Anyone carrying student loan debt should look at options for reducing or eliminating the total amount through loan forgiveness programs. There are specific eligibility requirements for this approach as well as differing discharge options.
Approximately 70 percent of all Americans graduate college with some degree of student loan indebtedness, and a recent report by Reuters shows both the extent of and prevalence of that debt is increasing for all age groups, with the 35-49 age bracket seeing a 47 percent increase in educational debt from 2008 to 2011.
This aid, which totals billions of dollars annually, is provided through federally funded loan programs as well as via private banks. While the loans ensure that people can obtain a higher education, the recession which began in late 2008 in America accompanied by unemployment hovering near 10 percent for three years has created a situation where student loan debt levels are now nearing $1 trillion, far exceeding the amount of credit card debt held by consumers.
Student Loan Forgiveness – Recent Developments
Prior to October 2011, federal student loan payments could be set at 15 percent of the holder’s discretionary income, with loan forgiveness after 25 years of payments. In late October, however, President Obama issued an executive order geared toward helping 1.6 million graduates lower their payments effective January 1, 2012. This measure put in place loan consolidation options for 6 million current students and reduced the interest rate being paid on existing loans by 0.5 percent. Additionally, the president has developed a plan that would go into effect in 2013 rather than 2014, which is what is currently called for, that would set payments at 10 percent of discretionary income with an option for loan forgiveness after 20 years of payments.
Federal Student Loan Forgiveness Options
As a result of the National Defense Education Act of 1958, Congress allowed for a portion of the Perkins loans and FFELP loans to be forgiven for certain teachers, provided that they met the eligibility requirements. Such requirements involve both the location of the school in question and the demand for secondary and elementary teachers attached to its work. If, for instance, the school serves a low-income area or special needs population, teachers employed there would likely qualify for a degree of loan forgiveness.
Medical doctors working in third world countries or areas that are considered to be at risk are also likely eligible for a degree of student loan forgiveness. The National Health Service Corps repays many student loans every year and there are also loan forgiveness options for professionals practicing law or medicine at non-profit organizations. Additionally, peace officers can seek loan forgiveness via the Law Enforcement Officials Student Loan Forgiveness Program.
Private Student Loan Forgiveness
Student loan forgiveness eligibility varies when a borrower has primarily received financing from private student loans and is much more difficult to obtain. The existing options are generally tied to work with non-profit organizations. Those who are currently offering charitable services in the Peace Corps or Vista volunteer programs, for instance, can apply to have a percentage or all of their private student loans paid. Working a minimum of 1700 hours in the Vista volunteer program will qualify the debt holder for compensation of approximately $4,725 toward private student loans.
Other Eligibility Options
Although it is not a pleasant consideration, student loan debts are automatically forgiven on the death of the loan holder. This at least ensures that the indebtedness will not pass to the next generation. Similarly, your loan can be discharged if you become permanently disabled and cannot earn a living as a result of the physical impairment.