BY: Savanna Pruitt
According to the Education Data Initiative, federal student loan debt in the United States currently adds up to a staggering $1.611 trillion. Let’s break that down: Over 40 million Americans have federal student loan debt averaging about $37,000.
Federal Student Aid reports that, regardless of whether they’ve secured employment post-graduation or not, federal student loan borrowers usually need to start paying back their loans six months after they graduate, drop below half-time enrollment, or leave school. There are a few types of loans such as the Perkins Loan that come with nine-month grace periods. However, there are certain special circumstances under which your federal student loan could qualify to be forgiven, canceled, or discharged. Here’s a look at a few of them.
Teacher Loan Forgiveness. If you teach for five complete and consecutive academic years in a low-income school or educational service agency, you might be eligible for up to $17,500 of federal student loan forgiveness. This applies to Direct Subsidized and Unsubsidized Loans, as well as Subsidized and Unsubsidized Federal Stafford Loans.
Public Service Loan Forgiveness. This type of student loan forgiveness has several requirements. You may qualify if you have Direct Loans that you’ve made 120 qualifying monthly payments on and are employed full-time by a U.S. federal, state, local, or tribal government or non-profit organization
Closed School Discharge. If your school closes and you aren’t able to complete your degree, you may qualify for student loan discharge for William D. Ford Federal Direct Loans (Direct Loan) Program loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans. There are other circumstances that qualify as well, depending on the span of time between when your loan was disbursed, when you withdrew, and when the school closed.
Perkins Loan Cancellation and Discharge. You might qualify for 100% Federal Perkins Loan forgiveness if you’re working full-time as a teacher in a public or non-profit elementary or secondary school system with low-income families.
Discharge in Bankruptcy. In extremely rare cases, some federal student loans can be forgiven in the case of bankruptcy. If you file bankruptcy and cannot pay back your student loans, you must file an adversary proceeding with the courts and prove that paying back your loans would keep you and your dependents from maintaining a minimum standard of living.
Borrower Defense to Repayment. Some or all of your federal student loan debt could be forgiven if attended a school that you believe misled you or engaged in other misconduct related to your loan or the education you received. In order to potentially qualify, you’ll need to fill out an application and submit documentation to support your case.
Discharge Due to Death. Your federal student loans will be discharged in full if proper documentation is submitted after your death.
It’s important to remember that even if you don’t finish your degree or find a job related to your degree, you’re usually still on the hook for repaying your federal student loans. So, is taking out federal student loans to fund your education worth it? There is no one-size-fits-all answer— it depends on your financial situation, your future plans, and several other important factors. It is interesting to note, though, that 52% of students who had taken on student loans reported not feeling like it was worth it in the long run. If you’re trying to decide whether or not you should get involved with the world of federal student loans, here are a few questions you can ask yourself to point you in the right direction.
- Do I have a plan to keep track of what I borrow?
- How much do I realistically expect to earn after I graduate?
- What are the terms of the federal student loan I qualify for?
- Will I be able to make payments on time?
Want to learn more about whether or not taking out a federal student loan is the right choice for you? Here are a few great resources: