Ultimate Guide to Teacher Student Loan Forgiveness

With reporting by Hannah Rounds and Brittney Laryea

Becoming a schoolteacher is heralded as a rewarding profession but not one that often comes with a large paycheck. Starting salaries for public school teachers range from $27,000 to $48,000, according to the National Education Association. And yet, teachers who graduate with a Master in Education carry an average of $50,000 in student loan debt.

With salaries like these, it’s no wonder teachers can struggle to afford their student loan payments. Thankfully, classroom teachers qualify for many debt forgiveness programs. These programs can help give teachers an extra boost to help them pay down debt while working.

These are the most important student loan forgiveness programs for teachers, which we’ll review in detail in this guide.

To skip ahead to the program you’re interested in, just click the links below.

Public Service Loan Forgiveness

Public Service Loan Forgiveness is a 2007 program that originally promised to forgive federal student loans for any employees of nonprofit or public sector companies. That, of course, includes teachers.  Under the program, borrowers who made 120 on-time payments would ultimately qualify for loan forgiveness.

However, the program’s future is now uncertain. A proposed education budget from the White House appears to eliminate the program, and it is not yet clear whether or not enrolled workers will have their loans forgiven as promised. Any budget will have to receive Congressional approval, which means we may not have a certain answer for months to come.

How do l know if I’m eligible?

Teachers at nonprofit schools are eligible for Public Service Loan Forgiveness. This includes public and private nonprofit schools. To qualify, teachers must make 120 on-time payments while working full time in a public service role.

The 120 payments do not have to be consecutive. However, you must pay the full amount listed on your bill. Additionally, your loans must be in good standing when you make the payment.

IMPORTANT: You can only qualify for loan forgiveness if you are enrolled in a qualified income-driven repayment option.  Learn more about income-driven repayment plans here.

Also, payments only count toward forgiveness if your loan is in active status. That means any payments made while loans are in the six-month grace period, deferment, forbearance, or default do not count toward forgiveness.

How can I be sure my employer is covered by PSLF?

There has been a lot of confusion about which employers are considered nonprofit or public service organizations. To be sure your employer is eligible, you should submit an employment certification form to FedLoan Servicing.

Although the future of the loan forgiveness program remains uncertain, borrowers may still want to prepare for a positive outcome and enroll in hopes that the program will continue.

How much of my loan will be forgiven?

After 120 payments, the government will cancel 100% of the remaining balance and interest on your Direct Federal Loans.

Direct Federal Loans include: Direct Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.

Will I have to pay taxes?

Public Service Loan Forgiveness (PSLF) is completely tax-free. You will not see an increased tax bill the year your loans are forgiven.

How to claim Public Student Loan Forgiveness

As the program launched in 2007 and requires 10 years of on-time payments, the first group of graduates who could be eligible for PSLF will begin submitting their applications in 2017.

But don’t expect it to happen automatically. Even if you qualify for loan forgiveness, the government will not automatically discharge your loans. You need to submit the PSLF application to receive loan forgiveness.

The applications for loan forgiveness are not yet available. The U.S. Department of Education will make them available before October 2017.

What if I have a Parent Plus, Perkins or FFEL loan?

As it stands, some types of federal student loans — such as Parent PLUS, Perkins and Federal Family Education Loans — are not included under the PSLF program. One way to get around this is by consolidating those loans through the federal direct consolidation program. If you take this route, the entire consolidation loan will be forgiven.

PSLF works best in conjunction with an income-based repayment plan. These plans lower your monthly payments.

Since you will qualify for loan forgiveness, this means more money in your pocket. Just remember, you must keep your loans in good standing — making 120 on-time consecutive payments — to qualify for forgiveness.

Federal Teacher Loan Forgiveness

The Federal Teacher Loan Forgiveness program encourages teachers to work in the neediest areas of the country. Teachers who qualify can have up to $17,500 in federal loans forgiven after five years.

How do I know if I’m eligible for Federal Teacher Loan Forgiveness?

Teachers must complete five consecutive years of teaching at a low-income (Title I) school. If your school transitions off the list after your first year of teaching, your work in that school still counts toward forgiveness.

Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Stafford Loans can be forgiven. Loans must have originated after October 1, 1998. This is important for anyone who hasn’t paid off loans and wants to consider teaching as a second career.

Your loans may not be in default at the end of your five years of teaching. The only exception includes loans that are set up in a repayment arrangement.

You qualify for teacher loan forgiveness as long as you are on a qualified repayment option. These include the standard 10 year repayment plans or the payments required by an income-based repayment plan. If your loan goes into a default, a repayment arrangement works with this program.

How much of my loan will be forgiven?

To receive the full $17,500 in forgiveness, you must meet one of two criteria: either work as a highly qualified math or science teacher in a secondary school, or work as a qualified special education teacher for children with disabilities.

Other highly qualified teachers can have up to $5,000 of loans forgiven if they work in Title I schools.

You’ll notice that all teachers must be “highly qualified.” To meet the highly qualified standard, you must be licensed in the state you work, hold a bachelor’s degree, and demonstrate competence in the subject(s) you teach. Do you need to check whether you’re highly qualified? The U.S. Department of Education explains qualification in detail.

Will I have to pay taxes?

The Federal Teacher Loan Forgiveness program forgives your loans and does not result in a taxable event.

How to apply

Qualified teachers must submit this application with administrative certification. Be sure you work with your school’s administration in advance.

Tips and tricks

Consider teaching at a Title I school directly after graduation. The loan forgiveness may help you achieve debt freedom within five years. Consider an income-based repayment program to lower your payments while you’re teaching.

Teacher Cancellation for Federal Perkins Loans

If you’re a teacher who took out a Federal Perkins Loan from your school, you may qualify for loan cancellation. Teachers can cancel up to 100% of their Perkins Loans after five years.

How do loans become eligible?

The teacher cancellation program for Perkins Loans is one the most lenient programs for loan forgiveness.

You will qualify to have loans forgiven if you meet any one of these three requirements:

  • You work full time in a low-income (Title I) school.
  • You work full time as a special education teacher.
  • You work full time in a designated shortage area (such as math, science, foreign language, bilingual education, or any shortage area declared by your state).

If you work part time at multiple qualifying schools, you may qualify for loan cancellation.

Your loans may be in a grace period, deferment, or any qualified repayment plan at the time of discharge. They may not be in default.

Also, you must be enrolled in a qualified repayment option. Your payment plan could be the standard 10 year repayment plans or an income-based repayment plan. If you qualify fordeferment, your loans may still be eligible for cancellation.

How much of my loan will be forgiven?

Over the course of five years, 100% of your Federal Perkins Loan will be forgiven. The discharge occurs at the end of each academic year. In years 1 and 2, the government discharges 15% of the principal balance of the loan. It cancels 20% of the loan in years 3 and 4 of service. The final year, the remaining 30% of your loan will be canceled.

In most cases, the five years of service do not have to be consecutive. However, this isn’t always the case. The university that issued your Perkins Loan administers the loan cancellation program. That means you need to check with your alma mater for complete details.

Will I have to pay taxes?

This program forgives your loans and does not result in a taxable event.

How to apply

You must request the appropriate forms from the university that holds the loans. If you don’t know the office that administers Perkins Loans, contact your university’s financial aid office.

Tips and tricks

If your Federal Perkins Loan qualifies for deferment, take advantage of this option. Under deferment, you don’t have to make any payments on the loan. At the same time, the government pays any accruing interest. Teachers who qualify for deferment can have 100% of their Perkins Loan forgiven without ever paying a dime.

