If you are considering canceling your student loan, it is not as easy as you might think.
There are complex requirements, rules and forms.
Here are the three things that will kill your chances of canceling your student loan – and what to do about them to get you ahead.
The forgiveness of student loans, especially the forgiveness of public service loans, is not as simple as saying, “I work in the public service. Now give up my loans.
If only it was that easy.
The Public Service Loan Forgiveness Program is a federal program that waives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in eligible federal, state or local public service employment or 501 (c) (3) non-profit job that makes 120 qualifying one-time payments.
However, these are not the only requirements. There are other important rules that you should follow if you plan to qualify for a public service student loan forgiveness. Here are three things that will kill your chances of getting a utility loan rebate:
1. Focus on your role, not your employer
“Working in a public service agency” is not enough to qualify for a student loan forgiveness. Many people are confused by this statement because they believe that if they are working with a government or nonprofit organization, they have met the requirement.
To qualify for the Public Service Loan Waiver, your employer is what matters. For example, if you are a consultant who works for a private consulting firm that advises the federal government and nonprofit organizations, you would not be eligible for a civil service loan forgiveness.
Focus on your employer. With the cancellation of civil service loans, you can change employers within 120 installments. Be sure to update your Employer Certification form when you change jobs and submit the form to the US Department of Education.
2. Do not join an income-based repayment plan
To be eligible for a utility loan discount, you must enroll in an income-based repayment plan. Income-based repayment plans such as IBR, PAYE, or REPAYE are offered by the federal government and allow you to reduce your monthly federal student loan payment based on your income and other factors.
However, it is not as simple as taking out an income-based refund. You must also make a majority of your 120 student loan payments while enrolled in an income-based repayment plan. While the standard 10-year repayment plan qualifies for civil service loan cancellation, your federal student loans would be repaid after 10 years, so there would be no more student loans to cancel.
How do you know which income-oriented student loan repayment plan is right for you? Well, it depends on your specific financial situation.
This public service loan cancellation calculator shows you which income-based student loan repayment plan will maximize your student loan cancellation.
3. Do not consolidate your FFEL loans
This one is so important.
Remember that only direct student loans are eligible for the civil service loan exemption.
So, if you have FFEL loans, you must consolidate these federal student loans into a direct consolidation loan in order to qualify for a civil service loan forgiveness. FFELs are not considered federal student loans because they were issued by financial institutions and not by the federal government. How do you know if you have direct student loans? You can check out Federal Student Aid. If you don’t see the word “Direct” next to your student loans, you may need to consolidate those student loans.
How do you consolidate FFEL loans? If you decide to consolidate these student loans, you can do so through StudentLoans.gov.
It is important to note that if you consolidate FFEL loans, only your student loan repayments are made. after that you consolidate are eligible for the civil service loan exemption. For example, if you made 50 payments on your FFEL loans and then consolidated those loans into a direct consolidation loan, you will (unfortunately) need to make an additional 120 payments in order to qualify for a utility loan discount.
While the rules for canceling student loans can be tricky, you’ll be better prepared if you know how to avoid these three things.