Student loan forgiveness is a big topic in recent days. Especially with the WH declaring that the covid induced moratorium on student debt would be extended to January 31st. Follow along as we dig into some of the causes and effects of the countries staggering student loan debt crisis.
Borrowers are fighting back against student loan debt. They are asking for student loan forgiveness. However, the government has made it more difficult for students to receive loans, and the federal government is not doing enough to help graduates with their debts.
Many students are graduating from college with huge student loan debt.
They are not only burdened by their monthly payments, but they might also be struggling to make ends meet and pay for day-to-day living expenses.
To help these young people manage their debt, the government has created an Income-Based Repayment (IBR) program. IBR is an income-based repayment plan that caps your monthly payment at 10% of your discretionary income, defined as your adjusted gross income minus 150% of the poverty line for your family size. Families earning less than $20,000 have no cap on how much they owe each month under this plan.
Why student loan forgiveness is needed
Student loan debt forgiveness is an issue that affects a lot of people. But most people don’t know how to get started or even what they should do. In this guide, we’ll break down everything you need to know about student loan debt and the various ways you can advocate for it.
1) What are student loans? Student loans are financial aid given by colleges to pay tuition and other associated costs like books, housing, and food.
2) Why does it matter if I have student loans? It matters because with so many young adults graduating from college with degrees but mountains of debt, the U.S economy may be at risk!
3) How do I go about getting my student loans forgiven (or refinanced)
You need to have made 120 qualifying payments (out of a total of 10 years) on your eligible federal student loan. If you believe that you qualify for PSLF, then apply now and check back after every payment. Be sure to include ALL loans in the application. You do not need to have any loans enrolled in an income-driven repayment plan or otherwise consolidated to apply for PSLF; anyone with eligible loans can enroll and see if they qualify! Note: if you consolidate all of your federal loans before October 2016, it will not count towards your eligible number of qualifying payments as long as you make qualified payments while the consolidation was active. If I am currently repaying my loans under an income-driven repayment plan, will this time count towards the 120 payments that I need to qualify for Public Service Loan Forgiveness?
Yes! Any amount of time spent making qualified payments while enrolled in an income-driven repayment plan counts towards your overall total.
When I make contributions to my 403(b) retirement account or IRA, will those contributions be reported as taxable income on my tax return even though they are pre-tax?
Yes, these types of savings vehicles for retirement come from post-tax dollars, and so the money you contribute is considered taxable income when it comes out. More information is available here. How do I know what interest rate I have been assigned by Nelnet (the servicer for the University)?
Log into your student loan account on Nelnet.com and click on “view/pay your bill.” You can also check your Nelnet Student Loan Master Promissory Note (There are different instructions for Federal Direct Loans and Federal Family Education Loans). The interest rate you will be assigned is reflected at the bottom of the page under “Interest Rate Information.” If this changes, you can log back in to see if a new interest rate has been assigned.
How do I know what my repayment plan options are?
Log into your student loan account on Nelnet.com and click on “view/pay your bill.” Clicking on each of the three tabs that appear after clicking on “pay your bill” will give you the option to see what repayment plans you are eligible for. Please note that each of our loans has different options, so be sure to check each loan’s section individually.
If I pay my minimum monthly payment every month, when will my loans go away?
Your efforts and time should not be wasted paying only the minimum monthly payment amount,t as this does not help decrease the overall interest cost on your loan balance. Instead, take control of your payments and create a plan that will help you pay off these debts sooner or even eliminate them in their entirety! Just by putting $50 extra per month (or $600 total) towards principal instead of interest could save over 20 years off of your repayment timeline. You can even save more money and shave off years by curbing your debt with a top-quality financial advisor at Student Debt Relief. The less interest you pay, the more you’ll have for other priorities in life like retirement or saving for your children to go to college.
If I am enrolled in an income-driven repayment plan, do I still qualify for Public Service Loan Forgiveness?
Yes! If you are enrolled in any of the Department of Education’s income-driven repayment plans (including REPAYE or PAYE), you will continue to qualify toward PSLF provided that your monthly payments are being made consistently throughout the year and on time. Please note: if you consolidate all of your federal loans before October 2016, it will not count toward your eligible number of qualifying payments as long as you were making qualified payments while the consolidation was active. Please see the Department of Education’s website for further information regarding income-driven repayment plans.
What are my options if I cannot afford to make minimum monthly payments on my student loans after graduation?
If you have more than one federal loan, do not despair! You may consolidate all of your federal loans into a single repayment plan which can help lower overall interest costs and simplify your payment schedule. Check out Student Debt Relief’s consolidation guide here for full details. If consolidating is not an option or does not seem like it would be beneficial in your situation, you should consider looking at income-driven repayment plans. These income-based options can help if your monthly payments are too high, but be warned: they will be a set amount and cannot go down or up based on your income or other variables. Income-driven repayment plans include Extended Repayment, Graduated Repayment (the default plan), Income Contingent Repayment (ICR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE); more information about the differences between each of these plans is available here. Please note that you may have heard REPAYE referred to as “Pay As Your Earn” or PAYE; this is not accurate – it has always been known as REPAYE.
If I am a military member, can I still have my loans forgiven under Public Service Loan Forgiveness?
No. Public Service Loan Forgiveness is only available to those who fulfill the following criteria: Be employed full-time by local, state, or federal government (including AmeriCorps/Peace Corps and other national service programs) OR by an organization that is tax-exempt under 501(c)(3) of the Internal Revenue Code Have made 120 “qualifying monthly payments,” which are defined as qualifying repayment plan payments (basically any payment that does not default/become delinquent); these must be made on time, cannot be more than 15 days past due Pay for at least 10% of my income toward my student loan payments (excluding taxes and insurance premiums) Be in the Direct Loan program, not private loans If you are a member of the military and believe that you should qualify for Public Service Loan Forgiveness based on your employment.
Does making extra payments on my federal student loans help me with PSLF?
For most people who have typically scheduled monthly student loan payments, it is impossible to make one big lump sum payment instead. However, if there is a time while you are paying off your debt where you can afford to do so – say, during the summer months or when times are financially tight – making some extra principal payments in addition to your regular monthly payment schedule could help lower your overall interest costs and may reduce the number of payments required to be eligible for PSLF. While we don’t recommend making extra payments on your student loans if you can’t afford them, some contribution calculators are out there that calculate whether or not you should take the risk.
Does making extra payments on my federal student loans count toward PSLF?
Thanks to a few helpful FAQs from the Department of Education’s official website, we know that paying more than the minimum amount due will count toward helping you qualify for PSLF. This means that when you make additional principal payments as opposed to just paying off accrued interest, they will still be counted as long as they fall within one of these specific time periods: The first 120 payments you make under your Income-Driven Repayment Plan (if applicable) Any payments made within the first three years of your repayment period Any payments made while you are still in school or during grace periods, deferment, forbearance, and administrative deferment status.
While this means that making extra principal payments before you even enter your 10-year forgiveness window will be counted toward PSLF, it doesn’t mean that they will erase all of the wrongs done to you by a student loan servicer. Most servicers have notoriously bad customer service and often charge borrowers for mistakes they have made – don’t forget, either way, you cut it, they get paid either way. We recommend staying on top of your loans, ensuring that you are receiving accurate information and that your payments are being applied where they should be.
What amount will I have to pay toward my federal student debt before PSLF kicks in?
Much like the forgiveness program offered by most states, there is a minimum qualifying payment requirement for loan forgiveness under PSLF – but unlike many income-driven repayment plans, your balance at the time of entering repayment does not matter. For borrowers who first enter repayment on their federal student loans after July 1, 2014 (the date when Public Service Loan Forgiveness was introduced), only 120 payments must be made before qualifying for loan forgiveness. After meeting this requirement, as well as completing 10 years from the day you began repaying your debt, the remainder of your Federal student loans will be forgiven. Keep in mind that this must happen all at once; you cannot spread out payments over a very long period of time and still receive forgiveness under the PSLF program.