TEACH Grant

The Teacher Education Assistance for College and Higher Education (TEACH) Grant isn’t like other loan cancellation programs. Under the terms of the program, you accept the money during your college years. Eligible students can receive a grant of up to $4,000 per year of education. After you graduate, you agree to work as a teacher for four years in a high-need field in schools that serve low-income families.

As long as you keep your end of the bargain, you don’t have to pay the money back. Otherwise, the grant transforms into a loan. If you’re planning to become a teacher, this can be a great opportunity. But you need to understand the details before you accept the grant.

How do I qualify for a TEACH Grant?

To qualify for a TEACH Grant, you must enroll in a teacher education program, complete the Free Application for Federal Student Aid, maintain a certain GPA (usually 3.25), and agree to a work requirement.

When you accept a TEACH Grant you agree to work as a teacher in a high-need field serving low-income families. You must complete four years of full-time teaching within eight years of graduation.

In this instance, you take the money first and agree to do the work later. That means that you’re taking on a risk.

You must complete a Free Application for Federal Student Aid form, and you must complete a training and counseling module from StudentAid.gov. Pay attention to the training; it will help you understand the risks of the TEACH Grant.

What happens if I change my mind?

If you don’t keep up your end of the bargain and meet all of the work requirements, the funds get converted into a Direct Unsubsidized Loan. What’s worse? The interest begins accruing from the point you received the grant. That means you’ll have the principal and interest to pay.

Don’t take a TEACH Grant unless you plan to meet the work requirements.

Will I have to pay taxes?

TEACH Grants are nontaxable education grants. However, you cannot claim a tax credit for education expenses paid by the grant.

Tips and tricks

The TEACH Grant offers a great way to graduate debt free, but you must commit to follow through. Don’t take the grant money unless you know that you can work as a teacher for at least four years.

Teacher Loan Forgiveness Programs by State

Several states offer generous loan forgiveness opportunities. You can use these programs in conjunction with the federal programs above. Qualified applicants might achieve debt freedom in a few years with these programs. These are some of the highlights of state loan forgiveness programs.

If your state isn’t listed, check out the database at the American Federation of Teachers. They keep track of most major scholarship and loan forgiveness opportunities for teachers.

Arkansas State Teachers Education Program

The Arkansas State Teachers Education Program (STEP) helps teachers with federal student loans pay back their loans. Teachers must work in geographical or subject areas with critical shortages.

Arkansas teachers with federal student loans can receive loan repayment assistance if they serve geographical areas with teacher shortages. They can also receive repayment assistance if they have licensure or endorsements in designated subject areas.

Eligible teachers can receive up to $3,000 per year that they teach in critical shortage areas. There is no lifetime maximum of loan forgiveness. Licensed minority teachers can receive an additional $1,000 for every year that they qualify for STEP.

Arkansas Teacher Opportunity Program (TOP)

The Teacher Opportunity Program, or TOP, awards tuition reimbursement grants up to $3000 of out-of-pocket expenses to licensed Arkansas classroom teachers and administrators with the Arkansas Department of Education.

Arkansas classroom teachers and administrators who declare an intention to continue employment as a classroom teacher or administrator in Arkansas after completing their program are eligible for TOP. Applicants must also have at least a 2.5 cumulative GPA in the courses funded by the TOP grant when they apply.

Applicants who meet all requirements can receive reimbursement for out-of-pocket expenses up to $3000 for courses related to employment. The grant reimburses educators up to 6 college credit hours each academic year.

Arkansas administrators and educators can find more information about TOP on the Arkansas Department of Higher Education website. Applicants must complete and submit an application to The Arkansas Department of Higher Education by June 1 each year.

Delaware Critical Need Scholarships

The Critical Need Scholarship program reimburses Delaware teachers for all or part of tuition and registration fees paid for courses that contribute toward the completion of a Standard Certification.

Full-time employees of a Delaware school district or charter school who teach on an Emergency Certificate in a critical need area as defined by the Delaware Department of Education. Applicants must also have a minimum 2.0 GPA.

The scholarship forgives all or part of tuition and registration fees paid up to $1,443 for undergraduate coursework or up to the cost of three credits per term for graduate coursework, not to exceed the cost of three credits at the University of Delaware.Courses must contribute toward the completion of a Standard Certification.

Teachers can find more information and application instructions here. You must apply through the school district or charter school where you are employed. The application cycles twice each year; one deadline is in January and the other is in June.

Illinois Teacher Loan Repayment Program

The Illinois Teacher Loan Repayment Program offers up to $5,000 to Illinois teachers who teach in low-income schools in Illinois. This award is meant to encourage the best teachers to serve students in high-need areas.

The Illinois Teacher Loan Repayment Program is a unique loan forgiveness matching program. Teachers must meet every qualification to receive Federal Teacher Loan Forgiveness. In addition, teachers must have served all five years in a low-income Illinois school.

Teachers who meet all requirements can receive federal loan forgiveness up to $5,000. You must apply for Illinois loan repayment funds within six months of receiving federal loan forgiveness.

Iowa Teacher Shortage Forgivable Loan Program

Iowa offers student loan repayment assistance to state-certified teachers as an incentive for educators to teach in subjects with a shortage of instructors through the state’s Teacher Shortage Forgivable Loan Program.

Current Iowa teachers who began their first teaching position in Iowa after July 1, 2007 and are completing studies in a designated shortage subject area are eligible for the Teacher Shortage Forgivable Loan Program.

Teachers must have a balance on either a Direct Stafford Loan or Direct Consolidation Loan and agree to teach in the shortage subject area upon graduation. For 2016 graduates, the maximum award is $6,858.

Recipients are awarded up to 20% of their remaining loan balance annually, up to the average resident tuition rate for students attending Iowa’s Regent Universities the year following graduation.

Teachers can find more information on the Iowa College Student Aid Commission website. The 2016-17 application window is between January 1 and March 31, 2017, for the academic year. Recipients must reapply each year.

Maryland Janet L. Hoffman Loan Assistance Repayment Program

Maryland offers loan repayment assistance to excellent teachers who teach STEM subjects or in low-income schools.

Only teachers who earned a degree from a college in Maryland or a resident teacher certificate from the Maryland State Department of Education qualify for this award. Additionally, qualified Maryland teachers must serve in low-income (Title I) schools or other schools designated for improvement. Alternatively, licensed teachers who work in designated subject areas such as STEM, foreign languages, or special education can qualify.

To qualify, you must earn less than $60,000 per year or $130,000 if married filing jointly.

Qualified teachers can have up to $30,000 repaid over the course of three years. The repayment assistance you receive depends on your overall debt load.

Total Debt Overall Award Limit Yearly Payment
$75,001 – Over $30,000 $10,000
$40,001 – $75,000 $18,000 $6,000
$15,001 – $40,000 $9,000 $3,000
$15,000 – Below $4,500 $1,500

The Janet L. Hoffman Loan Assistance Repayment Program offers some of the most generous loan repayment terms. However, the program has stringent eligibility requirements. To find out more about your eligibility, visit the Maryland Higher Education Commission website.

Mississippi Graduate Teacher Forgivable Loan Program (GTS)

The Graduate Teacher and the Counseling and School Administration Forgivable Loan Program (GTS/CSA) was established to encourage classroom teachers at Mississippi’s public schools to pursue advanced education degrees.

Current full-time Mississippi public school teachers earning their first master’s degree and Class ‘AA’ educator’s license in an approved full-time program of study at a Mississippi college or university are eligible for the GTS program.

Selected applicants are awarded $125 per credit hour for up to 12 credit hours of eligible coursework.

Teachers can find more information about GTS program on the Rise Up Mississippi website. Complete and submit the online application with all supporting documentation by the year’s stated deadline. The application must be completed each year to remain eligible.

