Thursday, March 9, 2017

Student Loan Forgiveness

There is a lot of confusion about student loan forgiveness, so let's try to clear things up a bit.

In 2014, 37 million Americans had student loan debt that averaged $23,200. Depending on where you live and where you go to school your student loan debt may be larger - a lot larger.

I bet most college students are aware of student loan forgiveness programs, but they probably have no idea how they work.

Over at Student Loan Hero, Eric Roseberg has outlined the basics of student loan forgiveness - and it's something to think about.

Here's some of the basics (disclaimer: this stuff changes all the time, so stay caught up with new or revised forgiveness plans):

Student forgiveness plans apply mainly to federal student loans (Perkins loans are another matter), so all those loans you took out with Wells Fargo will NEVER qualify for forgiveness. Most banks are private institutions out to make money, so avoid taking a loan with them at all costs.

Federal loans for certain kinds of degrees, mainly public service (social workers, etc.), qualify for some type of forgiveness after ten years. You have to work in the field to qualify for forgiveness.

Some teachers with federal student loans qualify for forgiveness after as little as five years depending on where you teach. For the rest, they have to wait for ten years.

Loan holders with income-driven payment plans will qualify for forgiveness after twenty to twenty-five years.

Something to keep in mind, most forgiveness programs only apply to loan holders who have maintained good standing, meaning you have made all your payments on time and are not in default.

Sounds good? Well, think about this. Yes, you can get a big chunk of your federal loans forgiven, but the government treats that like regular income, with an exception for public service and teachers who will not receive a tax bill. What does this mean? If you have $100,000 of your student loan debt forgiven, you can expect to pay taxes on $100,000 worth of income. That's right forgiven loans are treated just like regular income and are taxed at whatever rate you fall into. On $100,000 for some that could mean a tax bill of $25,000.

As Rosenberg points out student loan forgiveness is not "all rainbows and unicorns." Do you have any student loans? Do you plan on having any student loans? How can you avoid borrowing as a student?

14 comments:

  1. Currently, I do not have student loans. Financial aid has made my stay at community college extremely affordable - in fact, that is the understatement of the year. With the flexible scheduling of classes at my school I have been able to work enough to save money while completing general ed; but this all does not look so promising upon transfer to a four year institution.
    It is certain that I will end up with student loans after transfer, because I don't seem to have about 30,000 dollars lying around (especially when I will have higher living expenses from living in California's not-so-cheap college towns).
    I think that rather than avoid borrowing, because that feat seems unrealistic in the face of insane college costs, one can think about the smartest ways to borrow. For example, steering clear of those private loans that do not offer forgiveness. In addition, the working college student is a persona more students should make their own - because not only will it build your resume while you get your degree but it will also build a strength in character that novelties of free time cannot.

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  2. Student loans are one of the biggest causes of high school graduates hesitating to go to college considering the amount of debt they will be in with no for sure security that they will even land a good job that will provide more return of income. It seems like by taxing student loan forgiveness, its another way of making money off of the students but at the same time, it's at least cutting the total debt down. Our education system should be just like Germany where they provide free schooling to everyone. It's a win-win where people earn a career through studies and in turn, work for society in order to continue the life cycle.

    Personally, I don't have student loans considering the government provides me a GI Bill and pays for my education and housing. Unfortunately though, it isnt enough to finish my nursing program so I may have to turn to student loans if I am denied extension. I will only have to rely on student loans for the remainder of my last couple of months in the RN Program. The only way to avoid this is to work while I attend Nursing school but in doing so, will risk me to fail my classes due to the stress and lack of time to study and retain all the information I learn. Sadly, myself like most of society aren't born in a wealthy family that can provide us payed tuition and free housing.

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  3. First of all, I’m so surprised that 37 million American students had a student loan, and total debt reached over $100 billion. It’s unbelievable, however, I am more surprised that they have loan forgiveness program.
    I…think, it seems to be good opportunity erase your debt, but it is debt that you started with an agreement. I wonder that most of them expected they can repay all of the debts after graduation, but they couldn’t. It’s easy to imagine what happened according to the article we read in the class. However, we have some other choice, such as financial aids that received students don’t have to return, or going to cheaper college. So, I suppose some of the students applied for the student loan without consideration or getting affluent information. However, I cannot say that happened because of only their carelessness. As the article we read, needed information are not fully provided indeed. It’s also system error. And also, the forgiveness system has several flaws. It is too limited, only for federal loans, and students majoring social, public services, or being teacher. And then, the forgiveness is considered as an income is ridiculous. It’s not forgiveness. “forgiveness” wording is deceive. Personally, I cannot agree on whole this system.

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  4. Not surprisingly, most of college students get financial aid and have student debt in their life. As I was reading 2 other articles for the class assignment, this article is very familiar subject to me. Financial problem is one of the barriers that make students not to continue their education after graduating high-school. According to this article, it looks like helping students debt lower but still doesn't solve the ultimate problem.

    Fortunately, I don't have student debt yet, but I can't think about not having it forever. Student debt and forgiveness program is limited to local students, and that is another problem for me. Overall, I am studying for better future and making more money, but I have to spend so much money to have the opportunity of making money. This fact often makes me stressful.

