Debt forgiveness is basically writing off/cancelling all or a portion of a debtor’s outstanding debt. Forgiving debt may take place in order to minimize the amount of loss incurred as a consequences of the lender’s defaults. The process has also been used to help bolster the economy of a nation by other countries choosing to write off debt associated with resources borrowed in years past.
In the US, people taking loans can fall in the trap of indebtedness. The federal government has several programmes for its citizens, in which the loan repayment is either made easy or forgiven at some stage to reduce the burden of debts. But, this kind of assistance is available only to some people.
Student Loan Forgiveness Program
This program, also known as the Obama Loan Forgiveness Program, offers the students a more affordable loan repayment alternative or on specific circumstances, it can have their loans forgiven or cancelled. It can be seen as a debt forgiveness program, as the students are helped in reducing the debt they have because of the loans they took for their education.
To qualify for this program a student should either:
Engage In Volunteer Work
Voluntary Organizations AmeriCorps, Peace Corps and Volunteers in service to America (VISTA), offer loan forgiveness in lieu of your services. By giving 1700 hours of work to VISTA or 12 months of service in AmeriCorps, you can get $4725 for your loan repayments.
Join the military
Students of Army National Guard may be eligible for their loan forgiveness. Forgiven loan amount depends on the rank achieved.
Become a Teacher
By becoming a full-time teacher for five consecutive years in any low-income elementary or secondary school, $17500 of your loan can be waived off. Choose a good repayment plan- You can either choose the Income Based Repayment (IBR) Plan or the Pay-As-You-Earn Plan. These plans adjusts the students’ monthly loan payments not to be more than 15% of their discretionary income (the amount of money earned that falls above the federal poverty line) in the Income Based Repayment Plan and not more than 10% of the discretionary income in the Pay-As-You-Earn Plan.
Apart from students, citizens working in the public service or doing non-profit job can get loan forgiveness benefits from the Public Service Forgiveness Program (PSLF). The loans received under William D. Ford Federal Direct Loan (Direct Loan) are only eligible for forgiveness. In this program, the loan is forgiven after you have made 120 qualifying payments on the loan, while being employed full time by certain public service employer.
The most common job titles which are eligible for forgiveness through the Public Service Forgiveness Program are:
- Teacher/School Employees
- Hospital Employees
- City/State employees
- Non –profit employees and others
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