Mississippi Teacher Loan Repayment Program (MTLR)

The Mississippi Teacher Loan Repayment Program, or MTLR program, helps teachers pay back undergraduate student loans for up to four years or $12,000.

Mississippi teachers who currently hold an Alternate Route Teaching License and teach in a Mississippi teacher critical shortage area or in any Mississippi public or charter school if teaching in a critical subject shortage area are eligible for the MTLR program. Perkins and Graduate-level loans are not eligible for repayment.

Recipients can receive a maximum $3000 annually toward their undergraduate loans for up to four years or $12,000.

Teachers can find more information on the Rise Up Mississippi website. Complete and submit the online application by the year’s stated deadline. The application must be completed each year to remain eligible.

Montana Quality Educator Loan Assistance Program

The Montana Quality Educator Loan Assistance Program encourages Montana teachers to serve in high-needs communities or in subject areas with critical shortages. The program provides direct loan repayment for teachers who meet the requirements.

Licensed Montana teachers who work in “impacted schools” in an academic area that has critical educator shortages. Impacted schools are more rural, have more economically disadvantaged students, or have trouble closing achievement gaps.

Montana will repay up to $3,000 a year for up to four years.

New York City Teach NYC

Teachers hired by the New York City Department of Education who work in specified shortage positions can receive up to $24,000 in loan forgiveness over the course of six consecutive years.

Teachers must work in a New York City school in one of the following designated shortage areas:

  • Bilingual special education
  • Bilingual school counselor
  • Bilingual school psychology
  • Bilingual school social worker
  • Blind and visually impaired (monolingual and bilingual)
  • Deaf and hard of hearing
  • Speech and language disabilities (monolingual and bilingual)

The NYC Department of Education will forgive one-sixth of your total debt load, each year for up to six consecutive years. The maximum award in one year is $4,000. The maximum lifetime award is $24,000.

North Dakota Teacher Shortage Loan Forgiveness Program

The North Dakota Teacher Shortage Loan Forgiveness Program encourages North Dakota teachers to teach in grades or content levels that have teacher shortages.

The North Dakota Department of Public Instruction identifies grades and content areas with teacher shortages. Teachers who work full time as instructors in those grades and content areas in North Dakota can receive loan forgiveness.

Teachers can receive up to $1,000 per year that they teach in a shortage area. The maximum lifetime award is $3,000.

This program is administered by the North Dakota University System. To get more information, teachers should visit the North Dakota University System website, call 701-328-2906, or email NDFinAid@ndus.edu.

Oklahoma Teacher Shortage Employment Incentive Program

Oklahoma’s Teacher Shortage Employment Incentive Program, or TSEIP, is a legislative program carried out by the Oklahoma State Regents for Higher Education to help attract and keep mathematics and science teachers in the state.

Oklahoma state-certified classroom teachers who are not yet certified to teach math or science are eligible for TSEIP. Teachers must also agree to teach in an Oklahoma public secondary school for at least five years.

TSEIP reimburses eligible student loan expenses or a cash equivalent. The amount reimbursed varies from year to year.

Teachers can find more information on about the TSEIP on the Oklahoma State Regents for Higher Education website. Fill out and submit the Participation Agreement Form to your institution’s TSEIP coordinator no later than the date of your graduation from a four-year college or university in Oklahoma.

South Carolina: Teachers Loan Program

The South Carolina Teachers Loan awards forgivable student loans to students studying to become public school teachers. The program was created as an incentive for state residents to pursue teaching careers.

South Carolina school teachers and residents enrolled at least half-time at an accredited institution. Students must already be enrolled in a teacher education program or express an intent to enroll in a teacher education program. If already certified, you must seek an initial certification in a different critical subject area.

Freshmen and sophomore recipients can borrow $2,500 for each year, all other recipients can borrow $5,000 each year, up to $20,000. Loans are forgiven only if teachers work in an area of critical need.

Teachers can find more information on about the Teachers Loan Program on the South Carolina Student Loan website.Download and complete the application and submit it to South Carolina Student Loan.

South Carolina Career Changers Loan

The South Carolina Career Changers Loan awards forgivable student loans state residents who wish to change careers to become public school teachers. The program was created as an incentive for state residents to pursue teaching careers.

South Carolina residents who meet all requirements for the Teachers Loan, and have had a baccalaureate degree for at least three years. In addition, you must have been employed full-time for at least three years.

Recipients can borrow up to $15,000 per year up to $60,000.

South Carolina residents can find more information on about the Teachers Loan Program on the South Carolina Student Loan website.Download and submit a completed application to South Carolina Student Loan.

South Carolina PACE Loan

The South Carolina Program of Alternative Certification for Educators (PACE) loan reimburses individuals who have completed a PACE program. Those who are interested in teaching who have not completed a teacher education program may qualify to participate in the PACE program.

Teachers must be enrolled in the South Carolina Program of Alternative Certification for Educators (PACE) program and have received an Educator’s Certificate for the current year. You must be teaching full-time in a South Carolina public school.

Participants can borrow up to $750 per year, capped at $5,000.

Teachers can find more information on about the PACE Loan program on the South Carolina Student Loan website.Download and submit a completed application to South Carolina Student Loan.

Tennessee Math & Science Teachers Loan Forgiveness

The Tennessee Math & Science Teacher Loan Forgiveness Program is offered through the Tennessee Student Assistance Coalition. The program awards up to $10,000 of forgivable loans to public school teachers working toward an advanced degree in math or science or earning a certification to teach math or science.

Tenured Tennessee schoolteachers working toward an advanced degree in math or science or earning a certification to teach math or science at an eligible institution. Recipients Must work in a Tennessee public school system for two years per each year of loan funding received.

Recipients are awarded $2,000 per academic year up to $10,000.

Teachers can find more information on the Tennessee Student Assistance Coalition website. Teachers must reapply for the program each academic year. The application has two cycles; one deadline is in February, the other is in September.

Teach for Texas Loan Repayment Assistance Program

The Teach for Texas Loan Repayment Assistance Program encourages Texas teachers to serve high-needs areas. Qualified teachers can receive up to $2,500 in loan repayment per year with no lifetime maximum.

Any Texas-based teacher with outstanding loans can apply for loan repayment assistance. However, funds are given out with priority to teachers who work in shortage subjects in schools with at least 75% economically disadvantaged students. Shortage subjects include ESL, math, special education, science, career education, and computer science.

If funds remain, they are given out in the following order:

  1. Teachers who work in areas with 75% or more economically disadvantaged students in nonshortage subjects.
  2. Teachers who work in shortage subjects in schools with 48.8%-75% economically disadvantaged students.
  3. Teachers who demonstrate financial need.

Eligible teachers can receive up to $2,500 in loan forgiveness each year with no lifetime maximum.

West Virginia Underwood-Smith Teacher Scholarship Loan Assistance Program

West Virginia teachers who work in critical need positions may qualify for the Underwood-Smith Teacher Scholarship Loan Assistance Program. This scholarship helps qualified teachers pay back student loans.

Teachers and school professionals who work in a designated critical position can qualify for the Underwood-Smith scholarship. Critical positions include all teachers in underserved districts and certain teachers who teach subjects with designated shortages.

Qualified teachers can receive up to $3,000 per year in federal loan forgiveness and up to $15,000 over their lifetime.

West Virginia teachers can learn more about the scholarship on the College Foundation of West Virginia website. The most recent list of critical needs can be found here.

Pros & Cons of Student Loan Forgiveness

While some or all of a student loan balance magically disappearing is a dream for many Americans, student loan forgiveness programs aren’t always a walk in the park. Here are the pros and cons.

Pro: Poof! Your debt is gone.

