Who Qualifies For Student Loan Forgiveness?

The flip-side of student loan

Everybody needs a good and effective education to lead a happy and wealthy life. Education is an aspect of a person’s life that one cannot ignore or be careless about it. The higher a person grows in his education ladder, the more he has to pay to afford it. More and more students are turning to financial institutions that provide educational loans at lower interest rates. Easy availability of student loans has paved the way for University aspirants to pursue their dreams and achieve their goal. There are numerous organizations that provide student loans to candidates who are willing to borrow money from them in order to pay the university charges and related expenditures. Professional courses are extremely expensive and arranging funds for such courses requires meritorious students enroll for scholarship programs. Despite this a student is often burdened by increasing debt amount which can put a student at the risk of becoming a defaulter. Today, American economy is facing too many crisis and bad debts are adding to this already bad situation. The federal government has come up with plans to control the increasing student loan debt by offering concessions to those who qualifies for student loan forgiveness.

Exemption from repayment

Those who have taken direct loans from the federal government are exempted from paying their interest amount while they are still enrolled to a university. Upon completion of study the student can avail additional grace period of six months before he starts repayment. With the current amendment if a student is working for public or nonprofit employer he or she can get the benefit of Public Service Loan Forgiveness (PSLF). Only direct loans are considered for this program and all the loans taken under Federal Family Education Loan (FFEL) schemes have to be converted into direct loan. Since FFEL has been abolished and the estimated outstanding loan amount is close to $400 billion, government has been trying to provide waiver to the borrowers in order to recover some portion of the bad debt. Newly amended plan targets borrowers who are at greater risks of becoming a defaulter due to multiple loans which require separate monthly payment of interest amount. Incase FFEL is converted into direct loan; the borrower has to make a single monthly payment reducing the chances of nonpayment. When a student has only one loan to pay he enjoys additional benefit of interest rate reduction, which is up to 0.25%. In case the payment is made through Department’s automatic debit system a student can benefit from further reduction of rate of interest.

Income Based Payment

Keeping in mind the economic down slide, the federal government has brought about several amendments in its current policies. A fact that, a student may fail to find a well paid job even after completing professional training is extremely disheartening. In the wake of sluggish market trend many loan borrower fail to repay their debt amount. This new policy allows a professional to pay a maximum of 15% of his/her discretionary income and provide forgiveness after 20 years. All these steps are directed towards helping the students and troubled economic situation..