Saturday, November 19, 2022

Government Student Loan Consolidation Forgiveness Programs

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Expansion To The Payment Pause And Interest Waiver

Biden expands student loan forgiveness eligibility

Borrowers with a federally-held federal education loan are eligible for administrative forbearance and an interest waiver through January 31, 2022. Unfortunately, borrowers with defaulted loans in the Federal Family Education Loan Program were not eligible because those loans were held by guarantee agencies on behalf of the U.S. Department of Education. The U.S. Department of Education has decided to make these borrowers eligible for the federal student loan payment pause and interest waiver, affecting more than one million FFELP borrowers. FFELP borrowers who defaulted during the pandemic will also have their loans returned to good standing and the defaults removed from their credit histories.

Loans With Variable Grace Period:

  • PLUS loans

When it is time to begin repaying your student loans, you should explore your payment plan options and choose the one that best fits your needs. You should direct any student loan payments to your loan servicer, who will handle your loan while it is in repayment.

Tip: To find your federal student loan servicer, visit the National Student Loan Data System .

Try to stay current on your payments. If you have difficulty making your scheduled payments, you have other options to explore.

Tip: You may be eligible for an income-based repayment plan or employment-based loan forgiveness.

Is There More Student Loan Forgiveness Coming

Part of President Joe Bidens campaign pitch was that he was going to offer some sort of forgiveness to student loan borrowers. So far, Biden hasnt sorted that question out.

He told a February CNN Town Hall meeting that Im prepared to write off a $10,000 debt, but not $50,000, but has not followed up on that with any legislative proposal.

Instead, a month later, he asked Education Secretary Miguel Cardon to prepare a report that details a presidents authority to cancel $50,000 in student loan debt without approval from Congress.

According to student loan expert Mark Kantrowitz, the $10,000 cancellation would wipe out all student loan debt for about 14.5 million borrowers. The $50,000 cancellation would erase debt for about 36 million borrowers.

One thing to be aware of is that currently, whatever amount of loan is forgiven is counted as taxable income. That may change as new legislation comes out and possibly changes loan forgiveness programs.

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You Previously Tried To Certify Employment For Pslf But Were Denied

If the Department previously said your employer was not eligible for PSLF then you need to submit a new form through the PSLF Help Tool to see if you can receive credit toward forgiveness. You can also see which employers the Department has already deemed eligible through the PSLF Help Tool. Please note that this waiver does not affect qualifying employer rules. Your employer still needs to be a governmental organization, a 501 organization, or a not-for-profit organization that provides a designated public service to get PSLF under normal rules and the Limited PSLF Waiver.

Other Student Loan Forgiveness Programs

Federal Student Loan Forgiveness and Loan Repayment Programs ...

There are a few additional niche student loan forgiveness or payment assistance programs you may qualify for through federal or state programs. Eligibility in these programs depends on your profession and where you work.

  • State-sponsored repayment assistance programs. Licensed teachers, nurses, doctors and lawyers in certain states may be able to take advantage of programs to assist with repaying debt. For example, the Mississippi Teacher Loan Repayment Program will pay up to $3,000 per year for a maximum of four years on undergraduate educational loans to teachers with a specific teaching license for each year of teaching full time in a particular geographical or subject area. Contact your states higher education department to find out if you qualify for a program.

  • Military student loan forgiveness and assistance. Military personnel in the Army, Navy, Air Force, National Guard and Coast Guard may qualify for their own loan forgiveness programs. In the National Guard, for example, qualifying soldiers and officers could receive up to $50,000 to pay off federal student loans through the Student Loan Repayment Program.

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    Beware Of Student Loan Forgiveness Scams

    If youre on the lookout for debt relief, you might be susceptible to student loan forgiveness scams. These are illegal ploys to convince you that forgiveness is on the way, in exchange for upfront fees or your personal information. The words, Obama student loan forgiveness were often used in years past, for example, to scam borrowers.