A huge upside of student loan forgiveness is obvious: borrowers can get rid of a significant amount of student loan debt. Beware of caps on the total amount of debt that can be forgiven with some programs. For example, the federal government’s Teacher Loan Forgiveness Program caps loan forgiveness at $17,500.

Con: Eligibility

It’s tough to first qualify and then remain eligible for student loan forgiveness. For example, teachers are eligible for the federal Teacher Loan Forgiveness program, but those who got teaching degrees before 2004, only qualify to have $5,000 worth of loans forgiven. To top that, borrowers must also remember to update their repayment plans each year or risk losing eligibility for the program.

Pro: No tax…sometimes.

The federal repayment plans don’t tax the forgiven amount as income, so you won’t need to pay taxes on the forgiven balance there. However, other programs may not grant the same pardon. If your loans are repaid through a different program, you might be required to count the money received towards your income and pay taxes on it. Look at the program carefully and prepare to set aside funds in case you do need to pay up.

Con: Limited job prospects

Loan forgiveness is give and take. You might be limited to teaching in a particular subject or geographic location for a period of time in order to get your loans forgiven. This could mean relocating your family or a long commute if you unable to live near the location. If you fall out of love with teaching, you might be stuck with the job, just to get your loans paid off.

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9 Questions to Ask About Student Loans Before You Graduate

Graduation's around the corner, so don't put off asking the hard questions about how to handle your student loan debt.

It may not be your first priority, but preparing to repay your student loans should be on your pre-graduation to-do list. How you manage your student loan payments will shape your finances for decades to come, so know what you’re dealing with before you get swept up in the day-to-day demands of post-graduate life.

Before you leave school, also make sure you know the answers to the following questions. Good news: We’re giving you them (or at least telling how to find them on your own).

1. What Kind of Loans Do I Have?

You either have private student loans or federal loans. You can look up your federal loans using the National Student Loan Data System (NLDS). You should have the paperwork from your lender or student loan servicer (private and federal) from when you took out the loan. Private loans generally come from traditional banking institutions, while federal loans are issued by the government. Common federal loans include Direct subsidized loans, Direct unsubsidized loans and Perkins loans.

2. Whom Do I Owe?

You can find this information in the resources referenced above. Your financial aid office should have information on file as well, since they receive the money. If you haven’t gone through student loan exit counseling at school, you need to before you graduate. They’ll explain whom to pay, and it’s the perfect time to ask any questions. Once you know who’s managing your loans, set up an online account to access all your information.

3. What Are My Repayment Options?

This depends on the type of loans you have. Private student loan repayment tends to follow a typical installment loan repayment structure, in which you make monthly payments for a fixed loan term. Federal student loans offer more options. The default play is called standard repayment: fixed monthly payments for 10 years. If you want a lower monthly payment when you start out, you can change your repayment plan at any time for free, though the change may not take effect immediately. If you want to enroll in an income-driven repayment plan, graduated repayment or extended repayment, be sure to request a new plan through your student loan servicer as soon as you can. You can learn more about student loan repayment options here.

4. How Much Are My Monthly Payments?

For loans with a set repayment term, the payment will be the same every month if you have a fixed-interest rate (as all federal loans do), or your monthly payment amount will change if you have a variable-interest rate (as some private loans do). Monthly payments through income-driven plans will depend on how much money you make. You should be able to get this information from your lender or servicer.

5. When’s My First Payment Due?

Federal student loans generally have a grace period of six months, meaning your first payment comes due six months after you graduate, leave school or drop below half-time enrollment. Some grace periods are nine months. If you have a private lender, you may not have a grace period — find out as soon as possible.

6. How Do I Pay?

You’ll start hearing from your lender or servicer soon if you haven’t already. Like most bills, you can go the old-school route of sending a check, or you can pay online. Keep in mind you don’t have to wait till your grace period ends to make a payment, and you can also enroll in automatic payments to make sure you don’t miss any. On that note: You don’t want to miss any student loan payments, because it will damage your credit, and your credit score plays a role in how much you pay for other credit products, as well as renting a home or buying a cellphone. You can keep tabs on how your student loans are affecting your credit by getting two free credit scores every month on Credit.com. If you’re thinking about getting a credit card after college, here are a few good options for new grads.

7. What’s My Interest Rate?

This should be in your loan paperwork and in your online account. Make sure you know if it’s a fixed- or variable-interest rate.

8. How Can I Make Repaying My Loans Easier?

If you have multiple federal student loans, which most borrowers do, you can consider consolidating them. With a federal Direct consolidation loan, you can qualify for certain loan forgiveness and loan repayment options (though you may not have to consolidate to qualify), and you’ll only have to make one monthly payment, rather than several to multiple servicers.

You could also consider refinancing multiple loans with a private lender, but know that you’ll be giving up many of the benefits that come with federal loans if you do this. There is no federal refinancing option. You can also enroll in automatic payments to make your life a little easier — just be sure to check that it goes through every month and that your bank account has enough money to cover the bill.

9. How Can I Make My Loans More Affordable?

Among the benefits previously noted, enrolling in automatic payments usually gets you a 0.25% discount on your interest rate. Private loan refinancing could also help you save money if you have good credit and can qualify for a lower interest rate. Additionally, changing your repayment plan to a longer term or an income-driven plan can lower your monthly payments.

There’s another way to look at loan affordability: long-term savings. For example, all the interest your loan accrued while you were in school will be added to the principal once your grace period expires, meaning you’ll have to pay interest on interest. You can avoid this by paying off the interest before your first loan payment comes due. You can also pay more than your minimum payment each month, which can help you pay off your loans early.

Student loans can be complicated, so reach out to your student loan servicer if you have questions. Conversely, if you’re having issues with your student loan servicer, you can file a complaint with the Consumer Financial Protection Bureau.

Credit.com can offer help with your student loans, too. If you have questions about them or other money stuff, leave your questions in the comments. 

Image: Peopleimages

The post 9 Questions to Ask About Student Loans Before You Graduate appeared first on Credit.com.

6 High-Paying Careers That May Qualify for Student Loan Forgiveness

If you work in one of the following careers fields or are considering doing so in the future, you could get some or all of your student loans forgiven.

Prestigious career fields such as law and medicine earn some of the highest salaries in the country. Unfortunately, they also go hand in hand with major student loan debt, which can have a serious impact on your finances. (You can see how your debt is affecting your credit by viewing two of your credit scores for free on Credit.com.)

The average medical degree, for example, costs between $138,368 and $234,672. Going to a top law school means spending an average of $180,879 on tuition.

Even with a high income, paying back this kind of debt is extremely burdensome. Fortunately, there are student loan forgiveness and assistance programs that can help. If you work in one of the following careers fields or are considering doing so in the future, you could get some or all of your student loans forgiven. Keep in mind you may not qualify for forgiveness even if you work in one of these fields, as qualification often relies heavily on your employer, not just your job.

Six High-Paying Careers With Student Loan Forgiveness Programs

1. Lawyers

Practicing lawyers may have a number of forgiveness options.

Those who work in qualifying non-profit and public service jobs could be eligible for the Public Service Loan Forgiveness Program (PSLF). This program forgives the loans for any professional in an eligible public service position after 120 qualifying monthly payments.

In addition to PSLF, there are a few other forgiveness and assistance programs designed specifically for lawyers. Here are three programs available nationwide:

  • Department of Justice Attorney Student Loan Repayment Program (ASLRP): Awards up to $6,000 per year with a maximum of $60,000 to qualifying borrowers who work with the Department of Justice for three years.
  • John R. Justice Student Loan Repayment Program: Gives assistance in the amount of $10,000 per year with a maximum of $60,000. You must be a public defender or state prosecutor who has worked for at least three years in a governor-designated state agency.
  • Herbert S. Garten Loan Repayment Assistance Program: Awards up to $5,600 to about 70 qualifying attorneys every year using a lottery system.

