan is quite different compared to subsidized loans.

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Federal Direct PLUS loan

Parents of undergraduate students who are dependent and graduate students can take advantage of the Grad PLUS and Parent PLUS loans. Loan interest starts accruing once the loan is disbursed because PLUS loans are not subsidized.

Federal Direct Consolidation loan

With Consolidation loans, you can combine many federal student loans into a single loan, and still enjoy the benefits of federal loans.

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Private loans

These are loans offered by a private lender which comprises banks, credit unions, state loan agencies, or other financial institutions. Private loans are usually attached with a fixed or variable rate of interest.

Students who intend to procure a private loan are required to have a cosignatory and the interest is not subsidized.

What Is Student Loan Forgiveness?

Student loan forgiveness clears the debt of students to repay part of their loan or all federal student loans that they borrowed. Most students in colleges and universities have taken loans to finance their stay in school.

The loan enables students to pay for tuition, supplies, books, and other essential items.

Paying back these loans sometimes might be difficult and most students end up being in a huge amount of debt. It’s an alternative method for students to pay back loans collected and it’s available for certain types of loans.

Students who are in debt can work in a certain public profession which can be educational or military professions.

How Student Loan Forgiveness Works

Student loan forgiveness exists to eliminate or take out parts of a student’s debt. Loan forgiveness applies to any student and student loan forgiveness applies to U.S. government-issued or government-backed loans and they amount to 92% of all student loans in the U.S.

However, loan forgiveness does not apply to private loans issued by banks, credit unions, state loan agencies, etc. There are situations where borrowers can have their loans forgiven or even better cancelled totally.

If you want your loans to be forgiven, you are mandated to apply and continue making payments until you get approval for your application.

Types of Loan Forgiveness

Public Service Loan Forgiveness (PSLP)

The Public Service Loan Forgiveness Program is available only to those who work in public service jobs for nonprofit organizations or the government. Part of your loan can be forgiven if you provide volunteer work such as military service or medical practice.

There are a few requirements to meet before your debt is forgiven under the public service program.

You are mandated to make 120 qualifying payments.
Payments are to be made while you are still working as an employee for a qualified employer which can be a federal, state, local government, or nonprofit organization that has tax-exempt status.

William D. Ford Federal Direct Loan Program which is a direct loan made by the U.S Federal government is eligible for student loan forgiveness. Loans issued by private lenders which are considered nonfederal loans are not included in this program.

In a circumstance where the William D. Ford direct loan is unavailable to you, and you got a loan through the Perkins Loan Program, you can consolidate those debts to emerge as a direct consolidation loan.

A 2021 Revamp for PSLF

By normal Public Service Loan Forgiveness rules, the payment made alone on the joint loan is counted towards the 120 payment minimum. Initial payments that were made on the former loans were also considered and you have to be in one of the four income-driven repayment schedules owned by the government.

The U.S. Department of Education made an official announcement in October 2021, to loosen program restrictions and it lasts till October 2022.

Within this period, borrowers are likely to receive credit for previous payments made on loans, or else they won’t be eligible for Public Service Loan Forgiveness to reach the 12 payment mark.

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Income-Driven Repayment Forgiveness

The U.S. federal government offers four major income-driven repayment plans and they enable you to cap your loan payment at a particular percentage of your monthly earnings.

If you are enrolled in any of these plans, whatever remains of your loan balance will be qualified for forgiveness after a time of 20 or 25 years based on the plan.

Those who benefit from these plans are people with huge loan balances. According to the National Consumer Law Center, only 32 individuals have had the honour to receive loan forgiveness via income-driven repayment forgiveness.

How to Apply For Public Service Loan Forgiveness (PSLF)

To successfully apply for Public Service Loan Forgiveness, you are required to fill out an Employment Certification Form annually and also make pay stubs, W-2 forms, or other requested documentation.

However, if you successfully reach the requirements for repayment, you can submit a Public Service Loan Forgiveness application directly to the Department of Education. Once it is approved, the rest of your loan balance is forgiven.

Although the Public Service Loan Forgiveness Program is uncertain till there is a submission of a plan by U.S. President Joe Biden or Congress.

There is a possibility of dividing monthly payments. For instance, those earning below $25,000 in a year and couples that earn below $50,000 will not spend a dime toward their loan until there is an increase in their income.

Teachers Loan Forgiveness Program

The Teacher Loan Forgiveness Program was initiated to motivate teachers to work in elementary schools, secondary schools, and educational service agencies that specifically serve families with low income.

Every year, the list of low-income elementary and secondary schools is published by the U.S. Department of Education.

However, if a teacher wants a loan forgiven, they need to teach full-time for five straight years at a qualifying school. Once the process is completed, the teacher automatically becomes eligible to have $5,000 and up to $17,500 loans forgiven.

The types of loans that are eligible are directly subsidized and unsubsidized loans only. Currently, there are up to 13 U.S. states that provide loan forgiveness to teachers with different requirements.

The Teachers Loan Forgiveness Program can be applied upon completion of the Teacher Loan Forgiveness Application and submission to a loan servicer.

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Loan Forgiveness for Nurses

In the medical field, registered licensed nurses, members of nursing faculty, and nurse practitioners, those working in areas with critical shortages can qualify and have up to 85% of their loans forgiven under a program named NURSE Corp Loan Repayment Program.

The qualified candidates can work for 2 years in an underserved area and have up to 60% of their student loan forgiven. An additional 25% of the loan can be forgiven for 3 years of working. Currently, 33 U.S. states offer loan repayment assistance and you can go to the official website for Loan Forgiveness for Nurses to check if your state is among the 33 U.S states.

Loan Forgiveness for Doctors

Those with professions in the healthcare system such as physicians, pharmacists, and dentists together with other healthcare workers are provided many alternatives to get loan forgiveness.

The amount that is forgiven and the requirements vary, and this depends on the program entered.

Conclusion

Attending prestigious colleges and universities can be quite steep, hence the need for monetary assistance is crucial.

With federal and private student loans, students in colleges can take loans to help them get through school. Tuition, books supplies, and other essential items can be taken care of with these loans.

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References

Southern New Hampshire University: What is a Student Loan and How Does it Work?
Washington (CNN): Biden to forgive $7.4 billion more in student loan debt for 277,000 borrowers

Student Loan Forgiveness: How to Obtain a Student Loan Forgiveness