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Perform 10 years of public service and be forgiven on student loans

September 26,2011 by: Dallas Browne

To counteract the rising costs of college education, the United States government anticipates a new policy on the loan repayment. Referred as the Loan Forgiveness for Public-Service Employees Program, the Department of Education will delete the balance student loan debt repayment, in lieu of 10 years of service in the area of public service like social work, public safety or education.

In order to be qualified for the loan forgiveness programs you must have obtained the loan for pursuing your college education through the government and not via a third-party lender like bank or credit unions. Hence, if you owe the loan debt via Direct Loan Program from the federal government then only do you stand a chance of gaining the benefits from this program.

How does the Loan Forgiveness Program works? The program is open to any student who has borrowed from the Department of Education’s Direct Loan Program. In situation where you have borrowed from a private moneylender, you must first consolidate it into the Direct Loan Program to be eligible for the program. Moreover, you must meet specific criterion to qualify for the Loan Forgiveness for Public-Service Employees Program.

In order to get rid of your student loans, you must remain active in a qualified public-service career and working full-time for a decade.  At the time of your student loans forgiveness, you must be serving the public sector department.

During your tenure of full-time public service, 120 monthly repayments on the direct college loans should be made, if you are seeking for the loan forgiveness program. Payments made post 1st October 2007 will be counted toward the payment requirement. If you have consolidated your FFELP into Direct Loan Program, then any payment made before the above mentioned date will not be counted by the federal government.

In order to reach the 120 monthly payments benchmark you must sign up for any of the three different repayment programs. These include standard repayment, income-based repayment and income-contingent repayment. If you are enrolled for a different Direct Loan repayment program then only those payments will be considered into the benchmark which is at par with the monthly payment amount under the standard repayment program.

How do you exactly payoff your loan repayment debt? You must weigh your eligibility for the loan forgiveness advantages by evaluating income-based repayment and income-contingent plans. If you fall in the category of low-income borrowers, then you be eligible for lower interest on repayments and pull out the repayment period over to 25 years. Hence, borrowers who pay monthly instalments for their student’s loan on income-based repayment or income-contingency will have outstanding balance of 120 payments to be forgiven.

On the contrary if you have enrolled for the standard repayment option for 10 years of public service, you would realize that upon paying 120 instalments you will have no more loan repayment debts left to be paid. Since the 10 years of your service would equal to the requirement of 120-payments, your student loans debt would automatically be covered and forgiven.

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