One worry most graduates deal with is the payment of their massive student loans. It is especially important if you have a job that doesn’t pay enough to match your loan instalments and your cost of living. There are several opportunities and programs run by the federal government that can help you make the student loans disappear – without having to pay. Here are some to note:
1. Perkins Loan Cancellation and Discharge
These are federal, low-interest loans awarded to “high-need” students in college, or preparing to attend one. Depending upon their profession, borrowers can have 100% of the loan cancelled in five years. Perkins loans are canceled at the rate of 15% for the first two years, 20% for the next two, and 30% for the fifth year. Depending on your profession, you may also receive concurrent deferment. If cancellation and deferment options are combined, you may never have to pay for the loan.
2. Public Service Loan Forgiveness
If you’re working full-time at a public service or non-profit job, and have made 120 payments for your loan under the standard plan, this option can work for you. Those who qualify can receive up to 100% of the leftover balance, after the aforementioned payments have been made.
3. Janet L. Hoffman Loan Assistance Program (Maryland)
This is a specific program for Maryland residents who have received a degree from an institution in Maryland. To qualify, you must make less than $60,000 annually, work a public service or nonprofit job within the state of Maryland, and serve low income or underserved residents. The amount your receive is based on your total debt and will be made available for up to three years. Do note, there are several other specific programs like this one in other states as well.
4. Discharge Unpaid Refund
If you withdrew from school and did not receive all or a portion of the loan, you may be eligible for a refund to the amount that was originally supposed to be refunded. To apply, contact the school you withdrew from, and ask for their policy on federal aid refunds.
5. Income-Based Repayment
This plan customizes your loan payments based on your income and family size, thus reducing the burden substantially. You will have to prove you are in financial hardship, and on qualifying make payments at just 15% of your discretionary income. After 25 years and 300 payments, anything left on your loan will be forgiven. If you’re employed full-time in public service, there is a chance the loan will be forgiven after 10 years.
6. Income-Contingent Repayment
This plan recalculates your payments every year based on your income, family size, and the federal student loan. Like the previous IBR plan, monthly payments can be substantially low and you will be loan free after 25 years and 300 payments. Full-time public service and non-profit employees can be loan-free in 10 years.
7. Pay As You Earn Forgiveness
This program is valid only for “new borrowers”, i.e. those who did not have any federal loan before October 1, 2007. To qualify, you will need to prove partial financial hardship, after which a repayment plan will be drawn up, demanding no more than 10% of your discretionary income. Any outstanding balance can be forgive after 20 years or 240 payments, though that amount will be taxable.