Student loan forgiveness is one of the best kept secrets hidden from graduated college students. If you have never heard of student loan forgiveness and repayment programs offered by the Federal government and you are stuck paying hundreds of dollars in loan repayments per month, research the student loan forgiveness program and see if you qualify. The idea of having your loans reduced or completely paid off may seem too good to be true. If you qualify for one of the many student loan forgiveness programs, you can pay off between thousands of dollars and hundreds of thousands of dollars in debt just by applying. Understand what programs are available and how you can apply to pay off your student loan debt.
The Difference Between Student Loan Forgiveness and Repayment Programs
Student loan forgiveness programs are offered by the Federal government and will cover any student loan that was issued through the Federal government. These loans include Stafford loans, Perkins Loans, and Direct Loans. When you qualify for one of the many Student Loan Forgiveness programs, some or all of your debt will be erased from your credit file lowering your debt to income ratio significantly.
Student loan repayment programs are a bit different. Loan repayment programs do not limit debt elimination to only Federal loans. Under the repayment program, private loans, traditional loans, and non-traditional student loans all qualify. When you qualify for a loan repayment program you can choose to receive funds to pay down your loans, or you can request the payments be sent directly to the lender. Each of these programs help alleviate stress from students who do not know how they will manage their student loan payments and live comfortably once they complete school.
If Student Loan Forgiveness Taxable?
As you may know, grants and scholarships are not considered taxable income. The student loan forgiveness programs offered by the Federal government is not considered a grant or a scholarship so determining whether or not the funds are taxable can be difficult. A minor setback of the student loan forgiveness program as well as the loan repayment program is that the funds received are viewed as taxable income. If you are not an accounting whiz this can be explained in layman’s terms.
Example: If you receive the VISTA award for $4725, when you file your taxes the IRS will recognize this award as additional income. This means you will fall into a higher tax bracket the year you receive your federal award payment. If you think you can avoid reporting the award, no such luck. The funds are paid through the Federal government so the IRS is sure to see the income if it is “missing” on your tax return.
The fact that awards offered through the student loan forgiveness program are taxable should not deter you from filing. Even with this additional taxable income, you will make off far better paying off your loans, even if you have to pay the Federal government during tax season. The amount you are taxed depends entirely upon your current income and the total amount of awards you received from the program during the calendar year.
Types of Student Loan Forgiveness Programs
If you are a teacher you may qualify for the Teacher’s Student Loan Forgiveness Program through the Federal government. Teachers are one of the most underpaid professionals in the nation. The government is giving back by offering erasure of between $5000 and $17,500 in loans that were issued through the government.
If you are a teacher who has served 5 or more consecutive years teaching, you qualify for even more money. This addition student loan forgiveness program offers up to $5000 for Direct Loans with an outstanding balance. This is because the initial award may not be enough to pay off the entire balance of a teacher’s student loan debt.
The encourage teachers to teach in math and science areas, the Federal government is offering up to $17,500 in student loan forgiveness. There is currently a shortage in passionate math and science teachers in high schools around the nation. Offering this student loan forgiveness will inspire teachers to educate high school students without stressing about repaying piling student loan debt.
Student Loan Forgiveness for Volunteers
Student Loan Forgiveness programs for volunteers are offering through federal agencies including VISTA, the Peace Corps, and Americorps. Spreading goodwill gestures should come from your heart. While this is the case, these federal agencies want to give back to dedicated service members who volunteer for nothing in return.
VISTA rewards volunteers with $4725 to members who have qualified 1700 hours of service or more. Service offered through VISTA may include teaching children in poverty, volunteering in homeless shelters, and fighting hunger. If you have never heard of VISTA, visit their official website to learn more about volunteer opportunities in your area.
The Peace Corps also rewards its volunteers with sizable student loan forgiveness opportunities. This repayment works a bit different than others. The Peace Corps will pay 15 percent of student loan balances for volunteers each year. Volunteers can participate in this program until 70 percent of the balance is paid off. This means participants are only left paying 30 percent of their loan balances.
If you want to stay domestic to volunteer consider participating in Americorps. Americorps is a domestic Peace Corps program and offers up to $4725 in rewards for one year of service. This student loan forgiveness opportunity works much like VISTA.
There are more than 10 student loan forgiveness programs that graduated students can take advantage of. If you have never heard of Student Loan Forgiveness programs it is time to do your research and see if your qualify. The government has set aside money to pay off loans and erase student loan debt. Make sure you learn about the Federal government’s best kept secrets in terms of student loans. Always borrow responsibly and pay off your loans without breaking the bank.
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These student loan forgiveness programs are not advertised and are rarely discussed like the common bank student loans.