    While the general rule of thumb is to be skeptical of anything that sounds too good to be true , here are some other red flags of potential student loan forgiveness scams:

    • Receiving phone calls or emails from people or companies you dont recognize
    • Feeling pressured to sign up for a program you didnt know existed
    • Being promised immediate or overnight relief in exchange for fees or personal data

    And if youre unsure if a student loan forgiveness program is legitimate or not, contact your federal loan servicer as a first step.

    Should You Refinance Your Federal Student Loans

    Once you refinance federal student loans, you can’t reverse the process, so it’s crucial that you know for certain that it’s the right decision for you. Here are some things to consider:

    • You’ll lose access to student loan forgiveness programs and income-driven repayment plans when you move to a private lender.
    • You won’t be eligible for the federal student loan payment pause if it gets extended again or potentially up to $10,000 in widespread loan forgiveness, which the Biden administration has discussed.
    • Deferment and forbearance options from private lenders can vary and typically aren’t as generous as the programs offered by the federal government.
    • If you switch from a fixed interest rate to a variable interest rate, which some private lenders offer, it could increase your interest costs over time.
    • There’s no guarantee that you’ll get approved or receive a low enough interest rate to make refinancing worth it.

    All that said, there are some situations where it might make sense to refinance your federal loans:

    • You have excellent credit and can qualify for the lowest rates private lenders have to offer.
    • You don’t qualify for existing student loan forgiveness programs.
    • Your debt burden is large enough that the interest savings you gain from refinancing outweigh the potential offer of widespread loan forgiveness.
    • You have high income and savings and don’t anticipate needing an income-driven repayment plan.

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    Even If You Have Direct Loans Find Out If Consolidating Can Speed Up Forgiveness

    Even if some or all of your loans are Direct Loans,below are two scenarios in which consolidating your existing loans into a single Direct Consolidation Loan may help you get forgiveness faster. However, keep in mind that if you made more than 120 qualifying payments on an existing Direct Loan, consolidating that loan will disqualify you for any potential refund of the payments you made on that loan beyond the 120 required for forgiveness.

    • If some of your loans have been in repayment longer than others, consolidating may speed up forgiveness. Direct Consolidation Loans will be credited with the largest number of qualifying months among the loans that were consolidated. So, if some of your loans have been in repayment longer than others , forgiveness will come faster on your more recent loans if you consolidate them with your older loans. The entire new Direct Consolidation Loan will receive the credits associated with the underlying loan that had the largest number of qualifying months.
    • For example, if you had 50 qualifying months on one federal loan and 100 qualifying months on another, and you consolidate the two loans, the new Direct Consolidation Loan will receive 100 qualifying months towards loan forgiveness under the waiver.

    When Should Federal Student Loans Be Consolidated

    360 in-depth: Student loan debt and relief on the way for thousands

    The classic example of a smart use of federal direct consolidation is Federal Family Education Loan Program loans. Up until 2010, FFELP loans were from private lenders, but the federal government guaranteed them. These loans functioned mostly like federal student loans, but they had a few limitations.

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    Cfpb College Cost Comparison Calculator

    Once you have been accepted by colleges and receive financial aid offers, you can compare the cost of attending different schools with the financial aid and college cost comparison tool provided by the Consumer Financial Protection Bureau . The tool lets you compare the costs of different colleges, including the student loan debt that youll owe when you graduate, and estimates the percentage of your post-graduate monthly salary that will go toward paying off your loans.

    What Do You Need To Know When Applying For A Student Loan Forgiveness

    To get loan forgiveness for student loans, you must be working in a public service position for at least 30 hours per week in order to be eligible for the Public Service Loan Forgiveness program . After youve consolidated your federal loans into a suitable repayment arrangement, you must additionally complete 10 years of punctual monthly payments .

    The only loans covered by this option are Direct Federal Student Loansprivate student loans arent covered by the PSLF program.

