How Can I Get My Student Loans Forgiven?

| July 10, 2019
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The presidential campaigns for the 2020 election have officially begun. The first debates for the Democratic party took place on June 26th and 27th, and as expected, the student loan crisis was a big topic of debate. The solution proposed by some candidates is free tuition at a 4-year public university. Others have discussed free community college, while others would like to forgive all outstanding student loan debt. But did you know there are already programs that can lead to student loan forgiveness? They’re not as comprehensive as what some Democratic presidential candidates are proposing, but they’re available, and if your payments are a problem, you should become familiar with the specifics.


If you are a parent and have children who have not yet attended college, you can address the cost of college issue before it becomes a problem. Of course, you can save for college. But even if you haven’t saved a dime for college for your child, you can be intentional about choosing a low-cost college, analyzing the financial benefits of different degrees or degrees from specific colleges, considering community college, and applying for scholarships that your child is likely to earn. Too often, parents set up their kids for failure when they send them to colleges that neither the parents nor the children can afford. Then they get an absurd amount of student loan debt, and they can’t afford the payments. So try to analyze the cost of college ahead of time, instead of getting yourself or your child in to trouble. Or better yet, have us do that for you! We can do an in-depth analysis to figure out from where every dollar of college will be paid.


But let’s assume college was in the past, and that you’re the student, not the parent. Let’s say you’ve already accrued a ton of student debt, your payments are high, and you could use some serious relief. There are numerous ways you can have your loans forgiven. If you’ve been on an income-driven payment plan for a long time (sometime 20 years, sometimes 25 years), your loans might be forgiven. There’s another program called Public Student Loan Forgiveness (PSLF) that allows you to make 120 “qualifying payments”, and then have your loans forgiven. If done right, that means you could have your loans forgiven after about 10 years.


There a tons of rules around this. For example, the definition of a PSLF “qualifying payment” is specific. A qualifying payment is a payment that you make after October 1, 2007 under a qualifying repayment plan for the full amount due as shown on your bill. This payment can be no later than 15 days after your due date and must be while you are employed full time by a qualifying employer. You can make qualifying monthly payment sonly during periods when you are required to make a payment. Therefore, you cannot make a qualifying monthly payment while your loans are in an “in-school” status, grace period, deferment or forbearance.


Further, to qualify for PSLF, you have to be working for a governmental organization, a 501(c)(3), or a non-profit that isn’t a 501(c)(3), but does do qualified public services. You also have to be on an income-driven repayment plan, and you have to be working at least 30 hours per week. While you’re employed and working towards PSLF, you should be filing an Employment Certification Form each year.


Another requirement for PSLF is that your loans must be Direct loans. They can’t be private student loans, or FFEL student loans. But sometimes you can consolidate loans into a Direct consolidation loan, which would potentially make you eligible for PSLF.


Lots of rules means there are lots of ways to screw this up. Did you select the correct repayment plan option? Did you file the correct paperwork with the Department of Education when you switched employers? Did you consolidate the right loans, and leave alone the other ones? Are you a physician? Because if you are, these rules can be particularly helpful for you, but did you consider filing taxes separately from your spouse so that you qualify for a lower income-based payment? Oh wait, you’re not a physician, you’re a teacher?

There’s a whole different program for you with a whole different set of rules! It’s not impossible to navigate these rules on your own, but it’s a lot easier if you have someone helping you along the way. You can’t rely on the customer service line of your loan servicer, either. Sadly, the servicers aren’t intimately familiar with the rules and I’ve heard of situations where they give out information that is just flat-out inaccurate.


Let’s go back to the presidential debates. When it comes to future legislation surrounding student loans or college expenses, I have no idea what will happen. Your guess is as good as mine. Thankfully, precedence would lead us to believe that any changes made in the future that would only help people for the better. So if changes are ever made to the program that make it MORE difficult for students to get loans forgiven, they probably wouldn’t apply to people who are already progressing towards forgiveness.


These presidential debates are sure entertaining to watch, and as a fee-only financial planner, I particularly enjoy the discussions about college tuition and student loans. In the meantime, whether you’re a parent who is sending their child to college in the future or you’re a former student who has accrued student loan debt, you do have some control over your financial future. Let us know if we can help you go there.

 

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