If you’re already enrolled in an income-driven repayment plan, like PAYE or IBR, then those payments will count as one payment toward the 120 required to qualify for PSLF – but remember to apply your additional payments to help you pay off principal instead of just accrued interest!
What types of federal loans are eligible for Public Service Loan Forgiveness?
- Don’t worry – most types are included: Most Stafford Loans (Subsidized & Unsubsidized)
- Perkins Loans (sourced from the school, not your parents’)
- Direct Consolidation Loans (like the ones awarded for Parent PLUS loans and other types of federal consolidation loans)
However, what is excluded are any federal student loans that have been consolidated with private or alternative non-federal lenders. If you didn’t consolidate through a Direct Consolidation Loan with the Federal government, then it’s likely that your loan isn’t eligible for PSLF. Check out this calculator to see if your existing debt qualifies! Private student loans can qualify for PSLF – but only by consolidating them into a Direct Consolidation Loan. They cannot be included in an Income-Driven Repayment Plan without being consolidated with a Direct Consolidation Loan.
What if I’ve already made 25 years’ worth of payments?
It’s sad to say, but it doesn’t matter; the PSLF program is only available for borrowers new to repayment plans after July 1, 2014. No special discounts or retroactive forgiveness will be awarded if you’re already making payments on your student loans – even if they add up to more than 25 years’ worth! The PSLF program was designed as an incentive for borrowers just entering into repayment and rewards those who commit early to paying off their debt before taking on much else in life (like marriage, children, and jobs).
Who qualifies for Public Service Loan Forgiveness?
Anyone working for a public service organization and making full, 120 payments toward their federal student loan debt on time each month. To be considered an eligible employer by the Department of Education, you have first to spend at least 30 hours per week doing work that benefits your employer and the common good (you can’t just volunteer in your spare time). This includes emergency medical services, government agencies, and other employment with nonprofit organizations. According to FASFA, any job where you are performing the following qualifies you:
“…any activity performed predominantly for the benefit of persons rather than entities… with nonprofit 501(c)(3) tax-exempt status or similar state or local exceptions; federal, state, and local governments…”
It’s important to know that you must be employed directly by the eligible organization and cannot work through an intermediary or contracting firm. This means your employer must be a so-called “direct employee” of the organization you are working for – not just a contractor or freelancer hired by them. If you spend 30% or more of your time doing qualifying work, then your loan payments will still count toward PSLF. In this case, consider setting up automatic debits from your paycheck every month to ensure all payments are made on time without any gaps in repayment!
If I start making loan repayments after July 1st, 2014, does it mean my current student loans won’t qualify for PSLF?
Unfortunately, they’ll count toward your 120 monthly payments, but you won’t be able to count any loans made before July 1s,t 2014. This is because the PSLF program is designed to encourage new borrowers to enter into repayment plans right away and stick with them for the maximum amount of time possible!
What if I don’t want to work in public service?
You’ve got other options! Check out these other resources: How Much Are Private Student Loans? (And how they compare to federal student loans) What is an Income-Based Repayment Plan? How do I set one up?
If you’d like to learn more about the Public Service Loan Forgiveness Program, then check out the Department of Education’s website! There, you can learn everything you need to know about the program, from how to calculate your eligibility for PSLF loans to which employers will qualify as public service organizations.
Finally, please remember that this is not intended as expert financial advice. Please review any of my articles or other content on this website with a qualified professional before making any real-world decisions based on the information I’ve presented here! Thanks for reading – and always do your research before making life-changing decisions like these!
It’s a fact that student loan debt is crippling many Americans.
In fact, the average graduate has over $37,000 in loans, which translates into monthly payments of more than $400! Now imagine if you had two kids and one spouse who also needed to go to school. The financial strain can be impossible to bear when trying to provide for your family on a single income. It’s time we do something about this issue and help those struggling with their finances because they are paying off their student loans.
