Getting Ride of Your Student Loan

With college fees rising up & Business schools becoming expensive, professional education is becoming more and dearer with each passing day. Hence students opt to take education loans either for a complete degree or on a semester basis. It has been noticed that managing the repayment of education loan is difficult at times for the passed out students. A survey shows that there are many cases when the education loan payment exceeds their original cost. One can opt for forbearance or deferment but anyway the loan has to be repaid since these options are only temporary solutions. They do not close down the loan.

Unlike other debts, student loan is not discharged if one declares bankruptcy, so the individual still holds the liability to pay off the student loan. Disposing of the education loan is necessary to fetch other loans in future. Because default of a loan is a bad option one can opt for as it will tarnish the financial records of the individual that will absolutely bar that person to get any loans for future usage. But there are certain methods by which one can legally dispose off the debts or take them off from your financial records.

The details of the method are briefed below:

• When the debtor is dead or 100% disabled then the debtors or their heirs are not liable to pay off the student loan. It is necessary that the debtor’s family has the information about the fact that the student loan gets waived off in case the debtors dies suddenly. Otherwise if the debtor has faced an accident or facing a long term illness which does not allow him or her to work then also the loan gets discharged as per certain guidelines.
• In case the education institution closes before the debtor’s course or degree is complete, then the debtor does not stand responsible to pay off the loan. The loan stands cancelled fully and his or her credit report becomes clean
• The debtors can enroll in Peace Corps VISTA or can teach in a low income school for five years who are paid in nuts for teaching. Above this, these schools or Peace Corps provides you with a pay of 15% of the loaned amount each year as part of the program. This 15% directly goes to the loan agency hence there is part pay off of the loan. So the debtor can have some peace of mind.
• Though student loan is not dischargeable if one declares bankruptcy but one can request for a special “hardship hearing” where one can explain to the judge that repaying the debt would become an undue hardship on you. Only a small percentage of debtors get waiver through this mode.
• If one can prove that the school or college they have passed out have done a “False Certification” by saying that the course or the degree will benefit the individual but the promises are being fraudulent then one can get their loan discharged under certain guidelines.

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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..

Taxability of Student Loan Forgiveness

You are aware of the student loan forgiveness programs. But do you know the taxability of this sort of program? Here is the answer for you!

There is a definition of “student loan” in IRC section 108(f)(2) which states that it includes any loan that are given to help a person in attending a learning institute. The United States or any US agency or a state government and or any other political subdivision of a state government can give this student loan. Besides this, the charitable organizations that control a public hospital are capable of providing the students with their required loan. Many of the educational institutes also have the power to offer the students the loan, but in such cases, the finances must be provided from the provided from the other three resources stated above or you have to make the loan under a reimbursement assistance program of that learning institution, which is intended to persuade the students of that organization to serve in professions or in places that haven’t meet with the requirements.

Some of the loan forgiveness programs come under the tax while some are not taxable. According to the regulations of the recent times, the amount that the Government forgives is actually the taxable income of that year when the loan was written off. However, there are some exceptions to this rule. In reality, the Government excludes the student loan forgiveness program from the earnings in case this forgiveness is dependent on the student who is working for a particular number of years in any occupation.

There are numerous student loan forgiveness programs that are not taxable; for instance, the Public service loan forgiveness, forgiveness for teacher loan, assistance program of loan repaying of the law school as well as the National Health Service Corps Loan Repayment Program don’t fall under the taxes. However, if there are any Loan discharges for closed schools or any case of false certification or unpaid reimbursement, then these are considered as the taxable earnings. Any loan at the time of death or disability too is regarded as the taxable earnings. In addition to this, the mercy on the outstanding balance under income-contingent reimbursement as well as earning-based refunds after 25 years is also considered taxable earnings.

The treatments of loan forgiveness vary with states, which means different states have their different taxable loan forgiveness programs. For instance, in Pennsylvania, the student loan forgiveness program is not regarded as the taxable income.

Many applications as well as suggestions are being given to the Government in order that other types of student loan forgiveness plan are excluded from the list of the taxable earnings. For example, it is proposed that the forgiveness of income-contingent settlement after 25 years should not be considered under the taxable incomes, however, nothing has finalized still now. According to the common people, any person who is not able to pay the taxes on his or her forgiveness from his or her income should not be pressurized to repay that loan..

