Every year, hundreds of thousands of students take out federal student loans without truly understanding the details of this 20-year debt sentence. But that’s not so surprising because there’s a lot to know, and it can be quite confusing.
A common mistake is to assume that if you serve in the public sector for ten years, you automatically qualify for a Student Loan Forgiveness Program (SLFP). Unfortunately, it’s much more complicated than that, and the information found on government websites is about as confusing as using Sudoku to help you navigate the Oregon Trail.
Barbara Thomas, Executive Vice President of Southeast Bank, explains, “There are a number of qualifications for this particular program that a lot of students who attempt to enter the program don’t understand. Unfortunately, because there are ALSO a number of student loan programs that the federal government has sponsored and rolled out over the years, as well as [several] different types of income-repayment programs, it gets very confusing at times.”
There are four qualifying factors that determine whether someone is eligible to enter the Student Loan Forgiveness Program.
1) You MUST have a federal loan that was taken out through the Direct Loan Program
2) You MUST go on a qualified income-based repayment program
3) You MUST work for a qualifying employer
4) You MUST make 120 consecutive monthly payments in-full and on-time
Let’s be clear. You have to meet all four of these terms in order to qualify.
While the Student Loan Repayment Program was rolled out in 2007, this is somewhat of a newer issue, at least in the public eye. 2017 marked the first batch of expectant student debtors who reached the finish line of their ten-year sentence to discover they’d somehow fallen short of one of the qualifications. Often, it’s as simple as a missed payment. Even more despairingly, others found out that the employer whom they believed to be qualified for the program was, in fact, not eligible.
Sadly, only 500,000 borrowers qualified for forgiveness last year. Not surprisingly, the government doesn’t know how many were not qualified, claiming it’s entirely up to the borrower to verify their eligibility.
If this is you, Thomas explains, “The best thing you can do is to know your options.”
The most important option that so often goes overlooked is the opportunity for refinancing your student loans. Two-thirds of borrowers have yet to refinance their student loans, which is hard to believe considering this option could save you an average of $282 per month and more than $20,000 over the life of your loan (assuming they’re financed with a reputable lender).
Refinancing student loan debt is becoming more and more appealing as students learn the federal loan program is ‘one size fits all’, meaning regardless of your credit history, you’re given the same exact interest rate, which is sort of crazy because that is simply not how consumer lending works.
It’s important to note that refinancing your student loans will automatically negate your eligibility for the Student Loan Forgiveness Program, which isn’t the worst thing considering you can now go out and get that job you WERE waiting on debt row for ten years to get.
While the fear of losing the possibility of forgiveness may cause some of you to fret, refinancing may be the long-awaited remedy to a frustratingly difficult situation. Furthermore, refinancing can significantly reduce the length of your loan, and consolidation completely removes the hassle of making payments on multiple loans every month. Perhaps most appealing is the ability to shop for an interest rate and loan term that most appropriately works with your budget.
Suddenly, your disqualification of the loan forgiveness program isn’t quite so regretful. It may even be a blessing in disguise. Original Article written by Casey Wheeless at WVLT. The full interview can be found here.