If you find your self owing thousands of dollars for your student loans, you are not alone. There are repayment plans and other programs that can help you with your loan repayment.
If you get stuck in trying to pay off your student loans, there are a couple of paths to follow, including loan repayment and loan forgiveness.
Let's tackle loan repayment options. First, you should immediately get in touch with the organization that services your loan to avoid being charged late fees.
The three options are deferment, forbearance, and changing the repayment plan.
There are different grounds for deferment, including economic hardship, being enrolled in school at least part-time or being unemployed. Under deferment, interest does not accrue, except for unsubsidized Stafford loans.
If someone isn't eligible for deferment, they can apply for another forbearance. Unlike deferment, forbearance is granted at the discretion of the lender. It can be approved for up to 12 months at a time for up to three years. However, she will be expected to keep making the loan payments until she is notified that the forbearance application was approved by the loan servicer. And the interest expense on the loan will continue to accrue.
Another option is to have the federal portion of your student loan payments reduced through the Income Based Repayment ("IBR") program, which went into effect in July 2009. Under this option your repayments would be capped at 10 percent of your income.
The IBR program uses a formula that takes into account your family size and your adjusted gross income. To estimate what your repayment would be under this option, you can use the IBR online calculator at Studentaid.ed.gov. You should know that getting your payments lowered now will give you some break, but it may increase the total amount of the loan than if you stuck to a standard repayment plan.
The IBR program also automatically forgives all unpaid balances after 25 years, but you can have your loan erased sooner (10 years!) if you work full time in the public sector, as I will explain in more detail. So let's dive into the loan forgiveness programs.
Loan forgiveness programs cover only federal government loans like Stafford or Perkins. They are available to certain types of careers, volunteering activities or by joining the military.
OK, so what's the catch to get my loans erased? Am I signing my life away?
If you are a public service worker, your remaining balance will be forgiven after 10 years. So be careful before switching to the IBR option now, which may cost you big time. If you have been working in the public sector for the past six years, your loan balance will be forgiven automatically in four more years. But if you switch to the IBR option now, it will reset your repayment clock and it will take you another 10 years of public service before you become eligible for the loan forgiveness.
If you are a teacher, there is a teacher loan forgiveness program. In order to qualify, you have to teach full-time for five consecutive years in "low-income" elementary or secondary school. For more details, check out the American Federation of Teachers.
There are also programs for medical and nursing professionals. Working in a low-income community may be one way to qualify for loan forgiveness, but there are several other sources. So make sure to ask about these programs when applying for employment.
Also, if you get enlisted in the military services with a degree, there is a program to have your student loans forgiven.
Finally, you can also get your loans forgiven by performing certain volunteering services. So if you are passionate about making a difference in the world and are able and willing to devote your time for a couple of years to a great cause, check out Peace Corps and AmeriCorps.
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