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There's now $700 million of student loan forgiveness out there for those who are quick on the draw. Last I heard, it was a mere $100 million. If there is any indication of just how bad the student loan crisis is, then this increase should be it. Ah, but there is a catch, as always. So what do we know so far?
The federal government currently has a student loan forgiveness program. Most borrowers who think they qualify are rejected - 99% actually. Congress then created an expanded program, and yet the majority are rejected. Now, $700 million sounds great in this new "expanded program", but there is a strict set of qualifications. Between May of 2018 and May of 2019, Congress only spent a whopping $27 million of the $700 million. There were 54,000 requests, and only 661 were filed.
"Here's the important part that many of these applicants - including the 71% who were rejected for this reason - missed. To apply for this expanded student loan forgiveness program, you had to meet all the requirements for the Public Service Loan Forgiveness program, but you mistakenly enrolled in an ineligible repayment plan (such as the graduated or extended repayment plans). You with me?"
So how do you get into this club?
1. You must work for a qualifying public service employer in a qualifying public service role.
"Typically, there are two types of employers: a) state, local and federal government; and b) 501(c)(3) non-profit."
2. You must have what is considered direct, federal student loans.
"The Public Service Loan Forgiveness program does not forgive private student loans - even if you work in public service."
3. You must have applied in the past for Public Service Loan Forgiveness.
"This is critical. Do not skip this step. You must have applied for the Public Service Loan Forgiveness program and made some or all of your payments under a repayment plan that did not qualify. Then, you were rejected solely because you enrolled in an ineligible student loan repayment plan."
4. You must have enrolled in a a federal repayment plan.
"You also must be enrolled in an income-driven federal repayment plan, and make the majority of your payments under the plan. You can determine which student loan repayment plan works best for you with these student loan calculators."
What if you don't work in public service?
While you could try for student loan forgiveness through an income-driven repayment plan, it may take 20 to 25 years to receive forgiveness and your student loans may be paid off by then. There's a more proactive approach.
Student loan refinancing can lower your interest rate, which can save you substantial money in interest payments. With student loan refinance, you can combine your existing private student loans, federal student loans or both into a new, single student loan with a lower interest rate and one monthly payment. This student loan refinancing calculator shows you how much you can save.
You won't have access to federal repayment plans and benefits, but many private student loan lenders now offer forbearance and deferral programs for economic hardship. The higher your student loan balance, the more you can potentially save.
Ok, so the point I'm trying to make here, is to first show the hoops that are required to jump through in order to even be considered for the extended program. Call me a pessimist, but they are put in place so not just anyone can get help. I know $700 million isn't a lot compared to what many college grads are having to pay off into their 50's. Yes, I believe that there should be a selection process, but I don't think it should be so limited as this is. This type of loan only will help a certain sect within a sect of college grads, and overall, doesn't even come close to being a remedy to the bigger picture. Does anyone else agree?