Beyond these programs, there are others offered on the state level. For instance, the Oregon State Bar program offers $7,500 per year for three consecutive years to qualifying state residents who work as attorneys.

Finally, some schools of law offer aid to qualifying alumni. The University of Virginia, for example, offers 100% forgiveness to graduates who work in public service and earn less than $55,000 per year. Check to see if your alma mater gives assistance to any of its graduates.

2. Doctors

Like lawyers, doctors working in nonprofits could get Public Service Loan Forgiveness, but PSLF isn’t the only option for physicians. In fact, MD Magazine reported that 40% of medical school graduates intend to seek some form of student loan forgiveness.

Many doctors receive forgiveness from a variety of sources. These are a few of the loan forgiveness and assistance programs available for doctors:

  • National Health Service Corps (NHSC) Loan Repayment Program: Gives up to $50,000 to licensed healthcare providers working for two years at an NHSC-approved site.
  • Students to Service Program: NHSC-sponsored program that awards up to $120,000 to students in their final year of medical school. They must commit to a three-year contract at an approved site.
  • Indian Health Services Loan Repayment Program: Repays up to $40,000 in medical school loans for healthcare professionals. Borrowers must commit to a two-year service contract in a facility that services serves American Indian or Alaska Native communities.

Beyond these options, you may also get loan assistance from your state. Many states offer significant aid to physicians who work for two to three years in critical shortage areas. The California State Loan Repayment Program, for instance, awards up to $110,000 to healthcare professionals working in underserved areas in the state.

3. Dentists

The average dental student graduates with over $247,000 in student loans. Even with the high median salary of nearly $160,000 per year, that’s a huge amount of debt to pay off.

Fortunately, many of the same loan assistance programs available to doctors also help dentists. You can search for loan assistance programs in your state, many of which offer aid to anyone in the healthcare industry.

Plus, there are loan repayment programs specific to dentists, such as the Maine Dental Education Loan Forgiveness Program. It forgives 25% of awards up to $20,000 annually ($80,000 total) if you work in an eligible facility in an underserved area of Maine.

4. Pharmacists

After four years of schooling, pharmacists snag a hefty starting salary of around $122,000. If they work in a high-need area, they could also get significant loan forgiveness.

The Arizona State Loan Repayment Program, for example, provides up to $105,000 in student loan assistance to qualifying pharmacists. Look up your state to find loan forgiveness for pharmacists in your area.

5. Psychologists

If you’re a psychologist, you’re probably drawn to helping people. Thankfully, there’s also help for you in the form of student loan assistance. Many of the same loan repayment programs that help doctors and dentists also offer aid to psychologists.

The Colorado Health Service Corps, for instance, offers $50,000 to qualifying psychologists. And like many other professions, you could also qualify for PSLF if you work for a qualifying nonprofit organization.

6. Veterinarians

Several states in the country have significant need for veterinarians who work with certain animals. Meanwhile, the USDA Veterinary Medicine Loan Repayment Program pays $25,000 per year to vets who work in a designated shortage area for three years. Since it’s administered by the federal government, the USDA program is available to veterinarians across the U.S.

How You Can Get Your Student Loans Forgiven 

While all of these careers command high salaries, they also require years of expensive higher education. Debt of this magnitude can get out of control as the interest piles up.

If you work in public service or a high-need area, however, you could qualify for significant student loan forgiveness or assistance. (You can learn more about how to get student loan forgiveness here.) As each day goes by, you’ll develop your career while taking one step closer to financial freedom.

Image: Steve Debenport

The post 6 High-Paying Careers That May Qualify for Student Loan Forgiveness appeared first on Credit.com.

6 High-Paying Careers That May Qualify for Student Loan Forgiveness

If you work in one of the following careers fields or are considering doing so in the future, you could get some or all of your student loans forgiven.

Prestigious career fields such as law and medicine earn some of the highest salaries in the country. Unfortunately, they also go hand in hand with major student loan debt, which can have a serious impact on your finances. (You can see how your debt is affecting your credit by viewing two of your credit scores for free on Credit.com.)

The average medical degree, for example, costs between $138,368 and $234,672. Going to a top law school means spending an average of $180,879 on tuition.

Even with a high income, paying back this kind of debt is extremely burdensome. Fortunately, there are student loan forgiveness and assistance programs that can help. If you work in one of the following careers fields or are considering doing so in the future, you could get some or all of your student loans forgiven. Keep in mind you may not qualify for forgiveness even if you work in one of these fields, as qualification often relies heavily on your employer, not just your job.

Six High-Paying Careers With Student Loan Forgiveness Programs

1. Lawyers

Practicing lawyers may have a number of forgiveness options.

Those who work in qualifying non-profit and public service jobs could be eligible for the Public Service Loan Forgiveness Program (PSLF). This program forgives the loans for any professional in an eligible public service position after 120 qualifying monthly payments.

In addition to PSLF, there are a few other forgiveness and assistance programs designed specifically for lawyers. Here are three programs available nationwide:

  • Department of Justice Attorney Student Loan Repayment Program (ASLRP): Awards up to $6,000 per year with a maximum of $60,000 to qualifying borrowers who work with the Department of Justice for three years.
  • John R. Justice Student Loan Repayment Program: Gives assistance in the amount of $10,000 per year with a maximum of $60,000. You must be a public defender or state prosecutor who has worked for at least three years in a governor-designated state agency.
  • Herbert S. Garten Loan Repayment Assistance Program: Awards up to $5,600 to about 70 qualifying attorneys every year using a lottery system.

Beyond these programs, there are others offered on the state level. For instance, the Oregon State Bar program offers $7,500 per year for three consecutive years to qualifying state residents who work as attorneys.

Finally, some schools of law offer aid to qualifying alumni. The University of Virginia, for example, offers 100% forgiveness to graduates who work in public service and earn less than $55,000 per year. Check to see if your alma mater gives assistance to any of its graduates.

2. Doctors

Like lawyers, doctors working in nonprofits could get Public Service Loan Forgiveness, but PSLF isn’t the only option for physicians. In fact, MD Magazine reported that 40% of medical school graduates intend to seek some form of student loan forgiveness.

Many doctors receive forgiveness from a variety of sources. These are a few of the loan forgiveness and assistance programs available for doctors:

  • National Health Service Corps (NHSC) Loan Repayment Program: Gives up to $50,000 to licensed healthcare providers working for two years at an NHSC-approved site.
  • Students to Service Program: NHSC-sponsored program that awards up to $120,000 to students in their final year of medical school. They must commit to a three-year contract at an approved site.
  • Indian Health Services Loan Repayment Program: Repays up to $40,000 in medical school loans for healthcare professionals. Borrowers must commit to a two-year service contract in a facility that services serves American Indian or Alaska Native communities.

Beyond these options, you may also get loan assistance from your state. Many states offer significant aid to physicians who work for two to three years in critical shortage areas. The California State Loan Repayment Program, for instance, awards up to $110,000 to healthcare professionals working in underserved areas in the state.

3. Dentists

The average dental student graduates with over $247,000 in student loans. Even with the high median salary of nearly $160,000 per year, that’s a huge amount of debt to pay off.

Fortunately, many of the same loan assistance programs available to doctors also help dentists. You can search for loan assistance programs in your state, many of which offer aid to anyone in the healthcare industry.

Plus, there are loan repayment programs specific to dentists, such as the Maine Dental Education Loan Forgiveness Program. It forgives 25% of awards up to $20,000 annually ($80,000 total) if you work in an eligible facility in an underserved area of Maine.

