Over the past several years, there’s been a lot of talk about student loan forgiveness. As more and more college students struggle with paying down debt and the amount owed tops 1.7 Trillion — the topic is on more minds than ever.
Student loan forgiveness may not mean that your loan slate is wiped clean. In fact, many of the programs currently in place have strict requirements before you even qualify. Let’s take a look.
Current student loan forgiveness programs
There are several student loan forgiveness programs for federal loans — but most of them require individuals to make years of payments before they qualify for loan forgiveness.
Here are just a few of the most common potential forgiveness programs:
The Teacher’s Loan Forgiveness Program
This program was designed to help teachers in low-income areas get their loans forgiven. Teachers must stay in their position or a low-income district for five complete and consecutive academic years and make current payments on time before getting loans forgiven.
Income-based Repayment plan
If you choose the income-based repayment plan for your federal student loans, there’s a chance you can get your loans forgiven. However, you need to make payments on time. If you borrowed your loans on or after July 1, 2014, after 20 years you may be eligible for the forgiveness program. If you borrowed prior to July 1, 2014, you are eligible for forgiveness after 25 years. If you’ve already paid your balance by then, you do not get reimbursed.
Pay As You Earn
The Pay As You Earn program allows for adjustments to student loan payments based on income. You pay more the more money you make, and less should you see a drop in income. Only specific borrowers qualify for the forgiveness aspect of the program, and only after 20 years of on-time payments.
While your student debt may be forgiven after years of paying on your loan, you may still owe the government taxes when you finally reach forgiven status.
Many of the loans and programs mentioned above treat your forgiven loan balance as income. So, the year in which your loan is forgiven, you may be required to pay taxes on the remaining balance. Please consult a tax advisor for more information regarding the tax consequences of loan forgiveness.
To learn more about student loan forgiveness or ask questions about financial aid, contact us at firstname.lastname@example.org.