It’s easy to get discouraged and worry if you’ll ever be able to pay off your debts. However, student loan cancellation, in which your loan lender cancels the balance left on your student debt, maybe the solution for all your issues.
Is this, however, a viable option? For example, if you have certain types of loans and meet specific requirements, you may be eligible for student loan forgiveness, but only some borrowers will qualify.
Here’s what you need to know about student loan cancellation.
Top 4 Student Loan Cancellations to Consider
1. Public Service Student Loan Forgiveness (PSLF)
You may be eligible for PSLF if you work for a government or nonprofit agency. After making 120 qualifying payments as you work full-time for ten years, the U.S . Education Department forgives the remaining debt on a federal Direct Loan.
However, the forgiven debt balance is not taxable income under PSLF, so you won’t be surprised when it comes time to file your taxes.
You must be enrolled in an income-driven repayment plan to be eligible for PSLF. The IDR plan caps your payments each month at a percentage of your discretionary income and repayment terms.
The PSLF program isn’t available to all borrowers with federal loans. For example, PSLF doesn’t apply to FFEL or Perkins Loans unless they are first consolidated with a Direct Consolidation Loan.
You can use the PSLF Help Tool to determine if your loans and employer are eligible for the program.
2. Teacher Loan Forgiveness
Teachers can get help repaying their student loans through this federal program. You must, however, work for five years in a qualified school. If your school qualifies, you can look it out in the Teacher Cancellation Low Income Directory.
Depending on the subject taught, the amount of the loan forgiven varies. For example, a stipend of up to $5,000 would be paid to most elementary school teachers.
Teachers of math and science in secondary schools and special education teachers at all levels may be eligible for loan forgiveness of up to $17,500.
3. Student Loan Cancellation For Nurses
Nurses with student debt have several options for federal loan forgiveness, including the NURSE CLRP, which pays up to 85% of the remaining student loan for qualifying nurses, and PSLF and Perkins loan cancellation.
On top of the national programs, numerous states provide loan repayment aid to nurses.
Look through the LRAPs to see if any nurses are available. For example, you can search for awards by state, occupation, or cash amount. Nurses also have several loan forgiveness alternatives.
The PSLF is likely because Perkins loans are held by a tiny number of student loan borrowers, and the NURSE Corps program is very competitive.
4. Income-Driven Repayment Plan
If you can’t make your monthly payments under a 10-year conventional repayment plan, you can apply for an IDR Plan to lower your payments and qualify for loan forgiveness.
Your loan servicer will extend your loan repayment program to 20 or 25 years and cap your monthly payment at a proportion of your discretionary income if you choose an IDR plan. With changes in your income and family size, your payments may fluctuate over time.
Do Parents Qualify For Student Loan Cancellation?
You might be wondering if federal Parent PLUS Loan forgiveness is an option if you borrowed money to pay for your child’s education. Parent PLUS Loans, however, don’t qualify for PSLF or IDR plans. There is, however, a loophole.
A Direct Consolidation Loan can be used to merge your federal Parent PLUS Loans. After then, one of the four IDR plans will be available for your new loan.
You can apply for loan forgiveness through the IDR forgiveness program after consolidating your debt. You can also apply for PSLF if you work for a nonprofit company or government institution and have made qualifying monthly payments on your consolidated student loans for 10 years.
If you’re looking for a way to get out of debt, the solutions discussed in this guide can help. This may be able to assist you in repaying some or all of your outstanding debt. If you’re unsure what to do, we suggest seeing a student loan specialist.
These experts can assist you in determining the best course of action for your particular scenario. However, before making any conclusions, conduct a thorough study. You can also find practical strategies to handle your student loans while waiting for your forgiveness.
As a result, you’ll be able to focus on other aspects of your life.