4. Pharmacists

After four years of schooling, pharmacists snag a hefty starting salary of around $122,000. If they work in a high-need area, they could also get significant loan forgiveness.

The Arizona State Loan Repayment Program, for example, provides up to $105,000 in student loan assistance to qualifying pharmacists. Look up your state to find loan forgiveness for pharmacists in your area.

5. Psychologists

If you’re a psychologist, you’re probably drawn to helping people. Thankfully, there’s also help for you in the form of student loan assistance. Many of the same loan repayment programs that help doctors and dentists also offer aid to psychologists.

The Colorado Health Service Corps, for instance, offers $50,000 to qualifying psychologists. And like many other professions, you could also qualify for PSLF if you work for a qualifying nonprofit organization.

6. Veterinarians

Several states in the country have significant need for veterinarians who work with certain animals. Meanwhile, the USDA Veterinary Medicine Loan Repayment Program pays $25,000 per year to vets who work in a designated shortage area for three years. Since it’s administered by the federal government, the USDA program is available to veterinarians across the U.S.

How You Can Get Your Student Loans Forgiven 

While all of these careers command high salaries, they also require years of expensive higher education. Debt of this magnitude can get out of control as the interest piles up.

If you work in public service or a high-need area, however, you could qualify for significant student loan forgiveness or assistance. (You can learn more about how to get student loan forgiveness here.) As each day goes by, you’ll develop your career while taking one step closer to financial freedom.

Image: Steve Debenport

The post 6 High-Paying Careers That May Qualify for Student Loan Forgiveness appeared first on Credit.com.

6 High-Paying Careers That May Qualify for Student Loan Forgiveness

If you work in one of the following careers fields or are considering doing so in the future, you could get some or all of your student loans forgiven.

Prestigious career fields such as law and medicine earn some of the highest salaries in the country. Unfortunately, they also go hand in hand with major student loan debt, which can have a serious impact on your finances. (You can see how your debt is affecting your credit by viewing two of your credit scores for free on Credit.com.)

The average medical degree, for example, costs between $138,368 and $234,672. Going to a top law school means spending an average of $180,879 on tuition.

Even with a high income, paying back this kind of debt is extremely burdensome. Fortunately, there are student loan forgiveness and assistance programs that can help. If you work in one of the following careers fields or are considering doing so in the future, you could get some or all of your student loans forgiven. Keep in mind you may not qualify for forgiveness even if you work in one of these fields, as qualification often relies heavily on your employer, not just your job.

Six High-Paying Careers With Student Loan Forgiveness Programs

1. Lawyers

Practicing lawyers may have a number of forgiveness options.

Those who work in qualifying non-profit and public service jobs could be eligible for the Public Service Loan Forgiveness Program (PSLF). This program forgives the loans for any professional in an eligible public service position after 120 qualifying monthly payments.

In addition to PSLF, there are a few other forgiveness and assistance programs designed specifically for lawyers. Here are three programs available nationwide:

  • Department of Justice Attorney Student Loan Repayment Program (ASLRP): Awards up to $6,000 per year with a maximum of $60,000 to qualifying borrowers who work with the Department of Justice for three years.
  • John R. Justice Student Loan Repayment Program: Gives assistance in the amount of $10,000 per year with a maximum of $60,000. You must be a public defender or state prosecutor who has worked for at least three years in a governor-designated state agency.
  • Herbert S. Garten Loan Repayment Assistance Program: Awards up to $5,600 to about 70 qualifying attorneys every year using a lottery system.

Beyond these programs, there are others offered on the state level. For instance, the Oregon State Bar program offers $7,500 per year for three consecutive years to qualifying state residents who work as attorneys.

Finally, some schools of law offer aid to qualifying alumni. The University of Virginia, for example, offers 100% forgiveness to graduates who work in public service and earn less than $55,000 per year. Check to see if your alma mater gives assistance to any of its graduates.

2. Doctors

Like lawyers, doctors working in nonprofits could get Public Service Loan Forgiveness, but PSLF isn’t the only option for physicians. In fact, MD Magazine reported that 40% of medical school graduates intend to seek some form of student loan forgiveness.

Many doctors receive forgiveness from a variety of sources. These are a few of the loan forgiveness and assistance programs available for doctors:

  • National Health Service Corps (NHSC) Loan Repayment Program: Gives up to $50,000 to licensed healthcare providers working for two years at an NHSC-approved site.
  • Students to Service Program: NHSC-sponsored program that awards up to $120,000 to students in their final year of medical school. They must commit to a three-year contract at an approved site.
  • Indian Health Services Loan Repayment Program: Repays up to $40,000 in medical school loans for healthcare professionals. Borrowers must commit to a two-year service contract in a facility that services serves American Indian or Alaska Native communities.

Beyond these options, you may also get loan assistance from your state. Many states offer significant aid to physicians who work for two to three years in critical shortage areas. The California State Loan Repayment Program, for instance, awards up to $110,000 to healthcare professionals working in underserved areas in the state.

3. Dentists

The average dental student graduates with over $247,000 in student loans. Even with the high median salary of nearly $160,000 per year, that’s a huge amount of debt to pay off.

Fortunately, many of the same loan assistance programs available to doctors also help dentists. You can search for loan assistance programs in your state, many of which offer aid to anyone in the healthcare industry.

Plus, there are loan repayment programs specific to dentists, such as the Maine Dental Education Loan Forgiveness Program. It forgives 25% of awards up to $20,000 annually ($80,000 total) if you work in an eligible facility in an underserved area of Maine.

4. Pharmacists

After four years of schooling, pharmacists snag a hefty starting salary of around $122,000. If they work in a high-need area, they could also get significant loan forgiveness.

The Arizona State Loan Repayment Program, for example, provides up to $105,000 in student loan assistance to qualifying pharmacists. Look up your state to find loan forgiveness for pharmacists in your area.

5. Psychologists

If you’re a psychologist, you’re probably drawn to helping people. Thankfully, there’s also help for you in the form of student loan assistance. Many of the same loan repayment programs that help doctors and dentists also offer aid to psychologists.

The Colorado Health Service Corps, for instance, offers $50,000 to qualifying psychologists. And like many other professions, you could also qualify for PSLF if you work for a qualifying nonprofit organization.

6. Veterinarians

Several states in the country have significant need for veterinarians who work with certain animals. Meanwhile, the USDA Veterinary Medicine Loan Repayment Program pays $25,000 per year to vets who work in a designated shortage area for three years. Since it’s administered by the federal government, the USDA program is available to veterinarians across the U.S.

How You Can Get Your Student Loans Forgiven 

While all of these careers command high salaries, they also require years of expensive higher education. Debt of this magnitude can get out of control as the interest piles up.

If you work in public service or a high-need area, however, you could qualify for significant student loan forgiveness or assistance. (You can learn more about how to get student loan forgiveness here.) As each day goes by, you’ll develop your career while taking one step closer to financial freedom.

Image: Steve Debenport

The post 6 High-Paying Careers That May Qualify for Student Loan Forgiveness appeared first on Credit.com.

Most Borrowers Don’t Think Trump Will Be So Bad for Their Student Loans

Many borrowers actually like an idea about student loan repayment Trump mentioned in a speech during his campaign.

Nearly 40% of student loan borrowers are concerned that Donald Trump’s administration will negatively impact their student loans, according to a new survey from Student Loan Hero. As the country moves into a new era of governance, some graduates are concerned that an already-difficult student debt situation will get worse.

In fact, more than one-fourth (26.6%) of survey respondents admitted they believe a Trump administration will have a “very negative” effect on their student loans. On the other hand, about 40% said they think Trump will have neither a positive nor a negative effect on their student loans, and the remaining respondents (about 20%) said they think he will have a somewhat or very positive effect on their student loans.

