Paying Off Your Student Loans: Forgiveness Programs & Beyond

More than 44.2 million people in the U.S. have student loan debt, according to 2016 data from the Federal Reserve Bank of New York, and they all have one thing in common: They have to figure out a way to pay those loans back. Paying student loans is important not only because you agreed to do so when you borrowed them, but also because failing to repay your loans can seriously damage your credit, and once you fall behind, it can be pretty difficult to get back on track. This is especially important because student loans are difficult to get rid of, even if you’ve had financial hardship or filed for bankruptcy.

You can see how your student loans affect your credit standing  — and, as a result, your ability to qualify for credit cards, auto loans, etc. — by getting two of your free credit scores on Credit.com. Still, there are some programs available to you, including student loan consolidation, refinancing, income-based repayment programs and even public service student loan forgiveness, that can help you along the way.

Whether you’re considering taking out a student loan, just about to start repaying them or wondering how you can make your loan payments more affordable, here are some things you need to know about paying student loans.

How Do I Apply for a Federal Student Loan?

Federal student loans are the most common kind of education debt. (As of the third quarter of 2016, outstanding student loan debt stood at nearly $1.4 trillion, and federal loans accounted for $1.26 trillion of it.) The first step to getting a federal student loan is to fill out the Free Application for Federal Student Aid (FAFSA), and then your school will decide how much aid, including student loans, you qualify for. Federal student loans for undergraduate borrowers do not require a credit check (most applicants don’t have credit at that point in their lives), but PLUS loan and Parent PLUS loan applicants must not have an adverse credit history.

How Much Can I Borrow in Student Loans?

Federal student loans have limits that vary by what kind of federal loan you’re borrowing, your year in school and whether you’re a dependent or independent student. For Direct loans, the most common kind of federal student loan, the government limits dependent student loan borrowers to no more than $31,000 for their undergraduate degrees. It’s important to remember that you do not have to borrow the full amount you qualify for, and you should only borrow what you need.

Do You Pay Interest on Student Loans?

Yes, student loans carry interest, but how interest works varies widely by loan type. Some borrowers may qualify for subsidized student loans, which means the government pays the interest on them while the borrower is in school. Most loans are unsubsidized, meaning the loans accrue interest as soon as they’re disbursed. So, by the time you enter repayment, which may be several years from when you borrowed the loan, the balance may be much higher.

How Do I Repay a Student Loan?

Your federal student loan servicer (or lender, if you have private student loans) should be in contact with you about how to set up your online account to review your loan details and manage payment. If you don’t know who your federal student loan servicer is, you can log into the studentaid.ed.gov, using your FSA ID, to get the details.

Federal student loans have a variety of repayment options, including the ones we mentioned earlier: consolidation, income-based repayment programs and, yes, public service student loan forgiveness. You also have the option of deferring your loans or entering a forbearance period, if you qualify. Private student loan companies may also have options like forbearance or refinancing, but they vary by lender and your financial situation.

If you think your standard repayment plan isn’t going to work for you, ask your student loan servicer about your repayment options. For people with a high level of debt relative to their income, programs like Income Based Repayment (IBR), Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) can help you lower your monthly payments to an affordable level, and after 20 to 25 years of on-time payments, your remaining loan balance may be forgiven (though you may have to pay taxes on that forgiven balance).

Can I Get My Student Loans Forgiven?

In addition to the forgiveness options through IBR, PAYE and REPAYE, you can also consider working in a field that qualifies you for Public Service Loan Forgiveness (PSLF) or an industry-specific loan forgiveness program.

Loan forgiveness programs are available to everyone from Peace Corps and AmeriCorps volunteers to teachers, nurses, doctors and other young professionals serving communities in need. Professionals choosing to work jobs in communities in need may take home lower-paying salaries, but they’ll also get some serious help paying their student loans.

Here’s a roundup of the loan forgiveness programs and volunteer programs available to recent grads and young professionals.

