The Complete Guide to Federal Student Loan Debt Relief
Buried in student loan debt? Are you contemplating different ways to achieve federal student loan debt relief?
These days, it’s impossible to get a high-paying job without a college degree. Many universities have been taking advantage of this by jacking up tuition costs. How do people pay for college?
Upon graduation, the average college graduate owes over $37,000 in student loans. Americans owe $1.5 trillion in student debt. Suffice it to say, average Americans are undergoing a debt crisis.
Shackled with this much debt so early in life can completely suffocate your finances. But luckily there is help in the form of federal student loan debt relief. In this article, we’ll guide you through how to loosen the stranglehold debt has on your finances.
Breaking Down Federal Student Loan Debt Relief
The debt crisis forced the government to introduce programs to ease the debt burden. Below, we’ll break down each one and how they can help you.
The Obama Student Loan Forgiveness Program
Also known as the William D Ford Direct Loan program. The Obama Student Loan Forgiveness Program began in 2010. Included as part of the Health Care and Education Reconciliation Act.
This loan program allows you to take out federal loans and make payments based on 10% of their discretionary income. But this program is only beneficial for those that have already taken out loans.
The program allows you to consolidate all of your student loans into one big loan amount. Then, you can make payments on it to the government through 6 possible repayment plans:
Loan Forgiveness Using These Repayment Plans
- Standard Repayment: Under this payment plan, you would pay a fixed amount each month for the life of the loan. The size of the loan, the interest rate, and the length of the loan determines the fixed amount.
- Graduated Repayment: With this plan, you would start out paying less per month. As a result, the amount would increase over time.
- Income Contingent (ICR) Repayment: Here, the payment amount would be based on your income, family size, loan amount, and interest rate. If you’re really in a bind, you may pay as little as $0/month for a period of time.
- Income-Based (IBR) Repayment: Income-Based (IBR) Repayment: This payment plan bases your payment on solely your income and family size. The size of the loan and interest rate are not taken into account. But you would be required to pay 15% of your discretionary income towards your student loans.
- Pay As You Earn (PAYE) Repayment: This plan has the lowest monthly payment. It’s also based on your income like the IBR, but uses only 10% of your discretionary income.
- Revised Pay As You Earn (REPAYE) Repayment: This plan is the exact same as PAYE but is suited for married couples.
These repayment plans work because they reduce the interest rates on your loan payments. This saves you a ton of money over the course of your loan payment program.
On top of that, Obama’s program offers complete loan forgiveness. In fact, if you qualify for this aspect of the program, the total of your student loans will be forgiven after making 240 monthly payments.
The Public Service Loan Forgiveness Program
If you work a public service job, which is a job working for a government organization or a non-profit you can get your loans forgiven after just 10 years, or 120 monthly payments.
After those 10 years, you can just write the remaining balance off, similar to Obama’s program.
There is just one major stipulation in regard to this program. Only payments made after October 1, 2007, can count towards your 120 monthly payments. This makes it so that the first time anyone can begin to qualify for this program is in October 2017.
Nursing Student Loan Forgiveness
If you’re a nurse or are thinking about becoming a nurse, you can qualify for one of three different federal loan forgiveness programs:
- NURSE Corps Loan Repayment Program (NHSC): If you serve just 2 years at a qualifying health facility, the government will pay off 60% of your nursing loans. For a third year, they’ll pay off an additional 25% of your balance.
- Perkins Loan Cancellation Program for Nurses & Licensed Medical Technicians: To qualify for this program you just have to serve as a Nurse or LMT at a qualifying hospital for five years and the government will erase all of your Perkins loans. Of course, you have to have taken out a Perkins loan originally to qualify for this program.
- Public Service Loan Forgiveness Program: This is a bit redundant, but working as a nurse qualifies you or the aforementioned Public Service Forgiveness Program by default.
Federal Military Loan Forgiveness Programs
If you’re a veteran, the federal government provides several loan forgiveness options. However, they are sometimes the most difficult to qualify for.
Here are the two best:
- Army College Loan Repayment Program: This program offers up to $65,000 in loan forgiveness benefits. They are doled out on an annual basis that begins after you first qualify for your first year of military service.
- Army Reserves College Loan Repayment Program: If enlisted in the Army Reserves, you can also start qualifying for loan forgiveness after your first year of service. However, you only receive half of the benefits that traditional Army personnel receive.
Other branches of the military – the Navy, Coast Guard, and Air Force – also have loan forgiveness plans that almost exactly mirror these two plans. However, the Marines seem to get short shrift here, as they do not benefit from a similar loan forgiveness program.
Looking For More Student Debt Help?
Hopefully, this guide on federal student loan debt relief has set you on your way towards easing your debt burden. Regardless of your debt situation, there is likely a debt relief program out there for you.
If you need any more information or assistance regarding your college loans, check out the student loans section of our website.
Student loans can be suffocating, but they don’t have to be.
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