Tuesday, November 26, 2013

Student Loan Forgiveness Is Possible If...




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Long Island- Wish you could make your student loans disappear?

Student loan forgiveness programs can make it happen, but there’s a problem.
  
“There needs to be more awareness about these programs,” said Betsy Mayotte, director of regulatory compliance at American Student Assistance, a nonprofit that helps borrowers manage their student debt. So the organization released a student loan forgiveness guide this year on its website, http://asa.org.
The Consumer Financial Protection Bureau, a government watchdog, released its own guide recently to bring attention to the programs. The programs are not a quick fix. Instead, they enable borrowers to erase their remaining student debt after several years of payments. Most of the programs are tied to certain low-paid professions, such as teachers or public defenders, and have other restrictions.

Here’s an overview of several options.

Public service program
This program is for those who work in federal, state or local government jobs or at a nonprofit that has been designated as a 501(c)(3) tax-exempt organization.
The federal consumer protection bureau estimates that a quarter of the country’s workforce falls into those categories. Individuals also must have high student loan balances relative to their incomes.
The program works like this: Anyone who makes 120 on-time monthly payments toward their student loans and works in a qualifying job for 10 years (they don’t have to be consecutive) can apply to have their remaining balance forgiven.
The amount of the loans forgiven is not taxed, under current tax law.
Only those with federal Direct Loans will qualify for this program, but some loans, such as the Federal Family Education Loan (also known as FFEL) and the Perkins Loan, can be consolidated into a Direct Loan. If you don’t know what type of federal loan you have, you can find out at nslds.ed.gov.
The program was established in 2007, so no one has received loan forgiveness yet.
Those hoping to take advantage need to make sure their job qualifies with the Department of Education every year, says Mark Kantrowitz, publisher of Edvisors.com. Save the paperwork and annual income forms in case you need to later prove your eligibility.
The Department of Education offers more guidelines:
http://1.usa.gov/18sELJS.
Under this program, borrowers can qualify for reduced monthly payments and, after 25 years, the remaining balance is forgiven.
It is important to note that the forgiven amount is taxed as income, which means you will likely have to pay a sum to the IRS that is lower than the amount forgiven.
The program is for those whose federal student loan debt is high relative to their income and family size.
Your lender will ultimately decide if you are qualified, but you can see if you would benefit from this program by using this online calculator: http://1.usa.gov/1bIO1yw.
There are other rules, such as which types of federal loans qualify. The Department of Education has a helpful tipsheet: http://1.usa.gov/19JJVQA.

Pay as you earn plan
Borrowers can apply to have their monthly payments reduced and, after 20 years of payments, the balance is forgiven.
Any forgiven amounts are taxed as income.
This program is for those with a high level of federal student loans compared to their income and who took out their first federal student loan after Oct. 1, 2007.
Use the Department of Education’s online calculator to see if you qualify: http://1.usa.gov/194F7V0.

Other programs
Depending on your job, you may be able to get help with your loans.
Teachers, for example, should see if they are eligible for the teacher loan forgiveness program.
They must work at a qualifying school for five consecutive years to receive up to $17,500 in forgiveness on certain federal loans. For more details, see: http://1.usa.gov/1bITqWq.
American Student Assistance put together a list of more than 60 programs. Some are based on type of job; others are state programs. Some state programs even help with private loans.
Mayotte of American Student Assistance recommends an Internet search to see if your state or job qualifies for some sort of student loan help.
She says it’s important to ask your employers or human resources department if student loan help is available. She says more employers are refunding a part of their employee’s student loan payments.
Mayotte also warns that borrowers should not take jobs just to have their student loans forgiven, or take out too much debt because they assume their debt will be forgiven.
Many of the programs are budget-based, she says, and there’s a possibility that some could disappear or not be around by the time you graduate.