With hefty student loans most graduates are looking for strategies that would help them repay their student loans. Many students consider debt forgiveness as a dream come true. However, debt forgiveness is a relief only for some candidates.
Two Different Solutions
You can earn relief from your student loans in two different ways. You should make use of income contingent plans or work for a public service provider. Neither of these methods are straightforward and simple! Each solution has an endless list of constraints, regulations and conditions. For instance, income contingent plans should be stretched over a very long duration.
The Current Scenario
According to a recent survey, nearly 2 million graduates have applied for student loan forgiveness. These candidates believe that the option would remove an outstanding debt from their lives. Conversely, the Department of Education states that the country has student loans worth 108 Billion USD!
Debt forgiveness plans are surrounded by many pitfalls. Lawmakers and experienced market specialists state that student loan relief must not be taken for granted. This is because the special plan can result in more debt. Meanwhile, experts worry that educational institutions and colleges are likely to take advantage of loan forgiveness and charge bigger fees from students. This will undeniably increase the burden on potential borrowers.
Public Service Loan Forgiveness
Public service loan forgiveness is a special scheme offered by the government. Officially, you must make 120 payments to qualify for this debt relief. As suggested by its name, you should work for a non-profit or government organization with tax exempt facilities. Consequently, the organization will take care of your debt and reimburse it for you! However, only loans that are taken after 2007 would qualify for this program. Unfortunately, you will not receive forgiveness till 2017. This is because it would take 10-long years to complete 120 payments.
Federal Income Based Reimbursement scheme
There are few more student loan forgiveness programs in the market. This includes the federal income based reimbursement scheme. The customized program will delight you with loan forgiveness after 20 long years. Nevertheless, the program comprises of unique terms and conditions. You should read through the lender’s regulation, for a clear insight into the plan’s actual policy. If you want to experience the benefits of student loan forgiveness, you should find a suitable plan. Here are few common and well known Federal Student loan relief plans:
- Income based repayment – You will gain forgiveness after 25 years. And your monthly payments should be of 15% of your monthly income.
- Income Contingent Repayment – Forgiveness will be given after 25 years. The payments are computed based on your loan balance, income and family size.
A Simple Rule
Student loan forgiveness is meant for borrowers with direct loans that are obtained from the federal government. If you have borrowed other types of federal loans, you should consolidate them to a single, big one. Direct consolidation will qualify you for student loan debt relief. Always remember that non federal loans are not eligible for forgiveness.