Loan Forgiveness Photo by Etienne Martin on Unsplash

The current administration has changed the repayment date for student loans to the end of January 2022. But let’s look at some other options such as student loan forgiveness

Last time we talked about the Student Loan Relief Package and the Low Down on Taxes and Student Loans. And 2022 is still relatively close, so as we’ve stated before, keep in mind the ways to start paying on your loans including the interest that will start as well. Budgeting for payments and how that will factor into your taxes is important. It’s never too late to start prepping for the following year and your taxes.

Student loan forgiveness is always a hot political topic. There are a few different types of forgiveness programs available depending on the industry you work in. According to the Federal Student Government website, if you work in the public service government industry, you may qualify for the PSLF (Public Service Loan forgiveness). To qualify for this program, an individual must work in a government agency or for a not-for-profit agency. You also have to have made 120 payments to your Direct Loans, and the remaining may be forgiven IF you are working full-time with one of those agencies. Another forgiveness program is for teachers. If someone teaches full-time for 5 years consecutively in a low-income school, they may be eligible for up to $17,500 of debt forgiveness. This applies only to those Direct Loans and FFEL (Federal Family Education Loan) only. 

Individuals can also qualify for loan forgiveness if their school/educational institute closes while they are attending or soon after they withdraw.

Technically this falls under a Closed School Discharge program which removes the loan obligation under certain circumstances. Those circumstances are:  

• your school closed and you were still enrolled
• your school closed and you were on approved leave 

If you have more questions on eligibility for this, please consult the Federal Student Aid website. It’s important to stay up-to-date on these changes, as it can change the forms you may use or need for filing the following years’ taxes. And as always, you are more than welcome to set up a consultation with us, and we will do our best to help you out!

The Biden administration has canceled over $9.5 billion dollars in student debt and is presently working with the U.S. Department of Justice and the Education Department on finalizing more debt relief. Though these forgiveness programs would help millions, it may also cause issues as the legalities of these programs to have to clear the justice system first. Biden is hoping to cancel student debt through an executive order, however, that is not an option with the current government system. 

Other student loan forgiveness options include:

• The Perkins Loan and Cancellation and Discharge: this is an option for those that borrowed a Perkins loan specifically for teaching. Certain eligible employment and length of that employment or volunteer position and length of that position is what will determine the cancellation or discharge. 
• Total and Permanent Disability Discharge: this is an option for those that borrowed most any student loan, but can prove they are totally and permanently disabled. Only documentation through The U.S. Department of Veteran Affairs, the Social Security Administration, or a physician is accepted. 
• Discharge in Bankruptcy: this option is rare but is an option if an individual declares bankruptcy. 

If you took out loans through other loan servicers, you will need to contact them directly to see about the forgiveness opportunities. 

While an individual is applying for loan forgiveness through their servicer, they are still accountable for making on-time payments. The loan servicer may change payments in amount or payment dates. Reach out to make sure nothing negatively affects your credit. If the servicer approves the loan forgiveness, then you are clear of the remaining loan. However, the loan servicers might only approve some of the loans, and you may need to re-establish a payment plan. If the servicer denies your application, then you will need to continue paying on the loan when payments continue. You can apply for income-driven repayment plans through most loan servicers. 

If you or someone you know needs financial management, remember we have you covered!