    NOTE: Those who applied from the class of 2007 were the first to be eligible for loan forgiveness in 2017, and 99 percent of those applications were turned down. According to the U.S. Department of Education, that percentage has marginally improved, with 2.4 percent of applications being approved as of September 2020.

    Many borrowers wondered what qualifies you for student loan forgiveness before learning their applications had been turned down because they were in the wrong repayment plan. In an effort to reduce the number of denied applications, the Department of Education launched the PSLF Help Tool in 2018.

    The PSLF Help Tool helps you find employers that meet the programs standards, and has a number of questions pertaining to those requirements to guide borrowers through the eligibility process.

    You can still be qualified for Temporary Expanded Public Service Loan Forgiveness if youre judged ineligible because some or all of your payments werent made under a qualifying plan.

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    What Is A Private Student Loan

    Private student loans do not come from the federal government. Banks and other financial institutions generally provide private student loans. Other private student lenders include non-profit lenders and schools that offer their own loans.

    Generally, you should use private student loans as a last resort to fund your education. Most private student loans do not offer the same protections as federal loans, such as income-based repayment plans, forbearance, and discharge upon death. In addition, private loans are usually more expensive than federal loans.

    However, in contrast to federal loans, private loans are subject to state statutes of limitations on collection and, for the most creditworthy borrowers, may offer better interest rates than federal loans.

    Two subsets of private education loans are peer-to-peer loans and institutional loans.

    Student Loan Consolidation Vs Refinancing

    Student Loan Forgiveness for Military

    There are two types of student loan consolidation: federal and private. In general, though, private loan consolidation is referred to as refinancing.

    With federal consolidation, you keep your student loans with the federal government, but you can switch to a new loan servicer, reduce the number of your monthly payments to one and extend your repayment.

    In contrast, private consolidation or refinancing involves replacing your federal or private student loans with a new one through a private lender. Here are other ways the two differ:

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    You Have Options If You Were Denied Pslf

    If your application for PSLF was denied, you may be able to receive loan forgiveness under the Temporary Expanded Public Service Loan Forgiveness opportunity.

    As part of this opportunity, the Department of Education reconsiders your eligibility using an expanded list of qualifying repayment plans.

    This TEPSLF opportunity is temporary, has limited funding, and will be provided on a first come, first served basis. Once all funds are used, the TEPSLF opportunity will end.

    Visit StudentAid.gov for detailed information on how to be reconsidered for loan forgiveness.

    Limited PSLF Waiver Opportunity: The U.S. Department of Education in October 2021 announced a temporary period through October 31, 2022, during which borrowers may receive credit for payments that previously did not qualify for PSLF or TEPSLF.

    Get additional information on Studentaid.gov >

    Student Loans: Next Steps

    With 3 important deadlines for student loans approaching, Biden said he plans to announce his decision on student loan forgiveness likely in July or August. That means student loan borrowers will be in limbo regarding the future of their student loans. At the same time, Congress has proposed 0% interest on student loans, while Biden has proposed to lower interest on student loans. That said, student loan borrowers can plan now for the restart of student loan payments on September 1, 2022. Invest the time to explore every possible option for student loan repayment. Biden is unlikely to cancel all your student loan debt or, for many student loan borrowers, even most of your student loan debt. Its also possible that at least some of your student loan debt wont qualify for any student loan cancellation. Here are some popular ways to save money and pay off student loans faster:

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    How Do I Consolidate Federal Student Loans

    The actual process of federal direct consolidation is very simple.

    The Department of Education will process all of the paperwork electronically. They estimate that filling out the form takes about 30 minutes.

    One potential headache that borrowers should avoid would be third-party student loan consolidation services. These companies, perhaps more accurately described as scams, advertise a special relationship with the Department of Education. They claim to help borrowers qualify for Income-Driven Repayment Plans and Student Loan Forgiveness. In reality, they function as a middle-man who gets paid and adds no value to the service. In many cases, they end up making errors and making the process even more difficult than necessary.

