The 5 Secret Ways to Get Student Loan Forgiveness
When you finished high school, chances are good that attending college was your plan. Most college students end up securing student loans to cover at least part of their expenses. As you focused on your course of study and your work plans after school, you may have pushed off thoughts of repaying those student loans until ‘later.’ But with tuition rates rising faster than inflation in most recent years, combined with economic downturns over the last 10-15 years, completing school may also mean finding yourself in a position with extreme levels of student loan debt. Do you have any options for student loan debt relief?
While private loans typically do not offer payback help beyond refinancing, federal loans offer several different payback structures that can help you end up paying less than initially planned. Take a look at a few of your options below.
Income-Based Repayment Plan (IBR)
This plan is one of the most common loan repayment plans. For most recent loans, your payment will not exceed 10% of your discretionary income, and after 20 years of on-time payments, the remainder of your loan is forgiven. You’ll have to complete a worksheet to determine your discretionary income amount.
Revised Pay As You Earn Repayment Plan (RePAYE)
This plan is very similar to the IBR; it merely may apply to different loan types. As with the IBR, if you make on-time payments for 20 years amounting to no more than 10% of your discretionary income, any remaining debt is forgiven.
Income Contingent Repayment Plan (ICR)
Slightly different from IBR and RePAYE, ICR calculates a payment of the lesser of either 20% of your discretionary income or a calculated amount that you would pay on a 12-year fixed-rate plan. Your payments could end up being greater than a standard 10-year repayment plan.
Public Service Loan Forgiveness (PSLF)
This program allows for full-time workers in many areas of public service to have their loans forgiven after 120 on-time payments. These can include such fields as the military, not-for-profit companies, law enforcement, public education, and many others.
Disability / Death
If you have been permanently and totally disabled, you are likely eligible to have your loans forgiven. (Some private lenders have allowances for loan forgiveness for these extreme circumstances as well.) You will need to verify that your disability qualifies with input from a medical professional. If a borrower dies, then typically their student loans can be discharged.
Important: Tax Implications and Government Changes
Loans that are forgiven typically count as income, and depending on your tax situation, that may lead to an unexpectedly high tax bill when the benefits are paid out. But in the big picture, it often means paying less overall than if you were repaying the full amount of the loans. Additionally, federal rules regarding loan forgiveness can change at any time, so it’s critical to keep up with governmental proposals and know whether it’s in your financial interest to address your loan situation sooner rather than later.
If you are just not sure how to best manage your student loan debt, the experts at Resolvly are ready to help work through all your options. Give them a call today!