Student loan debt has skyrocketed over the years. The Student Loan Debt Clock keeps track of how much money students owe throughout the United States. Currently, student loan debt is over $1 trillion, and the number keeps growing. Depending on what’s happened to you since signing those student loans at 18, you may be eligible for student loan forgiveness.
Forgiveness, Cancellation, and Discharge of Your Student Loans
Three main terms describe dismissing student loan debt: forgiveness, cancellation, and discharge. Some people use the terms interchangeably, but that isn’t always accurate. They all (eventually) erase your student loan debt, but only two of the terms are truly similar.
Loan forgiveness and loan cancellation both mean you no longer need to make payments on your loans because of your job. Certain types of job can qualify you for student loan forgiveness. Loan discharge covers all other circumstances when you can’t make any more payments, such as permanent disability or because the school you attended closed.
What Doesn’t Qualify for Student Loan Forgiveness
The standards for student loan forgiveness are narrow. There are only a few reasons that make you eligible for forgiveness. Even if you didn’t find a job related to your degree, or you didn’t finish your college education, or you’re unhappy with the quality of that education, you still have to repay your student loans.
How to Apply for Student Loan Forgiveness
If you believe you qualify for student loan forgiveness, contact your loan provider. They will give you an application to fill out. While they process your request, you may not have to make payments on your student loans. In fact, the majority of the time, you don’t have to. If you’re unsure whether you should still make payments, talk to your loan provider. They will let you know if you have to make payments during the application review process.
What Happens After You Apply?
There are only two avenues for your your application. It will either be approved, or denied.
The Application is Approved
If your application to erase your student loan debt is approved, you no longer have to make payments on your loans. The forgiveness will cover either the full amount, meaning you’ll no longer have to make any payments, or it will cover a portion of the loan debt. In that case, you’ll have to pay the remaining balance.
Depending on the kind of loan you originally had, you may be eligible for a refund on the payments you’ve made. If the loan negatively impacted your credit score, that information will be deleted. If you defaulted on a now-forgiven loan, the default will be erased from your status and won’t impede the potential for student loans you may need in the future.
The Application is Denied
If your student loan forgiveness application is denied, you’ll be required to make payments on the loan. If you defaulted on your student loan, contact your loan service provider immediately to explain the situation.
Federal Student Aid writes that the sooner you get in touch, the easier it will be to reach a solution about how to pay off the defaulted loan. If you have any questions, or think the denial was a mistake, talk to your loan service provider. They will be able to answer any questions you have.
Taxes and Student Loan Debt
President Trump’s new tax law went into effect on January 1, 2018. The taxes you paid last year weren’t affected by the new tax law, but the taxes you pay this year will be, Student Loan Debt reports.
Under previous tax laws, loan discharge was viewed as taxable income by the IRS, so people who discharged their loans still had to pay taxes on them. However, as of 2018, the new tax law doesn’t view discharged student loans as taxable income, saving people money. The changes are designed to create a better financial future for people who had to discharge their student loans.
Student loan debt can really weigh down your budget for years. If you think you might be eligible for student loan forgiveness, get in touch with your loan service provider. Be sure you have solid proof as to why you deserve student loan forgiveness. It may take a while for the approval or denial to come through, so wait as patiently as possible.