Wednesday, September 14, 2022

Student Loan Forgiveness By Government

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More borrowers are now eligible for public service loan forgiveness — but you may need to apply sooner than the Oct. 31 deadline.

Alix Langone

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Alix is a staff writer for CNET Money where she focuses on real estate, housing and the mortgage industry. She previously reported on retirement and investing for Money.com and was a staff writer at Time magazine. She has written for various publications, such as Fortune, InStyle and Travel + Leisure, and she also worked in social media and digital production at NBC Nightly News with Lester Holt and NY1. She graduated from the Craig Newmark Graduate School of Journalism at CUNY and Villanova University. When not checking Twitter, Alix likes to hike, play tennis and watch her neighbors’ dogs. Now based out of Los Angeles, Alix doesn’t miss the New York City subway one bit.

If you’re eligible for Public Service Loan Forgiveness, the time to act is now.

To date, the PSLF program has forgiven more than $8 billion in federal student loans. After rule changes in and again in April of this year, student loan forgiveness was extended to even more public servants — teachers, government workers, first responders and firefighters — who may have previously been ineligible for the PSLF program.

Federal Scholarships And Grants

The federal government offers many different education grants which do not have to be repaid. Most of these grants require a showing of financial need.

Federal grants include Federal Pell Grants and Teacher Education Assistance for College and Higher Education Grants. You need to submit a Free Application for Federal Student Aid to be considered for federal grants.

Learn more about Federal Scholarships and Grants on Federal Student Aid, an office of the U.S. Department of Education.

A Growing Sense The System Is Broken

With the cost of attending higher education ballooning and household wages sputtering over the last few decades, more families have had to turn to loans to cover their children’s college bills. Average student loan balances at graduation have almost tripled since 1980, from around $12,000 to more than $30,000 today.

The country’s outstanding education debt balance now exceeds $1.7 trillion and poses a larger burden to households than credit card or auto debt.

Millions of people enrolled in programs that supposedly lead to debt forgiveness after a certain period of time haven’t received promised help. That includes borrowers in income-driven repayment plans and the popular Public Service Loan Forgiveness Program, who have been stuck continuing to pay after being rejected for the relief, often for technical and confusing reasons.

The companies that service federal student loans also have been accused of giving borrowers wrong and incomplete information.

“There have been decades of mismanagement, abusive practices and general incompetence, which has resulted in millions of borrowers missing out on many of the vital programs and benefits afforded under the law,” Yu said.

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Student Loan Forgiveness For Doctors And Nurses In Canada

Eligible family doctors, residents in family medicine, nurse practitioners, and nurses can get Canada Student Loan forgiveness through the federal government. However, only the federal portion of the loan can be forgiven .

Eligibility For Student Loan Forgiveness For Doctors and Nurses in Canada

To qualify for this type of Canada Student Loan forgiveness, you must:

  • Have a Canada Student Loan thats in good financial standing
  • Be working as an eligible medical professional in an under-served or remote region with a lack of proper healthcare .
  • Have been employed for at least one consecutive year in an underserved or remote community and provided at least 400 hours of in-person service.
  • Submit an this application

Eligible Medical Professionals

To qualify for Canada Student Loan forgiveness, you must be one of the following medical professionals :

  • Family
  • Nurse Practitioner
  • Family Medical Resident

You may get Canada Student Loan forgiveness for nurses and family doctors and if you are:

  • Enrolled in full-time studies
  • Repaying a student loan
  • In your non-repayment period

If your loan is in its repayment period, your monthly payments are still mandatory. That said, youre allowed to work as an eligible medical professional in more than one remote or under-served community and with multiple employers if you perform at least 400 in-person hours over a maximum period of 12-months.

Check out what happens to your student debt when you die.

Changes In Federal Student Loan Programs

Student Loan Forgiveness

Since 1997, changes to the federal student loan program, including programs that set certain borrowers on a path toward forgiveness, new repayment methods and the pause on student loan payments that was enacted at the start of the pandemic, have driven a 33 percent increase in the cost of the student loan program, totaling $102 billion.

Other changes included the Taxpayer-Teacher Protection Act of 2004, which increased the amount of loan forgiveness that certain teachers could be eligible for, resulting in a $48 million increase the College Cost Reduction and Access Act of 2007, which re-established models for income-driven repayment and PSLF, resulting in a $4 billion increase and the Revised Pay as You Earn plan, a form of IDR, resulting in a $9.9 billion increase. In total, these changes have accounted for a 6 percent increase, totaling $20 billion.

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Leaves And Change In Employment

Loan forgiveness is not pro-rated. If you leave government in the middle of the year, you’re not entitled to any portion of the loan forgiveness for that year and you must start making payments on the B.C. portion of your Canada-B.C. integrated student loan.

If you return to full-time studies, you’re not eligible as your loans will be in non-payment status during that time. You can re-apply when you return to work.

  • For less than 3 months during the 12 month service period being reviewed, you’re eligible for loan forgiveness
  • For 3 months or more during the 12 month service period being reviewed, you’re ineligible to receive loan forgiveness and will be removed from the program

Employees on general leave can’t apply while on leave, but are invited to apply or reapply to the program once they return to work.

How To Clear Student Loans

Federal student loans come with more benefits and are more flexible when compared to private student loans. They can also be forgiven in certain conditions. This is a reason for most of the borrowers to think of paying off private student loans before federal student loans. But those who choose this idea must make sure that they enroll in an income-driven repayment plan.

A Student loan forgiveness sounds like a very good plan but in the long run, it may cost you more. Chasing forgiveness can be expensive because borrowers the low monthly payments can mean significant interest accumulation. Taking 20 years to pay off a loan is more expensive when compared to paying off it in 10 years. And the forgiveness programs charge you with extra taxes for the forgiven loan amount.

For some borrowers, a student loan forgiveness program may become expensive when compared to just paying off the loan in full. Whereas it may be the best choice. For the borrowers who are stuck in the middle of these scenarios, an income-driven repayment plan will be a better way to sort out the problem.

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What About Borrowers Who Are In Default

Borrowers in default will automatically be given a “fresh start,” according to a statement from the US Department of Education. Their accounts will be returned to good standing and any delinquency will be “cured,” allowing them to repair their credit and gain access to programs like income-driven repayment and Public Service Loan Forgiveness, which benefits those who work for nonprofits.

“During the pause, we will continue our preparations to give borrowers a fresh start and to ensure that all borrowers have access to repayment plans that meet their financial situations and needs,” Miguel Cardona, the education secretary, said in a statement.

Latest Student Loan Forgiveness Updates

40,000 federal student loan borrowers will receive loan forgiveness

President Biden announced on April 6, 2022 in a video posted to Twitter that the pause on federal student loan repayments would be extended again, until August 31, 2022. The President ended the video by telling borrowers to visit studentaid.gov if they need help preparing for repayment. This continues a period of uncertainty for federal student loan borrowers who have not been required to make payments since March 2020. A further announcement related to the payment pause or large-scale student loan forgiveness is not expected until later in the Summer.

The Administration has thus far focused on discharging student loans borrowed to attend for-profit colleges that were found to be defrauding student borrowers, such as Corinthian Colleges. The Education Department announced a $5.8 billion group discharge to cancel loans associated with those schools on June 1, 2022.

On December 22, 2021, Joe Biden announced his third extension of the federal student loan payment pause and interest waiver. Federal student loans would remain interest-free until May 1, 2022. There was no reference in that announcement about a loan forgiveness or cancellation program that the Biden administration might be pursuing but President Biden asked borrowers to do their part to prepare for repayment.

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What If You Default

You should try to avoid defaulting on your student loans. A default will negatively impact your credit score and your ability to obtain credit in the future. But if you are unable to avoid default, you may have options to help repair your credit and get you back on track. You can consider contacting your servicer to discuss your options and ask them to work with you toward a sensible solution.

While each person’s particular situation is different, below you will find some general information regarding default and your post-default options:

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.

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Student Loan Forgiveness Programs

The Department of Personnel and Administration publishes annual, up-to-date information about eligibility requirements for federal loan forgiveness programs designed to incentivize public service and help make the State of Colorado an employer of choice. Recent events have made student loan repayment difficult for many public employees. On this page you can find additional information and strategies for reducing anxiety around your student loan.

Borrower Defense To Repayment

As more student loans head into default the federal government laid out ...

If you attended a school that you feel misled you or engaged in other misconduct in violation of the law, you may be eligible for discharge of your federal student loans through borrower defense to repayment. To apply for federal loan discharge based on borrower defense, complete an online application on the U.S. Department of Education website or complete a fillable PDF application form.

Along with your application, we recommend including supporting documentation, such as:

  • Documentation to confirm the school for which you are applying for borrower defense, your program of study, and your dates of enrollment
  • Promotional materials from the school
  • Emails with school officials
  • Your school’s manual or course catalog

Visit StudentAid.gov/borrower-defense for more information about borrower defense to repayment.

