Providing Students With Financial Help
Many people are familiar with the idea of student debt relief. This relief is widely acknowledged as the forgiveness, cancellation or discharge of federal student loans. For several decades, however, there has been the false assumption that the crux of student debt relief is student debt forgiveness.
The scope of student debt relief is much broader than the concept of student loan forgiveness. Are you aware that there are several student debt relief programs, each with its eligibility criteria?
This piece dives into the rudiments of student debt relief. Enjoy the read.
Overview of Student Debt Relief
The idea of student debt relief is relatively straightforward. All one must do is stick to a payment plan until the remaining balance is forgiven. Anyone who can meet the essential criteria of being employed by a government, not-for-profit organization or approved educational institution and completes a specific period of service with the approved organization, qualifies for student debt relief.
How to Apply for Student Debt Relief
The best way to apply for student loan relief is to contact a Loan servicer. The Loan servicer will help confirm one's eligibility and progress towards obtaining the relief. The only exclusion to contacting a Loan servicer for student debt relief is a Perkins Loan, where one is expected to contact their school directly.
Student Debt Relief Options
Several student debt relief options exist, from loan forgiveness to student loan deferment and forbearance. Let's get right to it.
Student Loan/Debt Forgiveness
Student loan forgiveness is a crucial element of student debt relief as it relieves borrowers of their obligation to repay some or all of their federal debt. This type of forgiveness typically pertains to loans issued or backed by the U.S. government and does not extend to privately issued loans.
Student loan forgiveness programs include:
- The Teacher Loan Forgiveness program: This is for teachers working in low-income schools or educational service agencies. Borrowers are eligible for up to $17,500 in loan forgiveness on their Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans and Unsubsidized Federal Stafford Loans. To qualify for this relief, borrowers must be employed as full-time teachers for five consecutive academic years and teach a subject area with a shortage of qualified teachers.
- The Nurse Corps Loan Repayment Program: This is for registered nurses, nurse practitioners and nurse faculty who agree to work in a Critical Shortage Facility (CSF) or serve as nurse faculty at an eligible nursing school. To qualify for this relief, borrowers must have outstanding qualifying educational loans obtained for pursuing a nursing degree and agree to work for at least two years in a CSF or an eligible nursing school. Borrowers must be U.S. citizens, nationals or lawful permanent residents and have a current, unrestricted license to practice as a registered nurse in the state where they will be employed. Borrowers are eligible for up to 60% payoff of their qualifying student loans.
- The Public Service Loan Forgiveness (PSLF): This program is designed for only direct and direct consolidated loans. Student loan borrowers must be employed full-time by a qualifying public or non-profit organization to access this relief. They must also have a qualifying repayment plan.
- Closed School Discharge: This program allows borrowers to have their federal student loans discharged if their school closes while enrolled or within 120 days after withdrawing. Only federal student loans, including Direct Loans, FFEL Loans and Perkins Loans, are eligible for Closed School Discharge. To qualify for this relief, the borrower must not have yet completed their study program at another school. Borrowers must apply for Closed School Discharge within three years of the school closing date or two years after the U.S. Department of Education notifies the borrower that they are eligible for discharge. Borrowers can enjoy an entire federal student loan balance discharged.
- Income-Driven Repayment (IDR) plans: This forgiveness plan allows borrowers to make payments based on their income and family size. It is calculated as a percentage of their discretionary income which ranges from 10% to 20%. Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans are eligible for IDR plans. The repayment term for IDR plans is typically 20 to 25 years, and borrowers must recertify their income and family size annually to remain enrolled in an IDR plan. Please note that private student loans are not eligible for this plan as it is only available for federal students.
- Perkins Loan Cancellation and Discharge: This allows borrowers to have part or all of their Perkins Loans canceled or discharged if they are teachers, nurses or law enforcement agents, have a permanent disability, go bankrupt or falsify their certifications. Only Perkins Loans are eligible for this program. Borrowers must apply for Perkins Loan Cancellation and Discharge through their school's financial aid office or loan servicer.
- Death: If a borrower dies, their federal student loans may be discharged. To access this relief, the borrower's family or estate must provide the loan servicer with a certified copy of the death certificate. Direct subsidized loans, direct unsubsidized loans, direct PLUS loans, direct consolidation loans, FFEL program loans and Perkins loans are all eligible. However, the borrower's co-signer is not eligible for discharge due to the borrower's death. The co-signer remains responsible for repaying the loans.
Alternative Student Debt Relief Options
There are other alternatives for those who do not meet the eligibility criteria for a loan forgiveness program or have private student loans. These alternatives include:
Student loan deferment
This provision temporarily postpones one's monthly payments when one re-enroll in a school, joins the military or becomes unemployed. In certain instances, interest on the student debt will not accumulate during this period.
Student loan forbearance
Forbearance is typically intended for student loan borrowers in severe financial difficulty. This alternative allows one to halt their monthly payments plan temporarily. In this case, however, interest will accumulate.
Refinancing student debt
With a good credit score or a co-signer with good credit, refinancing student loans is a feasible option for saving money through a lower interest rate.
Whatever your financial situation or student loan, you can rest assured that you have a student debt relief plan. Now that you know your options, contact your Loan servicer immediately to start discussing your student debt relief plan.
If you want to learn more about education loans, check it out here.