Dear Kirk: I’ve had friends tell me that their lenders have forgiven significant chunks of student loans because of their reliable payment schedule. I make regular payments (always on time, might I add), but I’ve seen no such action. Is this something I can ask for?
Kirk Says: Student loan forgiveness is a topic that should be discussed at length with your loan provider. These folks are very knowledgeable about which loan fits your situation best, and if you have a loan already, they can share the ins and outs of all possible ways to repay or have some (or even all) of your debt forgiven.
For loans received under the William D. Ford Federal Direct Loan Program, one possibility of student debt forgiveness is through the Public Service Loan Forgiveness Program. This program is designed for individuals that are full-time employees in a public service job or working for a non-profit organization. Any employment with a non-profit designated as tax-exempt by Section 501(c)(3) of the Internal Revenue Code, local, state or federal government agency may qualify under the PSLFP. Other program requirements are that 120 full qualified loan payments must be made on time before an individual may have the remainder of their outstanding debt forgiven.
Another program similar to PSLFP is the Teacher Forgiveness Program. Up to $17,500 of a Federal Stafford Loan or your complete Federal Perkins Loan can be forgiven if you complete five consecutive full-time years as a teacher in certain low-income schools.
Have you ever considered military service? Each branch of the military has a loan forgiveness program. Contact the branch of service that you are interested in, and ask them questions about how their forgiveness program works in regards to the level of rank you achieve and the specifics of service required.
The final option we will look at is the Income-Based Repayment Plan. This program modifies your monthly payment so that it is no more than 15 percent of your discretionary income that is above the federal poverty level. Ultimately, after 25 years of making these modified payments, any remaining balance is forgiven.
Spending the time doing your research on debt forgiveness options can reap major rewards. Many of these programs were put in place to encourage individuals to follow a passion for serving others. By lessening the blow of sometimes-staggering student debt, the low income sometimes associated with service professions becomes less of an obstacle. But again, it’s important to reach out directly to a representative of your loan provider for information that applies directly to your unique circumstances.
Kirk Gwaltney is a Chartered Financial Consultant and a Chartered Life Underwriter in Brentwood, Tenn. Learn more about him at kirkgwaltney.com.