These figures come from a poll conducted by Google Consumer Surveys on behalf of Student Loan Hero from Jan. 6 to 9, and the results are based on a nationally representative sample of 1,001 adults with student loans living in the United States.

In the last few years, there’s been quite a lot said about the growing student loan crisis. But what can be done? Student loan borrowers have some idea of policy changes they’d like to see implemented during the Trump administration.

Borrowers Want More Student Loan Forgiveness Options

When asked which student loan changes they would like to see implemented under Trump’s administration, nearly half (44.3%) of respondents chose “federal loan forgiveness after 15 years.” In a speech during his campaign, Trump mentioned something along those lines, proposing a repayment plan in which borrowers pay 12.5% of their income for 15 years, after which any remaining balance would be forgiven. (Whether or not that’s a viable proposal is another matter.)

Currently, student loan borrowers can have their loans forgiven after 20 to 25 years of payments on a federal income-driven repayment plan. There is also a program for federal student loan forgiveness after 10 years in a qualifying public service job (only payments made after Oct. 1, 2007 count). Additionally, borrowers in certain industries can qualify for partial loan forgiveness. However, not everyone qualifies for these forgiveness programs; of those who do, not all will actually have any debt left over by the time the repayment term is up.

It’s not surprising many student loan borrowers expressed interest in a federal loan forgiveness program that discharges student debt after 15 years. According to the survey, 25% of respondents have either stopped making student loan payments or have lowered the amount they put toward repayment in the hope that the government will forgive student loan debt in the future.

Borrowers Also Want Refinancing Options

Student loan borrowers aren’t just asking for forgiveness. Close to one-third of respondents (31.4%) would like to see a program to refinance federal student loans implemented during a Trump administration.

Currently, it’s only possible to refinance through private lenders — the federal government doesn’t offer a refinancing option. The problem is that refinancing federal loans with a private lender means losing access to federal protections such as income-based repayment, deferment, forbearance and some forgiveness programs. Not to mention, borrowers are subject to credit checks and other underwriting criteria that’s at the discretion of each individual lender.

A federal refinancing program could help more borrowers gain access to refinancing options, retain their federal benefits and allow them reduce their interest charges.

How Much Debt Do Student Loan Borrowers Have?

Addressing student loan debt is likely to be on the radar for the incoming administration, especially with nearly $1.4 trillion in student loan debt outstanding.

According to the survey, more than one-third (36.4%) of student loan borrowers have more than $30,000 in debt. Nearly one-fifth (19%) have more than $50,000 in student loan debt. Interestingly, 7.5% of the survey’s respondents aren’t even aware of how much debt they have.

It’s yet to be seen how Trump or Betsy DeVos, his nominee for Secretary of Education, will handle what many consider to be a crisis, but the consensus seems to be that something needs to be done. In response to a request for elaboration on Trump’s student loan repayment proposal, a spokeswoman from his transition team said, “If confirmed, the Secretary designate looks forward to working with the President-elect, the Congress and other stakeholders to address the issues of student debt and repayment.”

No matter who is president, student loan debt can seriously impact your financial situation, including your credit score. (You can see just how much by reviewing the two free credit scores you can get through Credit.com, which are updated every 14 days.) Knowing your options when it comes to student loan repayment and refinancing will be crucial over the next four years and beyond.

Image: vm  

The post Most Borrowers Don’t Think Trump Will Be So Bad for Their Student Loans appeared first on Credit.com.

How High Can Your Student Loan Debt Go?

student-loan-debt

It’s not unrealistic for a student starting college this fall to end up with more than $100,000 in student loan debt by the time they’ve earned a bachelor’s degree. The average annual tuition and fees at a private, four-year college is $32,410, according to the College Board, and that doesn’t include money to pay for course materials or living expenses. Even at an in-state, four-year public school, the average tuition and fees are at $9,410. Unless you’re raking in a bunch of scholarships or have significant savings, extending your education beyond high school is going to put you tens of thousands of dollars in debt.

For some people, that’s only the beginning. Graduate school, medical school, law school — advanced degrees can double your pile of debt (or worse). When you add interest — and, if you’re not careful, late fees — to the mix, your student loan balance could quickly grow. We’ve written before about people with more than a quarter of a million dollars — even half a million dollars — in student loan debt. Is there a limit to how bad it can get?

Not really. There’s no set limit at which your balance will just stop accruing interest or will no longer be subject to fees. At the same time, student loan debt isn’t exactly limitless.

“[I] wouldn’t say balance would grow forever because if [you’re] not making payments, that would result in default,” said Richard Castellano, Sallie Mae’s vice president of corporate communications, in an email. If you default on your student loans, that balance would be subject to debt collection activity, and you may have the option to settle the debt for less than you owe.

How to Tackle Big Student Loan Debt

If you have federal student loans, you may be able to enter an income-driven repayment plan, apply for public-service student loan forgiveness or rehabilitate your defaulted student loans. Under federal income-driven repayment plans, any remaining balance at the end of your repayment period can be forgiven. So, even if your balance grows while you’re making an income-driven payment, try to not get discouraged: It won’t hang over your head forever.

“Looking into loan consolidation, income-based, and income-contingent repayment plans, is often as far as one needs to go,” Michael Bovee, a founder of the Consumer Recovery Network, wrote in an email to Credit.com.

Preventing a Big Balance Is Easier Than Repaying One

There are borrowing limits in place to help consumers avoid a situation where they feel their education debts are growing with no sign of stopping. Dependent students are limited to borrowing $31,000 in federal loans for an undergraduate degree (with no more than $23,000 in subsidized loans, meaning the Education Department pays the interest while you’re in school). Independent students are limited to $57,500 for an undergraduate degree (same limit on subsidized loans), and graduate and professional students are limited to $138,500 of federal loans (only $65,500 can be subsidized). That $138,500 includes any unpaid balances from undergrad.

Private lenders and schools themselves also set limits.

“Private lenders like Sallie Mae assess the stability, ability, and willingness to repay before making a lending decision,” Castellano said. “Also, while undergraduate federal loans have limits, those borrowing federal PLUS loans and grad PLUS loans can borrow up to the school’s cost of attendance.”

When you receive a financial aid award letter that also lists loans, it’s important to remember that you don’t have to borrow the full amount you’re offered — it’s up to you to determine how much you need. Avoiding over-borrowing can help you keep things in control after you graduate.

Given that interest is the key reason a student loan balance grows, that’s another place to look when you’re trying to save on student loan debt. While the government doesn’t offer student loan refinancing programs, you could consider refinancing your debt with a private lender at a lower interest rate, though refinancing federal student loans means you lose the benefits and programs that come with those loans.

When it comes to keeping your student loan debt in check, there’s a lot to consider: interest rates, length of repayment, negotiating student loan repayment into an employment benefits package, applying for loan forgiveness and, of course, borrowing an appropriate amount in the first place. It’s not easy, but it’s important, because repaying your student loans on time can help you build and preserve good credit, as well as open the doors to other financial goals, like buying a home. To understand how your student loans and other debts affect your credit, you can get two free credit scores, updated every 14 days, on Credit.com.

Image: Ammentorp Photography

The post How High Can Your Student Loan Debt Go? appeared first on Credit.com.

Convent Tells Woman She Can’t Become Nun Until Student Loans Are Paid Off

student-loan-nun

A New York woman who wants to become a nun has been told she’ll have to wait to take her vows until she pays off her student loans.

Alida Taylor, 28, told New York’s CBS2 that her desire to become a nun happened after she graduated from the University of Louisiana, moved to New York and took a job with a Broadway costume designer.

