Your All In One Guide to Student Loan Forgiveness and Consolidation

How Do I Find Out Which Types of Federal Student Loans I Have?

  1. Go to StudentAid.gov/login
  2. Log in using your FSA ID (You can’t use your Federal Student Aid PIN anymore!)
  3. Scroll to the loan summary section. Go through each of the loans that are listed. Use the list below to see if you need to consolidate any of your loans to qualify for the best repayment options.

 

 

Now I know what type(s) of loans I have. What can I do?

  • I have some loans that I need to consolidate, and some that I don’t. Okay, you’re a little trickier to advise. You’ll definitely have some loans that you’ll want to consolidate, but the real question is, should you consolidate all of your loans? Only consolidate what you need to? You can do either. It will be easier to keep track of your loans if you only have one, but as you can see in the above section, sometimes you’re better off not consolidating if you don’t have to.

If you’re confused, need help, or have questions, you can contact Process My Student Loans at 1-844-602-6002 to get free advice.


You Could Qualify For Student Loan Forgiveness

If you enroll into either the Income Contingent, Income Based, or Pay As You Earn repayment plans, your loan balance would be forgiven at the end of the term if you still have a remaining balance. The term of the loan would be between 20-25 years depending on which repayment plan you choose, and when your loans were originally borrowed. How much you will be forgiven will depend on your original loan amount, how much you are earning, and how much your earnings fluctuate during your repayment term.

So for example: If a borrower owes $85,000 in federal student loans. The interest rate is 6.875% and the term is 25 years in the Income Based Repayment Plan. The borrower is currently earning $35,000 per year, and expects their income to stay the same for the term of the loan. This borrower would qualify for an IBR payment of $218.69, and assuming the income doesnt change, would make these payments for 25 years or 300 payments. The total amount the borrower would pay on this loan is 300 x $218.69 = $65,607 of the original $85,000 that was borrowed. This person would qualify for $19,393 in student loan forgiveness after making those qualifying payments. This does not include the interest that is being forgiven as the borrower would normally pay much more than the original debt due to the interest on the loan.

 

Your Loan Interest Can Be Forgiven

Under the William D. Ford Federal Direct Loan Program (also known as the Obama Student Loan Forgiveness Program), the interest accrued on your student loans will be forgiven.

So for example, if a borrower owes $40,000 in subsidized loans. The interest rate is 6.875%, and the term is 25 years. The borrower is single with an adjusted gross income of $25,000/yr. The interest on this loan would normally be $299.17 per month, but the borrower would qualify for an IBR payment of $93.69. In this case, the borrower would be forgiven $299.17 - $93.69 = $135.48 of interest per month. If this persons financial situation does not change for three years, they would be forgiven $135.48 x 36 = $4,877.28.


Public Service Loan Forgiveness

What is Public Service Loan Forgiveness

Those who work in the public sector, who have been making payments in an IBR, ICR, or PAYE repayment plan, can qualify for forgiveness. The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.

PSLF Highlights:

  • Very broad employment qualification requirements—it does not require that you teach at a low-income public school, or even be a teacher. Most full-time public and private elementary and secondary school teachers will meet the employment requirements.
  • You must have Direct Loans. If you have other types of federal loans, like FFEL or Perkins Loans, you must consolidate in order for those loans to qualify.
  • You should repay your loans on an income-driven repayment plan if you want to get the most value out of the program.
  • In order for payments to count toward the 120 needed to get forgiveness, they need to be full payments, made no more than 15 days late, and made after October 1, 2007.
  • Loan amounts forgiven under PSLF are NOT considered taxable by the IRS.
  • Check Your Eligibility for the Public Service Loan Forgiveness Program

 

The following types of employers do not qualify for PSLF:

* Labor unions
* Partisan political organizations
* For-profit organizations
* Non-profit organizations that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code and that do not provide a qualifying service
A qualifying loan for PSLF is any loan you received under the William D. Ford Federal Direct Loan (Direct Loan) Program.

