If you are not eligible for student loan forgiveness, what should you do?
There are additional options to reduce your loan repayment costs if you do not even qualify for a federal loan forgiveness programme or if you hold private student loans.
The Servicemembers Civil Relief Act (SCRA), for instance, can set a cap on the interest rate imposed on your loans while you are in active duty status if you are a member of the military. If you have federal loans, you may be eligible for alternatives for income-driven repayment that might lower your monthly payment. You may also be able to use loan forbearance or deferment options while facing difficult financial circumstances.
The IRS student loan interest deduction is available to borrowers of both government and private loans. As long as your income is below a particular threshold, you are eligible to deduct up to $2,500 or the total interest you paid on qualifying loans during that tax year, whichever is less.
Don’t know what to do? A financial professional could be enlisted for assistance.
Student loan discharge versus loan forgiveness
The process of loan discharge essentially cancels off all of your admissible student loans. Getting your debts discharged is a totally different process than getting your student loans forgiven, even though the outcome is the same (so not need to pay back that component of your school debt).
You might be able to request the discharge of your federal student loan debt if:
- You have a permanent and total disability (TPD).
- You initiate an adversary proceeding after declaring bankruptcy.
- When you are enrolled or soon after you graduate, your school closes (read the guidelines carefully).
- Your school approved for your credit without your knowledge or falsely certified that you were eligible for one.
- You dropped out of school, but the university didn’t pay back the balance of your loan to the provider.
According to the FSA, federal student loans may also be forgiven in cases where a borrower dies or a parent who takes out a + loan on a student’s behalf and a close relative or representative submits the required paperwork.
You might also be qualified for a discharge under the so-called Student Defense to Loan Payment if your institution misled you in some way or broke certain state laws. The specifics vary depending on the setting and circumstance, but might involve things like lying about a school’s standing or readiness to take credits from other institutions. If you think you qualified, be careful to discuss your experience in detail on the application.
Beware of false promises to cancel student loans
Scams are a possibility with regard to nearly anything in the financial sector. Despite the fact that these frauds can take many different forms, frequent red flags include:
- Organizations that are not partners or affiliates of the Education Department (ED).
- an insistence on paying ahead for debt forgiveness services.
- Companies that contact you and request personal details, like the social security number (SSN) or login details for Federal Student Aid.
As principle, you should exercise caution when dealing with businesses that approach you directly and make promises of immediate or total loan clearance or forgiveness. These con games frequently suggest time-sensitive deals or demand your quick attention. If the email has grammatical faults or strange punctuation, you might also be able to identify a fraud.