Stafford Loan Forgiveness for Legal and Medical Studies

Are you studying to become attorneys or advocates to serve the non-profit organizations or you want to work for the well being of society? Then just relax! Your institutions will give you the Stafford loan forgiveness for legal studies. The students of law learn numerous subjects in their law school. For instance, if the legal students are learning the law enforcement, parole, or probation, they may apply to get the Micheal Murphys Loan and thereby they will get the chance to work for one-fifth in the year as the State Trooper.

The same happens with the doctors, registered nurses as well as the medical students. The U.S. Department of Health and Human Sources provide the physicians and the certified nurses with the Stafford loan forgiveness. The doctors are offered the special consideration by the National Health Service Corps program. The Nursing Education Loan Program gives the nurses, who have proper licenses, the loan forgiveness. But there is one condition for this loan forgiveness. And that is, the physicians as well as the nurses should have completed their respective work for some years in such a region, which has no doctor and lacks the appropriate medical care. These regions also include the areas which are remote and which economically are not sounded.

The loan reimbursement program of US National Institutes of Health pays the Scientists at most $35,000 to repay the loan. However, in such cases, they have to be the citizens of the US and they have to carry out clinical medical investigation in US as well. A lot of hospitals as well as private clinics employ medical students as physical therapists or doctors so that they are excused from refunding the loan. The veterinarians, who promise to work for three years in an area that lacks the veterinary, are provided with the loan forgiveness of $25,000 per year for those three consecutive years. And US Department of Agriculture’s Veterinary Medicine Loan Repayment Program or in short VMLRP offers this loan forgiveness.

If you live in California, then the Office of Statewide Health Planning and Development can give you the loan forgiveness. Other states in the US have the same type of programs. The medical schools are provided with a lot of loans refunding programs that are:

1. Disadvantaged Health Professions Faculty Loan Repayment Program
2. US Air Force, Army, and Navy Financial Assistance Programs
3. Indian Health Service or IHS Loan Repayment Program
4. The Nicholas J. Pisacano MD Memorial Foundation Inc. offers mercy on your loan by the American Academy of Family Physicians Foundation program.
5. The NIH institute carries out several programs for loan settlement to students, such as, NIH Clinical Research Loan Repayment Program as well as NIH General Research Loan Repayment Program.

1. The American Association of Medical Colleges or AAMC keeps a record of state along with other loan refunding programs for the students of the medical schools.

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The New Student Loan Forgiveness Act of 2012 for the Low-Income Borrowers

Repaying the student loan is a tough ask for the college graduates and the list of the defaulters are really becoming longer day-by-day. The call for student loan forgiveness is getting louder and so President Obama has proposed to take quick actions on the new student loan forgiveness act of 2012 and loan consolidation plans to help the graduates repay back their loans and rejuvenate the economy of the United States of America.

President Obama has decided to operate the Student loan forgiveness program on a wider scale so that more and more students can enjoy the privilege of this plan. Now the loans borrowed for college education will be much easier to deal with as the students can now repay back their loans when they start earning. The present government is busy fabricating new rules for the “Pay As You Earn” program, which is emerging slowly. The main objective of this plan will be consolidation of the student loan at a low interest rate. This plan has three salient features, which are

The term of loan repayment

Each student loan that needs to be consolidates will retain back its original payment term that will allow the borrower to pay less interest during the term of the loan than what he or she would have paid if they were under the previous consolidation programs.

The rate of Interest

The rate of interest will be fixed that will not exceed 8.25% with a reduction of 0.25% applied. The lower interest rate will minimize the number of defaulters and will speed up the recovery of the principal amount much faster.

Benefit offered for using the Electronic Debit Payment

The students who are willing to utilize the new consolidation plan will be offered an extra 0.25% discounts if they use the Electronic debit payment system of the Education Department.

This new loan consolidation program is opened for a six months slot that is from Jan 2012 to June 2012. So the students who really need to get into this consolidation program better hurry. This consolidation program is open for people holding private or government loans. This is a good way to slash down the interest rate while the government is geared up for an income based loan repayment program that was scheduled to be launched in the year 2014.However, the borrowers will have to pay their loan installments though that would be only 10% of their income and most importantly the student loan would be forgiven after 20 years.

Though there is still an obscurity about the exact number of students this new loan plan is aiming to help but it is estimated that from 450,000 to 6 million students will be benefited from this program.

This loan would be a great help for borrowers who has low income. The monthly installment will be based on the amount that he or she earns above 150% of the poverty line and if he or she is unemployed or earn less than the current poverty threshold then they need not pay any installments at all..

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