In 2008, the world’s economy witnessed an abrupt decline that devasted the financial markets. The Great Recession’s economic crisis caused millions of Americans to lose their homes, jobs, and life savings.
The economic crises opted Americans to go back to schools to learn some new skills. Between 2008 -2018, the economy stabilized gradually in the country. Unfortunately, secondary education funding did not return to pre -2008 levels as the Federal and state governments cut most of the financing to restabilize the economy.
Since that time, education costs have started to rise in America, and these soaring college costs put the students in a difficult situation. College is more expensive than ever before. The average tuition fee for a four-year degree has increased by 24% in all 50 states.
On average, an American student spends $25,396 for one academic year, while the cost is twice for private colleges. As of December 11, 2020, an American student earns $45,242 annually, making it impossible to afford private colleges.
In this situation, students are left with no choice except to borrow loans to pay their fees. Resultantly, more students and families depend on loans to continue higher education, increasing student loan debt.
And what about Coronavirus, which rendered most of the students jobless in 2020?
Covid-19 and Student loan forgiveness
Thanks to the economic crisis unleashed by COVID-19, student loan debt has reached the highest level of $1.465 trillion in 2020, almost double of $675 reported in 2009. On average, college graduates relying on student loans are leaving schools with $29000 in debt.
The matter of increasing student loan debt also remained under discussion during the 2020 presidential campaigns. Enacted on March 27, a law named CARES allowed the US secretary of Education, Betsy DeVos, to cut interest rates on federally held student loans for two months as a part of the Coronavirus relief package.
After that act, a coalition of over 60 advocacy groups emphasized the congress to annul student debt in the next coronavirus stimulus package.
Advocates of student loan debt cancellation were disappointed as congress fixed only $2.2 trillion in aid. The President of the umbrella association also expressed frustration with the amount, saying it was inadequate to fill the gap.
Recently an organization named the “Debt Collective” initiated a movement to convince people to stop paying student loan debts. During the movement, dozens of people ignited their student loan bills and demanded the cancellation of loans for free education.
Apart from these organizations and activist groups, Sen. Bernie Sanders and Sen. Elizabeth Warren also pledged to terminate the student loan debt in America.
However, the announcement of Joe Biden as President-elect created hope in students and activists. They think that Biden’s administration might take the initiatives required to address student loan debt in the country.
Relevant tweets on the student loan forgiveness
To be clear: @JoeBiden has the legal authority to cancel 100% of student loan debt held by the federal government through powers called “Compromise and Settlement.” Congress vested this authority in the Department of Education through the Higher Education Act of 1965.— The Debt Collective (@StrikeDebt) December 24, 2020
Bad news: A continuing freeze on student loans is NOT included in the relief package.— Remington A. Gregg (@ragregg) December 21, 2020
When in office, Biden must continue the freeze, or we’ll face a calamity in February when 44 million are forced to spend money they don’t have.
Better yet, cancel student debt.
#CancelStudentDebt Cancel ALL student debt. Fund paying off non-federal loans. The enormous spending boost that this would create would support job growth for decades. I worked my a** off & paid mine off, so my voice counts: cancel fees fines penalties, wipe the slate clean.— Diamond (@Diamond61845143) December 24, 2020
Here’s what Biden can/should do via executive orders to help U.S. families:— Alyssa Milano (@Alyssa_Milano) December 21, 2020
1. temporarily renew extra unemployment benefits.
2. Raise the minimum wage, beginning with federal contractors.
3. Suspend student loan payments, without interest.
4. Halt evictions on unpaid rent.
In the past few years, student loan debt has risen dramatically. The average undergraduate now graduates with about $30,000 in loans, and that number is growing every day. Politicians have taken notice of this crisis and are trying to do something about it. Use these resources to stay informed on what’s happening in Washington regarding student loans so you can make educated decisions when voting for your representatives or contacting them directly (remember they need our votes!). What ideas does your representative have for solving this problem? How would you solve the issue of rising student loan debts if you were a politician?
Almost half of Americans are demanding the nullification of student loan debt. We want your feedback, though.
Let us know in the comment section.