A student loan is a nightmare for millions of college grads. In 2016 the Citizens Bank asked 501 American graduates and concluded that 6 out of 10 persons (aged 18 to 35) had no idea when they are going to finish their loan repayment term.
The most recent studies report that total U.S. student loan debt is $1.48 trillion. This debt ‘belongs’ to 44.2 million Americans.
Fortunately, in certain situations, you can eliminate the entire student loan or its part through one of the Federal Student Loan Forgiveness Programs. Depending on your degree and your current occupation, you can qualify for one of many programs to free yourself from the loan completely.
Wonder if you qualify? Here are 5 ways how your loan can be released or forgiven.
Become a Volunteer
Some volunteer organizations offer a student loan write-off in exchange for a certain amount of your time. If you a volunteer of AmeriCorps, Peace Corps or Volunteers in the Service to America (VISTA), you can get up to 70% off your student loans.
Become a full-time teacher
Those who took a Perkins loan, have a chance to ‘earn’ their forgiveness by working full time in a low-income public school for at least 5 years. The more years you teach, the more you’ll be forgiven. Your local school board can provide you with more information about those schools that may accept you on the terms of the loan forgiveness program.
Join the military
A lot of boys and girls choose the military career after graduation because it offers a repayment of their student loan. Currently, the army, the National Guard of the Army, the Air Force, the National Guard of the Air Force and the Navy offer to repay up to $ 20,000 depending on the industry. Unfortunately, the Marine, Coast Guard, and Air Force reserves do not offer student loans.
There is a chance that volunteer fire and EMS personnel will be eligible for the federal student loan forgiveness program as well.
Become a doctor or lawyer
Medical and specialists in law usually get a six-figure debt for their student loans. Fortunately, students of these 2 perspective job fields have several programs to have their loans forgiven or at least reduced.
- National health institutions forgive a certain part of the student loan debt for medical students engaged in a medical or clinical research. Some healthcare workers can have up to $50,000 forgiven from their student loans through the National Health Service loan repayment program. The program will help you get rid of the debt in exchange for a two-year volunteer service at the clinic that lacks health workers.
- Graduates of law schools can reduce their student loan for some non-commercial work. There is a list of law schools that may assist you in repaying your loan. If your school is on the list, contact the financial assistance department to find out how your loan can be forgiven.
Here is more information on how nurses can repay the student loan.
Wait 20 or 25 years
If you have a federal loan and you are enrolled in an income-driven payment plan, you can get a forgiveness after 20 years for an undergraduate debt and 25 years for a graduate debt. Or if you work in a public service, the time is reduced to 10 years. Your monthly student loan payments are limited depending on your income and a family size. For example, a family of 3 people with an annual income of $45,000 pays only $157 per month according to the IDB plan. You can apply for IBR by contacting the lender that serves you’re a loan.
The Obama Student Loan Forgiveness Program
The “Obama Student Loan Forgiveness” is actually a William D. Ford Direct Loan program with a little bit of change made by the former President Obama in 2010. He called it a Federal Direct Loan Program (FDLP). Thanks to Obama, more people became applicable for the loan forgiveness program. According to this student loan forgiveness act, borrowers can consolidate all their federal loans into one and then select the most affordable repayment plan, which are:
- Standard Repayment– A monthly payment stays the same until the loan is repaid. The payment depends on your borrowed amount, interest rate, and loan terms.
- Graduated Repayment– The borrower starts repaying the loans with a smaller amount than in the previously mentioned plan, but the payment will be increasing every two years.
- Income Contingent (ICR)– The amount of payment is based on the borrower’s income, family size, loan balance, and interest rate.
- Income-Based (IBR)– The payment depends only on the borrower’s income and family size without calculating the loan balance and interest rate. The borrower is responsible to pay 15% of his discretionary income.
- Pay As You Earn (PAYE)– Those who qualify for this plan are lucky because they have the lowest monthly payment out of all. The payment depends on your income but uses 10% of your discretionary income instead of the 15% as a payment.
Disadvantages of Student Loan Forgiveness
In certain situations, you need to report the forgiven loans as taxable income. This can increase your tax liability this year. Although, not all programs require you to pay taxes on the forgiven student debt. For more information, contact your tax preparer.
Find out more about the Public Service Loan Forgiveness program and how to apply for it.