Student Loan Forgiveness Options
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Filed under Student Loans
Despite your good intentions in paying off your student loans following your university or college graduation sometimes financial problems and/or job problems crop up. Perhaps you could not find the high paying job you expected and have had to make due with less pay until the job market improves. Perhaps you have suffered illness or have been in an accident that has left you unable to work. There could be any number of reasons that you end up falling behind in your student loan payments or simply cannot pay the monthly amount that is required of you.
When any of these unfortunate predicaments happens to you it is time to look into your options in terms of student loan forgiveness or loan repayment programs. Loan forgiveness is when the remaining principal and interest on a student loan are forgiven. There are certain circumstances under which the federal government is willing to cancel all or a portion of a loan made for educational purposes. These forgiveness programs are put into effect in exchange for a student who chooses a particular career such as teaching or service in the military. It is also put into effect when a student chooses certain forms of volunteer work after graduation. These volunteer organizations include AmeriCorps, the Peace Corps and Volunteers in Service to America (VISTA).
Not every educational loan forgiveness program offers the individual the exact same amount of monetary forgiveness. Some programs can take away the burden of a few thousand dollars while others can eliminate over $100,000 worth of debt. What is surprising is that many of these programs have few applicants because they are not well publicized. To find out about these programs you really have to search for the relevant information.
Loan Forgiveness versus Loan Repayment
You may be wondering what the difference is between student loan forgiveness and student loan repayment. Forgiveness programs for student loans have backing by the Federal government. In other words, these programs cover loans that are issued to students through federally funded programs such as the Perkins loan and the Stafford loan. If you qualify for one of these programs then all or a fraction of your student debt is erased.
Loan repayment programs are not the same thing. These programs are more commonly used than forgiveness programs. The loan repayment program can be used to get rid of any kind of student loan be it a government loan or a private loan. When you take advantage of this program you can choose one of two options. You can either receive additional money that can then be applied to your student debt load or a payment is made to your student loan lender directly by way of your employer.
The amount of money that is removed from your responsibility under the student loan forgiveness program is taxable income for the year that it was eliminated. For example, if you have $5,000 in student loans that are forgiven under this program this year then your taxable income for the year will go up. The IRS will want to know this information because it is pertinent for your income tax. While this is not a situation that is appealing to anyone do not let it scare you off from using this program. In the long run you will save a lot of money in student loan payments.
In order to avoid having the money that is forgiven by this program and/or your employer repayments subject to taxes you must have a provision written into the contract for your student loans that specifically allows it to be forgiven if need be. These provisions can include such things as choosing to work in select professions (as previously mentioned), or working for particular employers or working for a specified minimum duration of time.
Any student loan repayments that are made under the National Health Services Corp (NHSC) Repayment Program or any that are made under a state program that is deemed eligible for money from the Public Health Services Act is considered to be non-taxable.
Do Your Research on Loan Forgiveness
If you take the time to search online you will find that there are plenty of directories that list student loan forgiveness programs and repayment programs. In fact there are hundreds out there that the student will be happy to find if they are willing to be patient and thorough in their research. There are arrays of professional associations that are within a selection of industries that have a list of both of these types of programs.
If you want to look into the possibility of having your student loans forgiven, canceled or repaid then here are some places to start looking. If you are a teacher then look at the American Federation of Teachers which is a state-by-state directory. If you are a nurse, a doctor or a mental health professional in any capacity then look to the Association of Medical Colleges. Lawyers and legal professionals should direct their attention to the American Bar Association. If volunteer work is your thing then visit the websites of AmeriCorps and the Peace Corps.
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