You may have received loans under other federal student loan programs, such as the Federal Family Education Loan (FFEL) Program or the Federal Perkins Loan (Perkins Loan) Program. Loans from these programs do not qualify for PSLF, but they may become eligible if you consolidate them into a Direct Consolidation Loan. However, only qualifying payments that you make on the new Direct Consolidation Loan can be counted toward the 120 payments required for PSLF. Any payments you made on the FFEL Program loans or Perkins Loans before you consolidated them don’t count.

If you have both Direct Loans and other types of federal student loans that you want to consolidate to take advantage of PSLF, it’s important to understand that if you consolidate your existing Direct Loans with the other loans, you will lose credit for any qualifying PSLF payments you made on your Direct Loans before they were consolidated. In this situation, you may want to leave your existing Direct Loans out of the consolidation and consolidate only your other federal student loans.

Visit https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service for more details about Public Service Loan Forgiveness.

 


 

Teacher Loan Forgiveness

There are other programs, not part of the Obama Student Loan Forgiveness (Direct Loan) program, that offer student loan forgiveness as well. One of these programs is in place to help teachers reduce the principal on their loan. See the following options below:

Option 1) Forgive Up to $17,500 of your Direct or FFEL loans after 5 years or consecutive teaching at a qualifying school

View complete program details at StudentAid.gov/teach-forgive.

Here are some highlights:

  • You must have been employed as a full-time teacher at an eligible school for five complete and consecutive academic years, and at least one of those years must have been after the 1997–98 academic year.
  • Certain highly qualified special education and secondary mathematics or science teachers can qualify for up to $17,500 in forgiveness. Other eligible teachers can qualify for up to $5,000.
  • PLUS loans and Perkins loans are not eligible to be forgiven through this program.
  • Any time you spent teaching to receive benefits through AmeriCorps cannot be counted toward your required five years of teaching for Teacher Loan Forgiveness.
  • You apply for teacher loan forgiveness after you have completed the five-year teaching requirement.
  • Check Your Eligibility for this Program

 

Option 2) Perkins Loan Cancellation for Teachers

Forgives up to 100% of your Federal Perkins Loan Program if you teach full-time at a low-income school, or if you teach certain subjects.

View complete program details at StudentAid.gov/teach-forgive.

Here are some highlights:

  • This program can only forgive your Federal Perkins Loans. Check to see if you have Perkins loans at StudentAid.gov.
  • If you are eligible for this program, up to 100 percent of the loan may be canceled for teaching service, in the following increments:
    • 15 percent canceled per year for the first and second years of service
    • 20 percent canceled for the third and fourth years
    • 30 percent canceled for the fifth year
    • Each amount canceled per year includes the interest that accrued during the year.
  • Even if you don’t teach at a low-income school, you may qualify if you teach mathematics, science, foreign languages, bilingual or special education, or different subject determined by your state education agency to have a shortage of qualified teachers in your state.
  • Private school teachers can qualify if the school has established its nonprofit status with the Internal Revenue Service (IRS), and if the school is providing elementary and/or secondary education according to state law.
  • Check Your Eligibility for this Program

 

Option 3) State Sponsored Loan Forgiveness Programs

Tons of states offer loan forgiveness programs for teachers—especially if you teach in a high need area. The American Federation of Teachers has a great searchable database you can use to find state and local forgiveness programs you might qualify for.

You may qualify for more than one of the programs listed above. In some instances though, your decision to take advantage of one program may impact your ability to take advantage of another. For example:

  • You must have Direct Loans in order to qualify for Public Service Loan Forgiveness. If you have any Perkins Loans, you may be tempted to consolidate them into the Direct Loan Program in order to make them eligible for PSLF. However, if you do that, you’ll no longer qualify for Perkins Cancellation. You may be better off leaving your Perkins Loans out of the consolidation loan so you can take advantage of both programs.
  • You may not receive a benefit under both the Teacher Loan Forgiveness Program and the Public Service Loan Forgiveness Program for the same period of teaching service. For example, if you make payments on your loans during your five years of qualifying employment for Teacher Loan Forgiveness and then receive loan forgiveness for that service, the payments you made during that five-year period will not count toward PSLF.

To determine which programs you qualify for and maximize the amount of student loan forgiveness you receive, contact the experts over at Process My Student Loans. We are a document processing company that can help you expedite the filing process and reduce your student loan payments. Learn more about Process My Loans.