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Expansion To The Payment Pause And Interest Waiver

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.

Popular Arguments Against Student Debt Cancellation

  • Student debt cancellation is inherently unfair. Critics argue those who didnt go to college or those who already paid off their student loans would not benefit from student debt cancellation. Critics say cancellation would benefit only the 13% of the population who attend college, and argue cancellation is unnecessary because those with college educations tend to earn more.

  • Broad student debt cancellation is regressive. Research from a January 2022 Brookings Institution study argues cancellation would disproportionately benefit wealthy student loan borrowers those with the highest amounts of debt typically have attended graduate school. Holding an advanced degree tends to correlate with higher earnings.

  • One-time cancellation doesnt solve tomorrows student debt problem. If all student debt were eliminated, overall debt would return to the current level by 2035, according to July 2021 estimates by the Committee for a Responsible Federal Budget, a right-center public policy organization. If $10,000 in debt per borrower were eliminated, overall debt would rise to current levels by 2025.

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Restoration Of Total And Permanent Disability Discharges

Some disabled borrowers who qualified for a Total and Permanent Disability Discharge had their repayment obligation reinstated because they failed to submit the annual earnings paperwork during the pandemic. The U.S. Department of Education will reverse the reinstatements and provide other student loan debt relief for 230,000 borrowers with Total and Permanent Disability Discharges.

Loan Forgiveness For Lawyers

Half a million student loan borrowers could benefit from changes to federal forgiveness program

There are about a million jokes about lawyers being bloodsuckers on society, but the federal loan program begs to differ. There is a financial incentive for lawyers to practice in public service or government offices in order to have some portion of their law school loan forgiven.

For example, the Department of Justice provides up to $60,000 in loan forgiveness for lawyers who work there for at least three years. The Air Force Judge Advocate program offers up to $65,000 in loan forgiveness.

The best place to start looking might be your own law school, since several colleges forgive some or all of the student loans for students who make less than $60,000 a year.

That amount varies, so check with your school to get actual requirements and amount forgiven. If you cant qualify for a forgiveness program, look into refinancing your law school debt.

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Can You Get A Student Loan Forgiven

Canadian students with provincial or federal student loans are lucky to have the Repayment Assistance Plan . This program allows the federal and provincial government to share the cost of a loan with the student, who will only have to pay back what they can comfortably afford. While most cases involve reduced payments, students may also have the option of not making any payments during individual 6-month periods.

The problem is that the Repayment Assistance Plan cant actually get your student loan forgiven. Dont worry, because there are several loan forgiveness programs that you can apply for in Canada, including the ones below.

Learn how to pay off your student debt quickly.

Cancelling A Student Loan

Sometimes plans change. You may be able to cancel student loans that you no longer need or want.

Private Loans: You can cancel a private student loan up until midnight on the third business days after you receive the final notice of acceptance. Your lender or school cannot disburse your loan funds until after this three-day cancellation period expires.

Federal Loans: You can cancel your federal loans if you inform your school that you no longer want the loans by the later of:

  • The first day of the loan payment period .
  • If you did give your school affirmative written confirmation of the types and amounts of federal student loans that you wanted for the loan year before your school credited your loan funds, then you can cancel within 14 days after your school notifies you that you have a right to cancel your loans.
  • If you did not give your school affirmative written confirmation of the types and amounts of federal student loans that you wanted for the loan year before your school credited your loan funds, then you can cancel within 30 days after your school notifies you that you have a right to cancel your loans.

Tip: You might be able to cancel your federal loan after this time period, but that right is not guaranteed.

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Flaws In Estimates Of Borrower Behavior

The largest driver of the increase in federal student loan costs to the government was a gap in available data, the report says. Limited data available to the department to estimate how borrowers are repaying their loans, how much money borrowers are making and how many borrowers will default have driven a $189 billion increase in cost since 1997, according to the report.

The departments inability to access data on borrowers income through the Internal Revenue Service has been highlighted as a key driver of internal difficulties in administering income-based repayment programs, including the possibility that Biden will cancel $10,000 in debt per borrower for those making under $150,000 a year.

Assumptions on borrowers repayment plan selection alone drove a $70 billion increase. One of the most common repayment plans, IDR, is especially difficult to estimate because the amount a borrower is required to pay each month changes if they have a change in their income. Almost half of federal student loans, 47 percent, are being repaid through IDR.

Additionally, changes to borrowers estimated income growth caused a $68 billion increase, and assumptions on how many borrowers will default caused a $23 billion increase.

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