If you spotted tens of thousands of dollars just lying around on the street, wouldn’t you pick it up?
Of course you would—which is why it’s difficult to believe that everyone who’s eligible for college student loan forgiveness doesn’t take advantage of it.
Student loan debt now averages more than $29,000 per borrower, up from $26,600 in 2011, according to The Project on Student Debt from the Institute for College Access and Success. Seven in 10 graduates are saddled with some kind of college-loan debt as they enter the real world.
Many recent grads run into overwhelming challenges to repay; 14 percent have had at least one past-due student loan account. And two of five student-loan borrowers are delinquent at some point within the first five years of repayment, according to the Institute for Higher Education Policy.
About one-quarter of the U.S. workforce could qualify for favorable loan repayment options extended to those in public-service fields, including an estimated 6.8 million in education, according to the Consumer Financial Protection Bureau (CFPB). Such options are extended to teachers because it’s forecasted that the United States will need more than 425,000 educators by the end of the decade to replace retiring baby boomers, and the profession’s average starting salary is about $35,670, according to the National Education Association.
Although there’s no official research finding that reveals how much money is being left on the table, the CFPB indicates that it’s likely “substantial.”
So why aren’t debt-strapped grads snatching up this cash?
“Awareness is the biggest issue,” says Robert Farrington, founder of The College Investor, an online resource dedicated to helping individuals get out of student-loan debt. “The majority of financial aid offices are all about getting the student into college in any way possible. … Once the student graduates, those aid offices don’t offer any help. It’s on the students, who by now are focused their careers.”
Big Savings for Those Who Qualify
Regardless of any obstacles, if you do qualify, then exploring loan forgiveness options will be well worth your time. In fact, if you’re a teacher and a new college loan borrower, you can have as much as $17,500 of a subsidized or non-subsidized loan forgiven.
This applies to the William D. Ford Federal Direct Loan (Direct Loan) Program and the Federal Family Education Loan (FFEL) Program loans. You’re eligible if you’ve been teaching full-time in a low-income elementary or secondary school, or an educational service agency, for five consecutive years.
In addition, the Federal Perkins Loan (Perkins Loan) Program loan allows for loan cancellations up to 100 percent after five years if you serve full-time in a public or nonprofit elementary or secondary school system as a teacher serving students from low-income families; a special education teacher; or a teacher in fields of math, science, foreign languages, bilingual education or other specialties for which your state determines there is a shortage of qualified educators.
There are other special circumstances that can result in a loan being forgiven, canceled or discharged—all of which means the loan doesn’t have to be repaid, according to the U.S. Department of Education. These include a total and permanent disability and, in certain cases, bankruptcy.
You also could look into the Income-Based Repayment (IBR) plan, which sets a borrower’s monthly payment at a fixed percentage of your income. As your income rises, however, your monthly payments will rise.
How to Claim Your Loan Forgiveness
To proceed with being considered for any forgiveness option, you must go through your student loan servicer and indicate which option you’re interested in, Farrington says.
Then, you’ll need to undergo what could be considerable paperwork and follow-through, including forms that your employer must sign.
Yes, if you’ve taught at different schools, you have to have each one sign off on the application. Yes, if you have multiple loans with different companies, you have to undergo the same process for each one.
Yes, all of this can get complicated and tedious.
But just think of the potential savings you’ll reap as a result: If you graduated with $30,000 in debt and have to pay nearly $350 a month (a typical cost), you’ll end up spending nearly $42,000 over 10 years to resolve the loan, Farrington estimates. With $17,500 forgiven, the payments will shrink to $248 after the fifth year. And you’d only spend just over $14,900 on the original $30,000 loan—a huge savings.
“It can get complex, but it’s worth it,” Farrington says. “You never want to walk away from ‘free’ money!”
One More Option to Ease Your Payments
Even if you can’t take advantage of student-loan forgiveness programs, you still may be able to reduce the interest rates on your loans. There aren’t any federal programs that can lower them, Farrington says, but most student loan-servicing companies offer incentives to do so.
“Some of the common ones include signing up for automatic payments, or direct deposit,” he says. “And many lenders will give you a generous rate reduction simply for paying your monthly obligation on time. This can reduce your interest rate by as much as 2 percent after 48 months. So it never hurts to inquire with your loan-servicing company about what may be available.”
For more information about loan-forgiveness options, click here.
To learn about and access the Consumer Financial Protection Bureau’s student-loan debt toolkit, click here.
This article was published in NEAchieve!