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  5. The students loan is one of the biggest challenge that many students face. I think that for some student this college loan preventing them from going to college because not only colleges are very expensive, there are high cost of living like housing. It is very difficult for students to pay for college and for housing at the same time. I personality do not have student loan because I have received some grants and the scholarship. So, I am lucky enough to pay for my tuition and school expense, plus, can save some extra money. However, I saw my friend work more than one job, and could not still cover her tuition.Also. he could not find the right loan for her and has to leave the college. If there is loan forgiveness system, I think it will very helpful for students like her, even if they did taxing income. It is a lot better than paying the whole debt.

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  6. One of the number one reasons so many high school graduates don't choose to further their education is because they don't want to be in debt. I am not surprised at all to read that 37 million students reached total debt to $100 billion. The interest rate for loans now a days is just ridiculous. Us students are so thankful to receive financial aid because if not for the help of the government we would have to take out loans from the bank and be in even more debt than were already are. I personally and thankful that my parents are paying out of pocket my tuition so just my student housing is the only thing financial aid is helping out with.

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  7. This comment has been removed by the author.

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  8. As a first year college student, I fortunately did not have to pull out student loans. Because I want to get my Masters Degree, I am expecting to take out student loans in the future. I'm going to try to avoid taking out a numerous amount of loans by working full time over the summer and part time during the school year. My aunt has also been trying to give me advice on taking out certain loans, because she is one of the 37 million students in debt. I believe that the fear of not being able to afford college and going into debt, a lot of high school graduates deter from going to college. I personally always cringe at the thought of going into thousands of dollars in debt, but that's not stopping me from trying to get the best education that I can get. Honestly, financial aid is my right hand man, because without it, I don't know what I would be doing financial wise.

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  9. Student loans is something that is very common for majority of students whether youre attending a University or community college. I myself had to take out student loans in order for me to come to school. Its surprising that so many students are in debt. I think its discouraging for high school students or for anybody else wanting a higher education. Not having enough money to pay for college can be a huge factor in whether you attend college or not. I applied for scholarships in high school so that I wouldnt have to take so many loans out.

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  10. A lot of students do not continue their education because they are scared of all the money they are going to have to owe after graduating. They are discouraged because they think since they have no money they should not be allowed in school. That is how I felt at first but one thing we do not really know is that our loans can be forgiven. Depending on what you decide to study is whether loans can be forgive. I knew that for my major my loans can be forgiven. I want to be a teacher so after 5 years my loans can be forgiven if I work in low income school. The one thing I did not know is that we also have to pay taxes for it.

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  11. After reading the article,I started to think about other individuals who are not aware of the consequences dealing with taking out a loan with banks. In the past I have been told that receiving a loan with a bank is definitely not a good idea because all they really seek for is taking your money in the long run. Loans are common for many students and many of them graduate with a debt of who knows how much. It is crazy to think that many people are in debt due to the loans used for their education. I did not have to take out a loan due to the fact that I have applied to many scholarships and have actually received some which was great. I encourage many other students to take their time and effort into looking at scholarships which really benefits students that do not want to go in debt.

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  12. This article definitely has opened my eyes, I know for sure that I won't be going to my bank to ask for student loans. Something that I didn't know was that public workers had a 10 year forgiveness from federal loans, which I think is just fantastic, along with teachers having a 5 year forgiveness which is just splendid! Teachers and public workers definitely deserve that forgiveness simply for being willing to better society, and then deserve even more for the fantastic work that they do.
    As for myself, I do intend to take out student loans, but since I started out at a Community College level I hope that those loans won't be something along the lines of an arm and a leg.
    As for attempting to avoid loans, there are plenty of institutions out there that provide grants and scholarships for pretty much anything, which I will definitely be looking into.

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  13. I definitely never heard of something like this before. I always thought that if you had student loan debt, then you just pay it off. The fact that there is an alternative is something that should be given more awareness about. I don't have student loans, but I will probably get a student loan to help my parents pay for my education. The stress kind of makes me wish I went to community college first to save money. I can save money or try to get as much financial aid as possible to avoid taking out a student loan.

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  14. Before reading this outline described by Eric Rosenberg about student loan forgiveness, I knew very little amount about this topic. I was aware that there are some degrees and stipulations of how a student loan can be forgiven. Furthermore into the reading, I learned that although, student loans are forgiven there are still restrictions. Students are still expected to pay the loan by tax bill except, teachers and public service. It sounds good to be true as Rosenberg stated that “student loan forgiveness is not all rainbows and unicorns”. As a student, I do have some student loans. Before I decided to go back to school, I didn’t research as to how much tuition will cost me annually, since I’m using my military education benefits. However, as quarters passed by I realized that I didn’t have sufficient funds to buy my textbooks nor to support myself and my children. I would never find myself in this position as borrowing was my last option. I can’t say that I wouldn’t be having any other student loans at this point. I don’t have enough education benefits from the military for the next two and half years. Additionally, as I enter the nursing program this upcoming fall quarter, I would have to reevaluate my school finances. Overall, as a student I could have avoid borrowing student loans by doing my research beforehand of tuition and other school fees, like parking, textbooks. I could have also plan ahead of time and establish a school savings account.

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