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Use This Tool To See How Much of Your Student Loan Can be Forgiven If You Qualify

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Linsay ThomasGuest Blogger
September 11, 2016 · 4.1k Views
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Are you drowning in student loan debt? The average debt hovers around $30,000. That’s a lot of money to pay back. The good news is that there are some relief options available.

If you work in a certain field, you may be able to get part of your student loan forgiven through a program called the Public Service Loan Forgiveness (PSLF) program.  There are some criteria that need to be met, though. Read on to learn more about this program and see if you qualify.

 

How Does the Public Service Loan Forgiveness Program Work?

If you’re repaying a federal loan, the program forgives part of the loan. You must pay 20 payments first – that’s 10 years. You must also work for a qualifying employer, which typically includes non-profit and government organizations. The job must be full-time and you must have started making payments after October 1, 2007.

 

Using the Tool

There’s a calculator you can use to determine how much of your loan can be forgiven. This calculator takes into consideration several factors, including amount of debt, income, expected annual income growth, family size, interest rate and state of residence.

Note that this calculator does not determine eligibility. It just determines how much of your loan you can expect to be forgiven if you do qualify.

 

 

How to Qualify

Qualifying for student loan forgiveness is not an easy task. There are numerous requirements that must be met.

  • Your job must be with a certain employer. Federal, state, local and tribal government organizations qualify, as do tax-exempt non-profit organizations. In addition, full-time service in the Peace Corps or AmeriCorps qualifies. The type of job you do does not matter, so loan forgiveness is not based on your career choice; however, working hours spent on religious services, instruction or anything of that nature do not qualify. This means that employment at a church may not qualify depending on your duties.

  • Labor unions, for-profit organizations, political organizations and non-profit groups that are not tax-exempt do not qualify.

  • You must have a full-time job. Full-time is typically defined at 30 hours or more per week, but it depends on your employer’s definition of full-time work. If you employer considers full-time work at 40 hours or more per week, then that’s what will qualify.

  • The only types of loans that qualify are ones from the William D. Ford Federal Direct Loan (Direct Loan) Program. If you have loans from other programs, they won’t qualify unless you consolidate them into a Direct Consolidation Loan. However, there are some restrictions that apply.

  • You must make 120 qualifying monthly payments. These payments must be made after October 1, 2007 and no later than 15 days overdue. They must be made while you’re employed full-time, so payments made while not employed with a qualifying organization do not count. You must also make payments for the full amount due. Note that you receive credit for only one payment per month, so paying more than the amount due or making multiple payments in one month won’t make you eligible at a quicker pace. Also, qualifying monthly payments cannot occur while you’re still in school or during a grace period, deferment, default or forbearance. The payments do not need to be consecutive.

  • The payments must be made under an income-driven repayment plan. Although the default is the 10-year standard repayment plan, under the rules, you’ll have no remaining balance after 120 payments anyway, so there will be no loan left to forgive.

If you believe you meet all the requirements for student loan forgiveness, it’s not automatic. You must fill out and submit a form to be granted approval by the Department of Education.

 

Other Important Information About the Public Service Loan Forgiveness Program

Because the program did not start until October 2007, no loans have been forgiven yet. The 10-year mark on the earliest loans will arrive in October 2017.

If you are forgiven for your student loan debt, there’s more good news. The income is not taxable, so you won’t be hit with a huge tax bill when it comes time to file taxes.

Student loan debt is a huge source of frustration for college graduates. It can be a huge burden, and if it’s not paid timely, it can negatively impact your credit score. Plus, it can’t be wiped away in bankruptcy, so there are limited relief options. If you think you might qualify for this loan forgiveness program, it’s in your best interest to learn more and stay on the right track. Who knows, depending on how much debt you have, you might save thousands or even tens of thousands of dollars.


 

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Linsay Thomas is a seasoned writer and editor who has written thousands of articles about topics such as saving money, healthcare, law, pets and education. She hails from California, where she lives with her husband, two children and a menagerie of pets. When she's not writing, she enjoys sports, breeding chocolate Labs and visiting the beach.

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