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November 13th. 2015, Public Service Loan Forgiveness Programs Update

Qualifying programs constitute government organizations (federal, state, local, or tribal), 501(c)(3) nonprofit organizations, AmeriCorps, and Peace Corps. Additionally, the borrower must be in a qualifying repayment plan to truly receive forgiveness. Qualifying repayment programs are: Pay As You EarnIncome-Based Repayment, and Income-Contingent Repayment. The Public Service Loan Forgiveness program was created in October 2007 meaning that the first forgiveness of loan balances will not be until October 2017 (120 months later).

Within the Public Service Loan Forgiveness program, there is one other way that student debt can be forgiven. The Teacher Forgiveness Program is intended to encourage individuals to enter and continue in the teaching profession. Under this program, if an individual teaches full-time or five complete and consecutive academic years in certain elementary and secondary schools and educational service agencies, a borrower may be eligible for forgiveness of up to a combined total of $17,500 on their Direct Subsidized and Un-subsidized Loans and your Subsidized and Un-subsidized Federal Stafford Loans. Individuals must work for schools and educational agencies that serve low-income families and meet other qualifications. Plus Loans are not eligible for this type of forgiveness.

There is some misinformation going around about what type of loans do and do not qualify for the forgiveness programs listed above. Unfortunately, private loans fall into the category of loan types that do not qualify. Avoiding default on a private loan can be much more difficult due to the lack of deferment options. It is highly unlikely that a private lender will grant a deferment and the borrower is left with slim to none options on how to repay. Therefore, it is important to read the promissory note of any and all private student loans to know what options are available and what the borrower is agreeing to. At this time forgiveness and repayment plans are not available for private student loans.

Another piece of misinformation about Public Service Loan Forgiveness Programs is the likelihood of student loan cancellation. It is incredibly difficult to cancel a student loan. Furthermore, the only loans that may qualify for cancellation are federally funded ones. There are only a few circumstances that might provide a student borrower with the cancellation option. If a school closes while the borrower is in attendance or up to 90 days after withdrawal, if a borrower withdrew and the college owed a refund, but never followed through, if the college improperly certified the borrower’s ability to benefit from a higher education or the borrower was a victim of identity theft, if the borrower dies, or if a doctor certifies that the borrower is completely and permanently disabled (or a veteran is unemployed due to something service-related) then they might be eligible for discharge.

Original Article November 11th, 2015



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