On Oct. 20, the New Jersey Senate passed Senate Bill 743, which directs the state’s Higher Education Student Assistance Authority to forgive student loans of student borrowers who died or sustained total and permanent disability. On a nationwide level, there are federal programs that grant student loan forgiveness to qualified student borrowers. Let’s take a look at some of these federal student loan forgiveness programs. »Need to access student loans?»
1. Loan Forgiveness for Public Servants
The Public Service Loan Forgiveness (PSLF) Program forgives student loans after 120 payments (10 years). To qualify, you must be repaying your student loan under any of the income-driven repayment plans (noted below) and the 10-year standard repayment plan.
Eligible Borrowers: For student borrowers working full-time in government agencies at all levels, non-profit organizations (that are tax-exempt under IRC Sec. 501(c)(3), and other non-profit organizations that provide qualified public services. You have to work 10 years under a qualified employer to become eligible. Although it doesn’t mean having to work for the same employer within that period. It’s recommended to submit an Employment Certification form annually or as applicable for tracking purposes.
Eligible Loans: Direct Loans – Unsubsidized and Subsidized Stafford Loans, Direct PLUS Loans, and Direct Consolidation Loans. Federal Family Education Loans (FFEL) loans are not eligible for this program unless they are consolidated with a Direct Consolidation Loan. Perkins Loans have their own cancellation program.
2. Loan Forgiveness for Teachers
A. Teacher Loan Forgiveness
This loan forgiveness program offers student loan forgiveness for qualified teachers working in the elementary and secondary levels designated as low-income.
Eligible Borrowers: The borrower must hold an applicable state license to teach and has worked full-time as a teacher for five years. His/her loan must not be in default and not originated before Oct 1, 1998. Student loan forgiveness of up to $5,000 is available for those qualified teachers in elementary and secondary levels, while up to $17,500 in student loan debt may be forgiven for teachers who teach Math, Science or in Special Education.
Eligible Loans: Direct Loans and Federal Stafford Loans
B. Teacher Cancellation for Federal Perkins Loans
This program offers up to 100% in student loan forgiveness for Perkins Loans borrowers in the teaching profession.
Eligible Borrowers: For qualified teachers (i) who work full-time in designated low-income elementary or secondary schools or (ii) specialize in Math, Science and Special Education. Other public servants like firefighters, school librarians, police officers and nurses can also apply.
Eligible Loans: A Federal Perkins loan may be canceled up to 100%, based on the teaching service:
- 15% canceled per year for the 1st and second year of service
- 20% for the 3rd and 4th year of service
- 30% for the 5th year of service.
3. Repayment Plans Based on Income
There are four major income-driven repayment plans which aim to make repayment of loans more manageable, based on a percentage of a borrower’s discretionary income. The four plans and their corresponding percentage caps are:
Income-based Repayment (IBR):
- 10% of income for those who are considered new borrowers on or after 1 July 2014. But not exceeding payment under the 10-year standard repayment plan.
- 15% of income for those who are not new borrowers. But not exceeding payment under the 10-year standard repayment plan.
Income-Contingent Repayment (ICR)
Whichever is the lesser of:
- 20% of income, or
- The amount to be paid on a fixed repayment plan of 12 years, adjusted per income.
Pay As You earn (PAYE)
- 10% of income, but not exceeding the payment amount under a 10-year Standard Repayment Plan.
Revised Pay As You Earn (REPAYE)
- 10% of income.
Each income-driven plan has a repayment plan spanning 20 to 25 years. Under all plans, any remaining loan balance is forgiven if the federal student loans are not fully repaid at the end of the applicable repayment period.
Eligible Borrowers: Ideal for student borrowers whose loans (i) are higher than their annual income or (ii) represent a significant portion of such income. Notably, REPAYE is available to all federal student loan borrowers, regardless of income. Those seeking for Public Service Loan Forgiveness should repay their federal student loans under an income-driven repayment plan.
Eligible Loans: Direct Loans can qualify for any of the four plans. For FFEL loans, the only applicable plan is IBR. But if these FFEL loans are consolidated into a Direct Consolidation Loan, they can be eligible for the other three programs.
Needless to say, federal student loan forgiveness programs, student loan forgiveness for that matter, are only applicable to federal student loans. If you have a student loan with a private lender, you might want to contact them about your options. »Feel free to talk to one of our lenders now.»