    These companies have gotten so bad that at the top of the Department of Educations Student Loan Consolidation information page, it displays the following:

    As long as borrowers stick with the official Department of Education Student Loan Consolidation page and are careful only to consolidate when necessary, the process is relatively simple.

    Student Loan Repayment Assistance For Nurses

    Federal loan forgiveness program has 99 percent rejection rate

    In addition to national programs, many states offer loan repayment assistance to nurses. The Illinois Nurse Educator Program, for example, awards up to $5,000 per year for four years to qualifying nurses and nurse educators in Illinois.

    Browse through the available LRAPs for nurses. You can search by state, occupation or award amount. There are plenty more loan forgiveness options for nurses.

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    Groups Also Urge Biden To Extend The Student Loan Pause

    The Limited PSLF Waiver and IDR Adjustment are not the only temporary student loan relief initiatives expiring in the coming months. The ongoing student loan pause, which has stopped all payments and interest on government-held federal student loans since March 2020, is also set to end on August 31, which is in a matter of weeks.

    In its letter to President Biden, the coalition urged him to also extend the student loan pause, linking that relief to the expiring relief provided by the Limited PSLF Waiver and IDR Adjustment. We urge you to… extend the payment pause to a date after which loan cancellations from the Waiver and Adjustment will be processed, to reduce confusion and ensure that borrowers whose loans will be cancelled do not needlessly resume repayment.

    The Biden administration has suggested that another extension of the student loan pause is possible. But officials have not made any final decisions despite the looming August deadline, leaving borrowers grasping for clear information and guidance as time runs out.

    The coalition urged the Biden administration to be decisive and clear for borrowers. The administration must provide clear information to borrowers and the public… so that borrowers and those who work with them fully understand their options and can make informed decisions about how to manage their loans.

    Potential Advantages To Consolidation

    It is important to weigh the pros and cons of consolidation before you submit an application to consolidate. Here are some of the potential advantages to consolidation:

    • One servicer, one bill, one payment
    • Managing your federal education loan debt with one servicer and one monthly payment may be more convenient than with multiple servicers.
  • The option to choose your servicer!
  • When completing an electronic application, you will be given the opportunity to select the federal loan servicer you would like to help manage your Direct Consolidation Loan.
  • Potential for lower monthly payments by extending the time you have to repay your loan
  • Fixed interest rate
  • If you have variable rate loans, consolidation will switch your variable rate into a fixed rate.
  • Consolidation may make loans eligible for the following repayment and forgiveness programs, which are only available for Federal Direct Loans:
  • Pay As You Earn for student borrowers
  • Revised Pay As You Earn for student borrowers
  • Income-Contingent Repayment for student or parent borrowers
  • PSLF
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    What Does The Limited Pslf Waiver Do

    While qualifying employment is still required and borrowers must either have or obtain Direct Loans through consolidation, the Limited PSLF Waiver temporarily eliminates most of the PSLF Programs other rules. Through the waiver, some borrowers will receive loan forgiveness while others will get much closer to forgiveness. To summarize:

    • Non-qualifying payments will now count. Months in which you failed to make a payment, paid late, paid the wrong amount, paid under the wrong repayment plan, or paid on a loan that was later consolidated will count towards forgiveness under the waiver.
    • Payments on non-qualifying loan types can now count.Months in which you made payments on loan types that do not traditionally qualify for PSLF can count towards forgiveness under the waiver. However, you must apply to consolidate those loans into the Direct Loan Program by October 31, 2022.
    • Although consolidating restarts the clock on loan forgiveness under traditional PSLF rules, payments made prior to consolidation will count towards forgiveness under the Limited PSLF Waiver.
  • If payments were paused on your Direct Loans due to the COVID-19 emergency, those months will also count towards loan forgiveness under the waiver.
  • Forbearance periods of 12 or more consecutive months, or 36 or more cumulative months will count towards forgiveness under the waiver. The U.S. Department of Education will begin making account adjustments to include these periods in fall 2022.
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