Want to screw up your chances to get student loan forgiveness?
Here are literally the 4 fastest ways to ensure you never get student loan forgiveness.
Here’s what you need to know – and what you should do instead.
1. Assume your job magically qualifies for student loan forgiveness.
The public service loan forgiveness program – the one that 99% of borrowers have been rejected from – has several requirements. One of those requirements is that your employer must be an eligible employer. The fastest way to screw up your chances for student loan forgiveness is to assume you “work in public service.” Wrong. Focus on your employer, not your job. If you work for a company, but your client is the federal government, that won’t count. It’s your employer that matters – and it will take 120 monthly payments to get there. How do you make sure you’re on track for student loan forgiveness? Complete an Employment Certification Form.
Do This Instead: You should submit an Employment Certification Form to the U.S. Department of Education when you begin a job in public service, when you switch employers, and annually.
2. Assume all your student loans magically qualify too.
Another quick way to get rejected for student loan forgiveness? Assume all your student loans are getting wiped clean. This may be surprising, but not all student loans qualify for public service loan forgiveness. First, only federal student loans (not private student loans) are eligible for student loan forgiveness. Second, only Direct student loans qualify for public service loan forgiveness. For example, if you have Perkins Loans, FFEL Loans or you borrowed student loans before 2011, they are ineligible.
Do This Instead: Consolidate your federal student loans, if necessary, into a Direct Consolidation Loan.
3. Assume you don’t need an income-driven repayment plan.
Who needs an income-driven repayment plan? After all, you’re getting student loan forgiveness, right? Wrong. To be eligible for public service loan forgiveness, you must be enrolled in an income-driven federal student loan repayment plan. There are four types of income-driven repayment: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) and Income-Contingent Repayment (ICR). You also must make a majority of the 120 required payments while enrolled in a federal student loan repayment plan.
Do This Instead: Enroll in an income-driven federal student loan repayment plan.
4. Assume there are no other ways to get student loan forgiveness.
If you don’t work in public service, there’s no way you’ll ever get loan forgiveness, right? Wrong. If you enroll in an income-driven repayment plan, you may qualify for federal student loan forgiveness after 20 or 25 years. Yes, it’s a long time, so it may not be worth waiting that long. If you stick it out, your remaining balance gets forgiven. The downside is that you’ll owe income taxes on any student loan forgiveness you receive.
Do This Instead: Don’t chase student loan forgiveness because it sounds like your loans will disappear. Decide if waiting 20 to 25 years fits with your financial life goals and whether the tax payment at the end is worth it to you.
What are your other options?
Make a student loan repayment game plan. Whether you choose student loan refinancing, student loan consolidation, income-driven repayment or federal student loan forgiveness, understand your goals and timeline. If you want to pay off student loans faster and save money, consider student loan refinancing. Student loan refinancing rates are ridiculously cheap now and start at 1.99%, and can save you thousands of dollar in interest payments. When you refinance, you 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 refinance calculator shows you how much you can save.