All you need to know about Student Loan Forgiveness
Student loans are sticky and they often end with long years of debt trailing behind. While these loans are unavoidable, the recent buzz around student loan forgiveness, gives college students all over America a way out of student debt. Loan forgiveness programs are much sought after. However, there is a lot more to it than debt-free years.
Here are a few things you should know about student loan forgiveness-
IBR, Public Student loan forgiveness and Teacher Student loan forgiveness are the commonly opted for programs by eligible students. The most common mistake most of us make is assuming loan forgiveness is a convenient way out of paying student debts. Weighing the pros and cons of these programs is crucial.
Public Student Loan Forgiveness
Under this program, you get your loan forgiven after repayments for 10 consecutive years which is 120 instalments. To gain eligibility, you will have to work in the public service sector and issue documents to the loan servicer. A major drawback of this program is that failure to pass on the paperwork in time may lead to disqualification.
Teacher Student Loan Forgiveness
This program has a bigger con. Eligibility for Teacher Student loan forgiveness relies on the borrower maintaining a teacher’s position for over five years at a Title 1 or a school with at least 30% Title 1 students. Also, if you work at a qualified school but on behalf of Americorps you won’t qualify for loan forgiveness. Adding to the disadvantage, the program only forgives 17,500 $ of the loan amount.
IBR and PAYE
Income-based repayment is popular among students who choose to work through college. But, this repayment scheme is a lot more complicated than the rest of repayment options. It comes with the major downfall of taxes. The loan debt which is forgiven turns into tax bills that can be unaffordable.
Revised Pay as You Earn
Obama’s student loan plan opened their program to a million American students. RPAYE helps you repay loans by capping your earnings to 10% of the income and on 20 years of repayment, the loan is forgiven. Your loan gets forgiven if your payments lapse into a period above 20 years. The Obama student loan relief is a boon to students for times when they are earning low incomes. However, on the other hand, when your income increases, you will end up paying more.
Debt forgiveness seems like a good way out of student loan repayment, but before enrolling you will have a lot of disadvantages to consider. Consult with your loan servicer for more information on loan repayment schemes.