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Student Loan Forgiveness Programs – Are You Eligible?

Everybody wants to know about Student Loan Forgiveness.

In 2010, President Barak Obama signed into law a policy of Student Loan Forgiveness.  Formerly known as the Health Care and Education Reconciliation Act. The purpose of this law was to help certain indebted students recover from the burden of high education loans. Properly called the William D. Ford Direct Loan program, most people know it as Obama Student Loan Forgiveness. Who qualifies for the student loan forgiveness program and what are the eligibility requirements?

The Eligibility Requirements and Qualifications for Federal Student Loan Forgiveness.

To be clear, the Education Reconciliation Act provided a variety of relief processes for students overburdened by student debt.

One is the Public Service Loan Forgiveness program (PSLF). It was developed for students who enter public service and remain for a certain time. Because the program offered benefits retroactive to 2007, the first loans to be forgiven could start as early as 2017. Provided Congress does not scrap the program as suggested by the President in 2017, the following are the eligibility requirements:

  • Employment with any federal, state, local, or tribal government organization
  • Ten years on the job
  • 120 qualified monthly payments to service the debt
  • Only direct federal loans made under the William D. Ford Federal Direct Loan Program qualify (private loans do not)
  • Be on a repayment plan

How Certain is Student Loan Forgiveness Under the Ford Direct Program?

As mentioned, Congress may nullify the program at the behest of President Trump. If that happens, there will be no forgiveness. Outside of that, the wise former student would have their employer check with the loan servicing company periodically to ensure their organization still qualifies. If not, it may be wise to seek employment immediately with an agency that does. Of course, remaining in the position could allow someone to advance such that the increased income would offset the loss of this benefit. Consider both options.

A student can make payments directly to the loan servicer, but in many cases the loan rates are substantial. The most important element of the program is the 120 consecutive qualified payments. These, however, do not have to be the full payment as required by the lender. Many students opt for a loan repayment program that can arrange payments based on income. For many entering government service, this will reduce the payments considerably.

For example. One student went to work for a state corrections agency upon graduation. On checking with a loan repayment organization, the student learned that his wages were such that he was not required to make full payments. In fact, his payments were reduced 95%. In addition, the program consolidated the 11 student loans which had been taken out over the course of his education into two loans. This had an immediate positive impact on his credit score. Most importantly, these reduced payments are qualified payments which are low enough he can manage them on the wages he receives from his qualified state employment. Assuming the program is not stopped, in ten years he will qualify to have the balance forgiven.

Beware of Student Loan Schemes.

The student loan crisis has spawned an enormous segment of businesses promising forgiveness and protection from collections. Do not be duped. There are five things to watch for if a student debt relief company comes calling:

  • Upfront payments required for services
  • The promise of immediate forgiveness
  • High-pressure sales tactics
  • Asked to provide Private information like Federal Student ID access
  • Your contact info came from an ad on search engines or social media

Companies that advertise must find a way to recoup their costs. They are in business to turn a profit. But the government does not charge to consolidate student loans or arrange payment plans, so a company seeking your business using advertising is looking for a way to profit from you, perhaps to your ruin. Just be aware of these and take the necessary steps to protect yourself. If you ever have a question about your student loans or have already signed up with a loan servicing company, you can visit studentloans.gov to find out if there are problems of which you should be aware of.

Resources

https://www.studentdebtrelief.us/forgiveness/obama-student-loan-forgiveness/

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service

https://www.nerdwallet.com/blog/loans/student-loans/how-to-spot-student-loan-scam/

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