Student Loan Forgiveness FAQ
Do you have questions about your student loan debt that need to be answered? Do you have questions about consolidating your debt and receiving debt forgiveness? If so this is the right page to come to.
Read the information below and if you still have questions, feel free to call our office immediately at 860-449-1510 and we’ll help you with your questions and also set up a free consultation with one of our student loan debt attorneys.
- What Is Student Loan Forgiveness?
- What is Qualifying Employment?
- Which Types of Federal Student Loans Qualify are considered Direct Loans
- What Are Qualifying Monthly Payments?
- What Are Qualifying Repayment Plans
- What is Debt Consolidation?
Student Loan Debt Consolidation And Forgiveness FAQ Questions
The cost of a college education is increasing every year. For some students the cost of a four-year college education can be $75,000 for just one year. Most students require one or more loans to be able to fund their education. Unfortunately, the great paying jobs to pay off these loans are only available to a select few.
Many students struggle to keep up with their loan payments. There are some solutions for students who cannot meet their bills. Here are some of the commonly asked questions and answers about student loan forgiveness. For advice on your situation, please contact an experienced student debt attorney.
What Is Student Loan Forgiveness?
The main form of student loan forgiveness is the Public Service Loan Forgiveness (PSLF) Program. (resource)
The PSLF has a number of strict requirements. The program forgives some of the remaining balance on Direct Loans:
- If you have a qualifying repayment plan.
- If you have made 120 monthly payments that qualify
- If you work full-time for a qualifying employer.
- If you make the payments under the qualifying repayment plan
The terms of the PSLF loan forgiveness program only raise more questions. Here are the questions and answers that can help you understand the key requirements.
What is Qualifying Employment?
Qualifying employment depends on who your employer is and not on the kind of work you do.
The following types of employers DO qualify:
- Any local, state, or federal Government organization including tribal organizations
- A not-for-profit organization that meets the IRS Section 501(c)(3) definition for being tax-exempt
- Some non-profits that provide qualifying public services
- Service in the Peace Corps or AmeriCorps
The following types of employers DON’T qualify:
- Enterprises that are for-profit
- Labor unions
- Partisan political organizations
- Non-profit organizations that fail the IRS Section 501(c)(3) test for being tax-exempt
In short, if you work for a private employer that makes a profit, you probably do not qualify. The student loan forgiveness program is for some but not all workers.
Which Types of Federal Student Loans Qualify are considered Direct Loans
Any loan under the William D. Ford Federal Direct Loan (Direct Loan) Program qualifies.
Loans that are consolidated into a Direct Loan qualify. May federal student loans, such as FEEL (Federal Family Education Loan) and the Federal Perkins Loan Program do not directly qualify. If these loans are consolidated into a Direct Consolidation Loan, then the loans may qualify – but there is a catch. The 120-month payment period only applies to the consolidated loans, not the original loans. It is very important to think through which loans are consolidated because, while combining loans has advantages, you may lose important payment credits.
What Are Qualifying Monthly Payments?
Qualifying loans must be made after October 1, 2007. They cannot be made while the student is in school or during a grace period, a forbearance, a deferment, or during default. To qualify, the payment must be:
- for the total amount due
- within 15 days of the due date
- while the student is employed full-time by an employer that qualifies and
- under a qualifying repayment plan;
The 120 monthly payments do not need to be in a row. Making larger payments doesn’t help. For the most part, you won’t get credit for larger payments other than one month’s credit.
What Are Qualifying Repayment Plans
This is a tough concept this is best reviewed with a skilled student debt attorney. Basically, qualifying repayment plans are based on your income and family size. The Department of Education has four types of repayment plans.
- PAYE. Pay as you Earn. The monthly amount is normally about 10% of discretionary income – if the student qualifies.
- IBR. Income Based. The monthly payment is about 15% of discretionary income based on the earner’s income and family size.
- ICR. Income Contingent. In addition to the student’s income and family size, the amount of the debt sill due and the interest rate are factored into the monthly payment plan.
- REPAYE. Revised Pay as You Earn Repayment Plan. Payments are due on a monthly basis for a specific number of months or years. Factors include the amount of debt and the interest rate as well as the length of the loan.
What is Debt Consolidation?
Debt consolidation is a way of combing several qualifying federal student loans into one loan so the student makes just one monthly payment.
The advantages of debt consolidation are that you may be able to change the way you make your payments, the criteria used for making payments, and the length of the loan. Most student federal loans are eligible for debt consolidation. Your lawyer can explain which loans qualify.
There are other eligibility requirements for student debt consolidation such as that at least one of your loans must be currently being re-paid or in a grace period. Consolidated loans must meet the qualifying repayment standards. There are different types of repayment plans so it is best to understand them and do the full math before agreeing to a repayment plan.
There may be some disadvantages to repayment plans. For example, the repayment plan may extend the length of the loan.
Still have questions?
If you live in New London County and want help with your student loan debt, call our office now at 860-449-1510 – we’d love to help you!