Know Your Student Loan Relief Programs

Student loan relief programs are programs that allow you to either stop repaying your student loans or replay student loans under more favorable terms. This includes loan forgiveness programs and income-based repayment programs. Most of those programs are designed for federal student loans.  The sheer number of programs you can choose from can be daunting, but so long as you know what to look for, you should be able to find a student loan relief program that is right for you.

Student Loan Forgiveness Programs

Student loan forgiveness programs are programs where a student loan is either wholly or partially forgiven. The portion of the loan that gets forgiven is permanently subtracted from your student loan debt. You still have to repay the reminder under the same terms as before. Some of the more popular student loan forgiveness programs include:

  • Public service loan forgiveness - if you make no less than 120 monthly payments after October 1, 2007, you are eligible for loan forgiveness if you work full-time in a public service job.  This program will forgive your direct federal loans. Other types of federal loans can be forgiven if you consolidate them with direct federal loans beforehand. Under the program's guidelines, this includes government jobs, jobs with child and family services and jobs with private charitable organizations.
  • Volunteer-based loan forgiveness - your direct federal student loans will be forgiven if you serve in AmeriCorps or Volunteers in Service to America (VISTA) for up to 12 months. If you serve in Peace Corp, your 15% of your Perkins loan debt will be forgiven for every year of service.
  • Teaching-based loan forgiveness - if you become a full-time teacher in a public school that serves predominantly low-income areas, a portion of your Perkins Loan will be forgiven. 15% of your loan will be forgiven for each of the first two years, 20% for each of the third and fourth year and 30% for the fifth year.

Income-Based Loan Repayment Program

Under income-based loan repayment program, your monthly payments will be capped at no more than 10% of your gross income. The cap will be adjusted annually based on the changes to your income. The program is available for all federal loans. You will have to repay the loan over the course of twenty-five years. Everything that you still owe after that is automatically forgiven. However, this is only true if you make all your payments on time and in full. You can also have the remainder of your loans forgiven in ten years time if you work full-time in a public service job.

Income Sensitive Repayment Program

This program is designed to help repay loans that are part of the Federal Family Education Loan Program (FFEL program). Your monthly payment would be pegged at no less than 4% and no more than 25% of your gross monthly income. Some FEEL program lenders set the percentage based on your debt-to-income ratio. As with income-based loan repayment program, your monthly payments are adjusted on annual basis. You will have to repay your loan over the course of ten years - anything that remains will be automatically forgiven.

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