The student debt crisis in the United States is at an all time high. With over $1 trillion in outstanding debt, most students can be certain they will have some sort of debt when they graduate. While financing an education is still seen as good debt, any debt can be scary for new graduates. Luckily for many, there are some student loan forgiveness programs that can help them reduce debt. Not everyone will qualify for such programs, but here are more details on how they work.
Public Service Programs
These programs reward graduates who work in public service. Part of the Direct Loans program, borrowers can get their loan discharged after 10 years of working full time in the public sector. During that time, borrowers must have made 120 monthly payments. Both the interest and the principle are forgiven once the requirements are met. Public service jobs include military, government, public education, public safety, public health, and many other jobs. Only payments made after October 1, 2007 are eligible toward this forgiveness program. The eligible loans include Federal Direct Stafford loans, Federal Direct PLUS loans, and Federal Direct Consolidation loans.
State Specific Programs
While there are federal student loan forgiveness programs, there are a number of states that have their own specific programs. These program typically include graduates that work in the public sector or government.
For example, New York has student loan forgiveness programs for certain attorneys, licensed social workers, nursing home workers, teachers, and other public service employees. Illinois has many of the similar industries, but also include child care workers.
Not every state has a dedicated program, but students should always check in order to reduce debt. It never hurts to contact your state’s education department to see what is available.
Income Based Repayment
For graduates struggling to find work or who have low paying jobs, then an income based repayment plan could be helpful. These programs were created to help people pay for their education loans, while not taking too much of their income to do it. These plans cap the repayment amount to 10% of gross income. This number is calculated based on last years tax returns. Loans are discharged after 25 years, but that amount is then considered taxable income. The income requirements for this type of plan is capped at $50,000 for single borrowers and $100,000 for married borrowers with two children.
Pay As You Earn Program
This program will typically have the lowest monthly payment on student loans. It is a student loan forgiveness program that requires the borrower to have a financial hardship. A hardship is considered when a standard repayment plan would cost you more per month than the monthly payment of the pay as you earn program. This plan’s payments can fluctuate each year based on previous years income and family size. Borrowers are required to pay on their loans for 20 years. Once you start the plan, you won’t be kicked off if you no longer have a financial hardship.
Negotiate Into Your Contract
There are even opportunities to negotiate student loan forgiveness into a relocation package. It is not uncommon for hospitals in remote or less popular locations to offer to pay off a portion of student debt in exchange for a minimum contract term.
Readers: Would you be willing to move or take a job in order to have a portion of your student loan forgiven?