With the Biden administration’s sweeping loan forgiveness program in front of the Supreme Court and the now three-year student loan repayment pause coming to end either naturally or via bipartisan legislation, borrowers may be panicked about having to pick up, or in some cases, start repayment. It should be noted, however, that the federal student loan programs have several avenues to offer borrowers relief from onerous loan payments, including opportunities for loan forgiveness. You can give your alumni and your current students peace of mind by sharing information about the programs.
Income Based Repayment Plans: There are four distinct plans. Eligibility and terms are based on when the student first borrowed, the type of loan(s) borrowed, and/or a debt-to-income comparison. Each of these plans provides forgiveness after a certain number of years of repayment (varies by program). See this chart for the details and encourage borrowers to try out Federal Student Aid’s Loan Simulator. Note that under any of these programs the calculated monthly payment could, in fact, be $0.
Public Service Loan Forgiveness (PSLF): Borrowers with eligible loans and on an eligible repayment plan and with eligible employment (see our May 2019 blog for definitions of ‘eligible’) can qualify for loan forgiveness for any remaining balance after ten years of repayment. Borrowers who believe they meet the eligibility criteria would be well-served to file proof of employment annually although it is not required. Also, Federal Student Aid has created a tool to help borrowers determine whether their employers are eligible.
Teacher Loan Forgiveness: Most teachers will qualify for PSLF, but teachers should take a gander at this option before deciding which to pursue since you can’t double dip. Under the teacher loan forgiveness program, borrowers only need to meet the ‘eligible employment’ criteria for five years (as opposed to ten) to have up to $17,500 of their student loan balance forgiven. For teachers in qualifying schools with lower outstanding loan balances or ineligible loans, this is a good alternative.
Borrower Defense to Repayment or Closed School Discharge: Do you have students that transferred to your institution as a result of misconduct by or closure of their previous institution? Make sure they know about these two programs and how to receive relief under them.
Total and Permanent Disability Discharge: When tragedy strikes, borrowers are protected from having to continue making student loan payments under this program when they can’t work or work enough due to their disability. When the disability is documented by the Social Security or Veterans’ Administration, the discharge should be automatic, otherwise borrowers must apply. Borrowers are monitored and if their situation should change, the loan obligation will be reinstated.
Entrance counseling this fall should emphasize that the last three years were not the norm and students borrowing federal loans to pay educational expenses should take this obligation seriously and expect to make payments after leaving school. At the same time, they should also know that the programs mentioned above, along with deferment and forbearance provisions are available should they need help along the way. The Higher Education Assistance Group can help you fine-tune your entrance counseling program to ensure it is compliant and provide all the information students need to make an informed borrowing decision — email us at info@heag.us to speak with a regulatory expert.