 


 

college-student-reading-a-bookTypes of Consolidation Programs Available

What Should I Consider Before Consolidating

First, evaluate whether you want any of the benefits that are available only in the Direct Loan Program.

Consolidating your loans can increase the amount of interest that accrues on your loans, so if you’re not interested in any of these programs, you may not want to consolidate. Also, understand that, by consolidating your loans, you will start your forgiveness clock over. For example, if you were already on an income-driven repayment plan and consolidate your loans, then you will lose any credit you had already earned toward forgiveness.

Other Notes: Generally your payment plan under an income-driven plan is a percentage of your discretionary income. This percentage is different depending on which plan you select. This chart can help you estimate the payment amounts on each income-driven plan.

Standard Repayment

The borrower will pay a fixed amount each month for the life of the loan. The payment would be determined by your borrowed amount, interest rate, and term of the loan.

Graduated Repayment

The borrower would make payments lower than the standard repayment plan, but these payments would gradually increase every two years.

Income Contingent Repayment (ICR)

In this plan, the borrower would make payments based on their income, family size, loan balance, and interest rate. Borrowers in the ICR can have a payment as low as $0.00/mo.

Income Based Repayment (IBR)

This plan bases the borrowers payment strictly on their income and family size. The balance of the loan and interest rate are not used in calculating the monthly payment. The borrower would be responsible to pay 15% of their discretionary income to their federal student loans. Borrowers in the IBR can have a payments as low as $0.00/mo.

Pay as you earn (PAYE)

This plan usually has the lowest monthly payment, and is also based on your income but uses 10% of your discretionary income as a payment instead of the 15% used in IBR. Qualifying for the PAYE repayment plan is more difficult than the others. Borrowers in the PAYE can have a payment as low as $0.00/mo.


 

History of the Student Loan Forgiveness Program

At the height of the financial crisis in 2008, the U.S. federal government quietly began purchasing federally guaranteed student loans made by private lenders. These lenders believed that they could no longer make a profit; they either could not raise the capital necessary to hold the loans or had to pay too much for that capital. To prevent students from being forced to drop out of school because they could not pay their tuition and fees—as well as allow colleges and universities that were dependent on tuition and fees to remain open—Congress passed the Ensuring Continued Access to Student Loans Act, which authorized the U.S. Department of Education to acquire newly made student loans. In the end, the federal government committed to purchase or outright acquire $150 billion in student loans that were originally made by private lenders between 2007 and 2009, or 85 percent of all student loans made by private lenders during those years.

In retrospect, the unprecedented acquisition of student loans by the federal government was the beginning of the end of the Federal Family Education Loan, or FFEL, Program, which relied on private lenders to raise capital to make student loans. The U.S. Department of Education being forced to buy loans from private lenders laid bare a simple and undeniable fact: Lenders abandoned students when they could no longer profit from them. In the face of this reality, political support for the FFEL Program crumbled. On March 30, 2010, President Barack Obama signed into law the Health Care and Education Reconciliation Act of 2010, which eliminated the program. Just a few months later, on July 1, the Department of Education began to make new federal loans exclusively through the direct student loan program.

Concentrating federal student loans in the direct loan program has had significant benefits for both students and taxpayers. The William D. Ford Federal Direct Loan Program delivers the same amount of federal student loans, with the same terms and conditions, at a substantially lower cost to taxpayers. Indeed, under the direct loan program today, federal taxpayers do not contribute to the cost of the program at all because the borrowers are paying more than the program costs to administer. This has allowed the federal government to simultaneously increase funding for Pell Grants, expand repayment through service, and make income-based repayment more accessible with better terms.

 

 


 

Resources:

Process My Student Loans. Student Loan Forgiveness and Debt Relief. Disclaimer: Process My Student Loans is a private company and does not claim to be affiliated with any Federal, State, or Local Government agencies. The Process My Student Loans assists people to obtain Federal Government Student Loan Forgiveness and or Consolidation programs by pre-qualifying, preparing and submitting required documentation on their behalf. People with student loan debt have the legal right to use an attorney or process Federal Student Loan Services documentation on their own behalf.