Tips for Federal Student Loan by Bruce Mesnekoff
A recent article by a leading daily has revealed that nearly 2/3rd students that are graduating from the American universities are crippled with certain level of federal debt. Another screaming headline viewed in a CNBC article disclosed that approximately 24% millennials are expected to receive forgiveness on their outstanding debt loan balances.
The dizzying Federal student loan measures a great percentage of the overall national debt, which in turn is leading to several consequences, including:
- Decelerating economic growth of the country
- Rising interest rates
- Limited access to capital
In this light, a range of repayment forgiveness programs have kicked off to mitigate the financial debt burdens of the Government-backed student loans. This article attempts to share information on the list of events that qualify a student to be either discharged off or forgiven the federal loan for higher education under the Federal student loan forgiveness program. Here’s how it goes!
Total and Permanent Disability or TPD Discharge: In this situation, a student is discharged from the repayment of following loans on the basis of their permanent and total disability:
- William D. Ford Federal Direct Loan Program
- Federal Perkins Loan Program
- Federal Family Education Loan Program
Besides, such students are also discharged from the obligation to complete their TEACH Grant services. However, it is required to share information on permanent disability with the U.S. Education Department. The information is later reviewed and evaluated on the basis of following criteria to determine whether a person qualifies for the TPD discharge:
- Submit an approved document from the Veterans Affairs’ Department of the United States to declare than an individual is unemployable as a result of service related disabilities.
- Submit benefits received from Supplemental Security Income and Social Security Disability Insurance stating the next scheduled date of disability review.
- Submit a document from the certified physician confirming permanently disability.
Death Discharge: In the event of borrower’s death, the debt taken by the student will be discharged. This means, the PLUS loan taken by the parent would be discharged in case of death of the parent or the student for whom loan was obtained. A certified copy of death certificate needs to be furnished by the family member to the loan servicer.
Bankruptcy: Under Chapter13 or Chapter7, if an individual has filed for bankruptcy then the obligation of loan repayment will be discharged. This will be based on the following decisive factors:
- The individual, if obligated to repay loan, would be unable to sustain a required minimal standard of living.
- Submission of a significant evidence to verify that the hardship would continue for a considerable period of time.
- A prudent attempt of minimum 5 years was made by the individual to repay loan before filing for the bankruptcy.
False Certification/Illegal Payment Discharge: Another eligibility condition that exempts a person from the repayment of federal student loan is based on the below mentioned circumstances:
- The school falsely authorized the eligibility of a student to receive loan without his/her ability to meet the eligibility requirements.
- The name of the student was falsely signed by the school on the application form without his/her knowledge and proceedings from the loan were not delivered to the student.
- The student is a victim of cyber identity theft.
- The school wrongly endorsed a student for loan eligibility when the person is ineligible to work for the occupation in which he/she was trained, due to
Ø a given physical/mental condition
Ø criminal record
Ø age ineligibility
Unpaid Refund: A student would be eligible for expulsion of FFEL loan if he/she withdrew from the school but didn’t receive the required refund. This is applicable only for the amount of unpaid refund.
Teacher Loan Forgiveness Program: If the borrower is a new applicant and is serving as a low income full-time teacher for five successive years, the individual would be discharged to repay up to $17,500 loan amount.
Loan Forgiveness for Public Service Jobs: People serving public services and have successfully paid 120 instalments on the Direct Loans accrued are exempted from repaying the balance amount under specific repayment plans.
Perkins Loan Discharge & Cancellation: This is applicable for individuals who are engaged in specific type of business or have performed certain kinds of public service. Under this program, a small percentage of the loan gets cancelled in each year of the service performed. Services that are considered in the loan cancellation are:
- Medical technician or nurse
- Member serving the U.S. armed force services
- Volunteer of the ACTION or Peace Corps program
- Head-start worker
- Law enforcement officer
- Mediation service provider
- Children or family of the worker serving public services
Federal Student Loan Forgiveness program is applicable for individuals meeting any one of the mentioned requirements. If the loan is discharged for an individual, he/she is not obligated to repay any part of the loan availed. Besides, they will further regain eligibility to other types of federal student aids, which they previously lost.