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What Is Student Loan Forgiveness?

Graduating college students frequently carry debilitating amounts of educational debt from student loans they needed to use to pay their tuition, room and board, books, and other necessary expenses. Student loan forgiveness sounds like an exceptional way to erase all this debt and move forward with a much happier and freer financial future. Before you get too excited about total freedom from loan repayment, understand how this type of forgiveness works and what it may mean for you.

Different Types of Student Loan Forgiveness

When it comes to federal student loans, the language used matters. You may see the terms forgiveness, discharge, or cancellation used in a nearly synonymous fashion on paperwork and online websites. While they may sound the same, they actually describe different types of situations.

First of all, it is mostly impossible for all your student loan debt to disappear completely. You are responsible for repaying all the money legally from the moment you receive the financial aid package. Student loan forgiveness means you will not have to make payments anymore. Discharged student loans only happen if you become permanently disabled or the institution that holds your loans no longer exists.

Reasons for Student Loan Forgiveness

Forgiveness, which means you no longer have to make student loan payments, comes only due to your career as a teacher, nonprofit employee, or government worker. To narrow things down even more, a teacher will only receive loan forgiveness up to $17,500 if they work in a low-income area. Nonprofit and government workers may qualify for the Public Service Loan Forgiveness (PSLF) program. To qualify, you need to make 120 loan repayments for specific types of direct loans only.

New Talk About Other Student Loan Forgiveness Plans

Although the above instances are the primary ways you can have your student debt forgiven at this time, President Biden has suggested various plans that allow for more savings for college students and adults laboring under excess debt. These arguments are entwined with Covid-19 relief bills. The main one spoken of in May 2021 includes a $10,000 federal loan forgiveness amount. While this may not wipe out all educational debt, it can certainly help people recover from it more easily.

Other government officials suggest even higher amounts for student loan forgiveness. The ongoing discussion about who deserves what and how much will undoubtedly continue for months or even years. At present, there are no new forgiveness plans actively in place, so you still need to pay your bills in total.

If you are having a difficult time paying your student loans, there are other relief options besides forgiveness, cancellation, and discharge. Explore options related to income-specific repayment programs, payment and interest deferrals, and loan restructuring that may reduce monthly bills or the total amount of time you have to pay the whole thing back.