The Catch With Student Loan Forgiveness Programs

student-loan-debt-1160848_1280After the joy of graduation fades, students transition into the reality of life as an indebted graduate. Graduates are faced with many challenges, on top of finding a job, they must learn to deal with their financial situation. Today, there is more than 1.2 trillion dollars worth of student loan debt in our nation, and 7 million of these debtors are in default. This massive debt is clearly a problem, and now young graduates are looking for a solution. Due to their desperation, these young adults are in danger of being taken advantage of. Student loan forgiveness are the three magic words that could easily make the stress of student debt disappear. It seems so easy, but there’s a catch.

In the same way you should read all of the fine print on your student loan, you should pay attention to the terms and conditions of a student loan forgiveness program. There are two types of student loan forgiveness programs you are most likely to qualify for, public student loan forgiveness and teacher student loan forgiveness. In order to qualify, you will need to meet extremely strict requirements. You can qualify for a public student loan forgiveness plan once your have paid your loans for 10 years, or 120 payments. These payments must also be made on a qualifying repayment plan, and you must be employed by a public service organization for all 10 years. To prove your qualification for the forgiveness program, you will also have to annually provide paperwork to your student loan servicer. It is crucial to remain on time with all of your paperwork submission, a failure to do so could disqualify you from forgiveness. You may also be disqualified if you miss loan payments or change your job.

If you think public student loan forgiveness could be tricky, prepare yourself for teacher student loan forgiveness, which comes with even more stipulations. To qualify for a teacher student loan forgiveness program, you must be a teacher for at least five years and you must teach at a Title I school, or at a school in which 30% or more of the students qualify for Title I. You also cannot be in default on your loans. If you worked for a Title I school as an teacher for Teach For America, you will not qualify. If you do qualify, the program only forgives $17,500 of your debt. If you have more debt than that, you will have to pay for the remainder. Keep in mind that Perkins loans are handled differently. If you have a Perkins loan, you can read about loan cancellation here.

If you are a student in debt, or a graduate in debt, it is always important to be aware of the tools and resources available to you. Forgiveness plans are an excellent way to deal with your debt, but you should be careful and avoid falling prey to financial schemes looking to exploit young students and graduates.


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