Student Loan Repayment Forgiveness Overview

There are many loan forgiveness or assistant programs available.  One of the first places to visit to see what is available is your company human resource department.  Many employer offer different programs that are based on the type of business or industry, they are involved with.   If you do not have a job only the various loan repayment options are your best solutions.  Most of the plans require you to be a full time employee to receive this benefit.

Another place where loan forgiveness is available is in rural or economically depressed area.  These companies or government agencies offer additional plans to the two must common plans offered by the federal government.  In most cases, your salary is also very limited.

The two most common government plans are:

Federal Service Forgiveness Plan

To qualify for this plan you need:

  • Make 120 on time payment while working for a government or non-profit agency.
    • Does not need to be consecutive
  • Needs to be full time while making the payment
  • Only certain repayment qualify
  • Needs to be direct federal loans
  • It is tax free
  • Keep good records of your employment for verification

Federal Loan Forgiveness Program

To qualify for this plan you need:

  • Made loan repayments for 25 years
    • A new proposal is for to be reduced to 20 years
  • Only Federal loans qualify not private student loans
  • The forgiven amount will be taxable
  • Employment level does not matter

Most loan forgiveness programs are considered taxable income.  This could become an issue if you are in one of the income based repayment plans.  In the year following the forgiveness amount your income will rise by the amount forgiven.

Understanding the plans your employer offers, your current repayment option and loan forgiveness options need to be all considered to maximize your loan forgiveness opportunity.

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