“When I moved to the city, I had all these desires. I wanted to have a career, a family and marriage, but your heart begins to shift,” she told CBS2.

Alida was hoping to join the Sisters of Life Convent on the city’s Upper West Side, but was told she has to pay off her student debt first.

“That financial debt, having that be resolved allows her to freely enter into her vocation,” Sr. Mariae Agnus Dei of the Sisters of Life told CBS2.

Alida had planned to pay off her student loans over the next 10 years. Now, she’s set up a Go Fund Me page to help pay off the $18,000 in time to make the convent’s September deadline.

Why is the convent so strict about the debt? A job outside the convent is not an option, and the convent does not provide a salary or stipend for nuns.

“Religious life is a full-time job, so to speak, so she wouldn’t be able to work and enter into religious life,” Sr. Mariae Agnus Dei told CBS2.

Dealing With Student Loan Debt

If your student loans are standing in the way of you achieving your personal or financial goals, you can consider ways to pay off your student loans early, or you can see if you qualify for student loan forgiveness.

If you’ve fallen behind on student loan payments, keep in mind that they could have a direct impact on your credit scores. You can do serious damage to your credit, particularly if your loans go into default. To see how your payment history is impacting your credit, you can check your two free credit scores, updated monthly, on Credit.com.

More Money-Saving Reads:

Image: ArturDarekTorris

 

The post Convent Tells Woman She Can’t Become Nun Until Student Loans Are Paid Off appeared first on Credit.com.

How Do Forgiven Student Loans Impact Your Credit?

student_loan_forgiveness

The idea of having your student loan debt forgiven might sound like a dream come true, but there are a few things you’ll want to consider should you be among those eligible for student loan forgiveness.

It turns out that there are many ways to get federal student loans forgiven. In fact, the Consumer Financial Protection Bureau a few years ago estimated that more than a quarter of working Americans are eligible for the Public Service Loan Forgiveness Program, but only a small percentage are actually using it.

And while student loan forgiveness in and of itself may not negatively impact your credit, the status of your loans before and after you enter into a forgiveness program could, so it’s important to thoroughly discuss with your lender how your loan discharge will be reported.

“Before entering into a loan forgiveness program, be sure you understand how the loan will be reported on your credit report,” said Rod Griffin, director of Public Education at credit bureau Experian. “For there to be no negative impact on your credit scores, the loan must be reported as if it were paid according to the original contract terms.”

That means you might need to negotiate if you’ve made any late payments or gone into default.

Let’s say you qualify for forgiveness because of a disability, and you fell behind on your student loans due to medical bills, inability to work and other factors that might impact your finances. If, when your loan is discharged, the servicer reports the missed payments to the credit bureaus, your balance will show up as zero, but those late payments will remain on your credit report.

You can try to persuade the lender (or collector if it’s gone that far) to remove the blemish from your reports, and they might consider it if you have a good explanation as to why it happened.

Also, if the lender indicates that the account was settled for less than originally agreed, that could also hurt your credit scores, Griffin said.

“It should indicate it is paid in full and that there are no delinquencies in the credit history” in order to not negatively affect your credit, he said.

Errors in your payment history also can negatively impact your credit score, so it’s a good idea to check your credit reports before entering into a student loan forgiveness plan. By doing so, you’ll be able to dispute any errors on your student loan accounts and have them corrected. You can start that process by checking your free credit scores, updated monthly on Credit.com, which will also show you major credit scoring factors like payment history. You can also get a free copy of your credit reports from each of the major credit bureaus annually.

[CREDIT REPAIR HELP: If you need help fixing your credit but don’t want to go it alone, our partner, Lexington Law, can manage the credit repair process for you. Learn more about them here or call them at (844)346-3295 for a free consultation.]

Will You Pay Taxes?

Certain types of student loans that are forgiven are not taxable, but other types are, so it’s good to know where you stand so you aren’t shocked by a big tax bill. A good place to begin your research is our primer on taxes after student loan cancellation. While President Obama’s 2017 budget proposal seeks to exclude Department of Education loan forgiveness programs from taxable income, it will require Congressional action to make that happen.

If you’re already behind on payments, there are some options available to help you get back on track, even if forgiveness isn’t one of them. To get out of default, you can combine eligible loans with a federal Direct Consolidation Loan, or you can go through the government’s default rehabilitation program. If you make nine consecutive on-time payments (these can be extremely low), your account goes back into good standing, and the default is removed from your credit report.

More Money-Saving Reads:

Image: CareyHope

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Student Loan Debt Haunts Parents After Son’s Death

student-loan-debt

The tragic death of a Maine man in 2012 has prompted federal legislators to introduce a bill that seeks to eliminate tax penalties for families whose student loans are forgiven after the death or permanent disability of their child.

Keegan Brennen died at the age of 22 from a brain aneurysm just six months after graduating from college. His parents, Donald and Nora, were successful in having his $78,000 in student loan debt forgiven, but were hit with $30,000 in taxes owed to the state and federal government. That’s because the IRS considers the forgiven loan amount as taxable income.

That could soon change, however, if Sen. Angus King (I-Maine) has his way. King introduced on April 14 a bill co-sponsored by Sen. Rob Portman (R-Ohio) and Sen. Chris Coons (D-Delaware) that would eliminate this tax, which the legislators say “simply replaces one financial burden with another and serves no public policy purpose.”

The bill also would allow a parent whose child develops a total and permanent disability to qualify for student loan discharge. While the federal government forgives certain federal student loans in the case of the death or disability of the borrower, the IRS still levies an income tax on this cancelled debt which can result in tens of thousands of dollars in immediate tax liability.

While the IRS considers most types of cancelled debt as taxable income (lenders must report cancelled debts of $600 or more to the IRS on a 1099-C form), not all cancelled student loan debt is taxable. There is, however, no tax break for student loan debt that has been cancelled due to death (if someone besides the deceased was also a borrower) or disability, despite the fact that borrowers who qualify for cancellation are considered totally and permanently disabled, and may never work again. In fact, the Department of the Treasury has specifically stated that student loans cancelled due to the Death and Disability Discharge (Section 437(a) of the Higher Education Act of 1965) are taxable.

“To think that a person who becomes disabled or a family that loses a child would be forced to reach into their pocket to pay the IRS taxes on student loans that have already been forgiven is just wrong,” Sen. King said in a statement on his Senate website. “It’s unfair, and it only serves to heap totally unnecessary financial hardship on folks when they’re already trying to cope with personal tragedy. This fix is not only common sense, it’s just the right thing to do, and I hope we can act on this bill soon so that no one else in Maine or across the country has to be the victim of this senseless policy.”

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The bill comes at a time of heightened awareness around student loan debt.

In fact, the Obama administration announced in mid-April a plan to forgive $7.7 billion in federal student loans held by an estimated 387,000 permanently disabled Americans, of which roughly half (179,000) are in default.

While the administration tried to streamline the discharge of student loans for the permanently disabled four years ago, few eligible borrowers took advantage. Now, the Department of Education is starting to identify and reach out to eligible borrowers to help them take the necessary steps to discharge their loans.

As King’s legislation proposal wends its way through Congress, it’s important to remember that keeping current with student loan payments is essential because defaulting on a loan seriously damages your credit score. And because student loans are rarely discharged in bankruptcy, the debt can beat down on you for decades. (You can see how your student loans are currently impacting your credit scores for free on Credit.com.)

There are some options for people who are behind on payments to get back on track, though, even if forgiveness isn’t an option. To get out of default, you can combine eligible loans with a federal Direct Consolidation Loan, or you can go through the government’s default rehabilitation program. If you make nine consecutive on-time payments (they can be extremely low), your account goes back into good standing and the default is removed from your credit report.

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