Nursing Education Loan Repayment Program

This program repays up to 60% of student loans for registered nurses who agree to work full-time (32 hours or more each week) for two years in a non-profit facility in need of nurses. Nurses that choose to work a third year have the opportunity to repay an additional 25% of their student loans.

Repaying as much as 85% of student loan debt after 3 years is some deal. For more information, visit the website of the Health Resources and Services Administration.

National Health Service Corps

Doctors, nurse practitioners, physician assistants, dentists, dental hygienists and mental health professionals including psychologists, social workers and marriage and family therapists can wipe out a big chunk of their education debt by choosing to work for two years in an underserved community with the National Health Service Corps.

In exchange for two years of full-time employment at a qualified facility, up to $25,000 in student loans will be repaid each year. Further loan repayment is available if you choose to serve beyond the two-year contract.

Loan Forgiveness Program for Teachers

Teachers who are willing to make a five-year commitment to a school in need can get some much-needed help with their student loans. The richest rewards are reserved for science, math and special education teachers.

Science and math teachers who work in low-income high schools may be able to cancel as much as $17,500 of their federal Stafford loans. This money gets eliminated from a teacher’s loan balance after he or she completes five years of teaching at a designated low-income school.

Special education teachers who work in designated low-income schools for five years may be eligible for as much as $17,500 in loan forgiveness for their federal Stafford loans.

Other full-time teachers working in a designated low-income elementary or high school for five years may be able to cancel as much as $5,000 of their qualified federal loans.

For more information on teacher loan forgiveness programs, visit the U.S. Department of Education’s website.

Public Service Student Loan Forgiveness

The College Cost Reduction and Access Act of 2007 created a new loan forgiveness program for public service employees. This program requires quite a commitment — 10 years working as a public service professional. But the payoff — the cancellation of all remaining Direct federal loans after 10 years of service and 120 qualifying student loan payments — may be just the incentive a heavily indebted college grad needs to choose a lower-paying, service-oriented career path.

Eligible public service jobs include everything from emergency management, public health and safety and law enforcement to social work, child care, library sciences, public interest law services and jobs serving people with disabilities and the elderly.

To be eligible for this program, you must make 10 years of consecutive, on-time repayments of your federal Direct loans, including Direct consolidation loans. Keep in mind that the standard repayment period for federal student loans is 10 years. If you choose standard repayment for your student loans and keep up with your payments, your student loans will be paid in full in 10 years. You won’t qualify for loan forgiveness because you’ll have no remaining debt left to forgive. Only grads that are eligible for reduced student loan payments, because of very high debt levels or consistently low salaries, would be eligible for this loan forgiveness program. To qualify, they would still need to make 10 years of on-time payments through an income-based or income-contingent repayment plan and work full-time for 10 years in a public-service job.

Public service can also help you with Perkins loan cancellation. Qualified jobs include things like like firefighting, law enforcement, federal public or community defenders, and many others. You can read more about loan cancellation on the Department of Education’s website.

Loan Forgiveness for Volunteer Programs

Borrowers who serve full-time in AmeriCorps or Peace Corps positions can also qualify for PSLF. Additionally, Peace Corps volunteers with Perkins loans can cancel as much as 70% of their debt after four years of service. Peace Corps volunteers who complete a two-year term can wipe out 30% of their Perkins loans’ balance. Another 20% can be canceled upon completion of a third and fourth years of service. Federal student loan payments may also be deferred while serving in the Peace Corps.

Other Student Loan Forgiveness

Federal student loans can be canceled in the event of a borrower’s total disability or death and, in rare cases, bankruptcy. Borrowers may also apply for loan cancellation if they were defrauded or if their school closed, preventing them from completing their degree.

In the case of all loan repayment programs, forgiveness and cancellation, nothing is automatic. All programs involve an application process, so if you have questions or need help, reach out to your student loan servicer (helping you is their job), contact the department of education or, if you need additional guidance, consider working with a nonprofit credit counselor or attorney who specializes in student loans.

Lucy Lazarony contributed reporting to this article.

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