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Wednesday, July 24, 2013

Dealing With Student Loans

Apologies to my regular readers for the length of time between this post and my last.  It's somewhat difficult to put these pieces together when working so many hours in addition to maintaining my other blogs.  I will endeavor to return to a regular posting schedule beginning with this piece.

With all the talk about student loans and rising monthly payments expected due to the increase in interest rates, I thought it would be timely to reprint a recent piece from American Public Radio's daily program, "Marketplace Money." The piece, "How To Get Rid Of Your Student Loans Without Paying," is pretty self-explanatory in it's subject matter (especially since I only recently completed an obligation with my own student loans).
In addition to reprinting the advice-filled story, have taken the liberty of embedding the audio for the story in this week's blog contribution. I hope you will find this helpful.
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How To Get Rid Of Your Student Loans Without Paying

by Daryl Paranada 
Marketplace Money for Friday, July 5, 2013 

Students hoping to become public defenders, work in the health field, or hopeful veterinarians in the state of Kentucky specializing in large food animals -- you're in luck.

You might be eligible for a number of programs that will help to repay your student loan debt. (Problem is, these programs aren't easy to find out about.)

"The information can be really buried within a website or can be fractured," said Betsy Mayotte, director of regulatory compliance at the nonprofit organization American Student Assistance. "You kind of have to dig for the details."

With the interest rate on new subsidized Stafford loans doubling from 3.4 percent to 6.8 percent on July 1, 2013, students taking on debt to pay for their graduate degrees might consider researching the different programs out there. To help guide students interested in forgiveness programs, ASA has put together an eBook called "60+ Ways To Get Rid Of Your Student Loans (Without Paying Them)." The organization divides the programs into two broad categories.

"Forgiveness programs are generally programs where you are rewarded for something that you do. Generally it's some sort or volunteer or a specific working profession where there's a need for people to work in that profession," said Mayotte. "Unfortunately, discharge is for when something bad happens to you."

The loan forgiveness and discharge programs were instituted by the federal government (as well as some state governments, organizations and private businesses) to eliminate all or part of a student’s loans if he or she qualifies. Borrowers who give back to their community, work in fields or areas of need, or face unpredicted, extenuating circumstances are eligible for these different programs.

To apply for forgiveness, you may need proof that you've worked for the required number of years at the location or profession that makes you eligible for the program.

The types of loan forgiveness programs available can be divided among these broad categories:

Community service 
One community service option is applying for an AmeriCorps. award. It repays part of a person's student loans based on their service in the AmeriCorps program. The U.S. federal government program is meant to engage adults in intensive community service work with the goal of "helping others and meeting critical needs in the community." Other volunteer organizations offering loan forgiveness include the Peace Corps. and Volunteers in Service to America (VISTA).

Military 
Perhaps one of the most well-known ways to forgive your student debt. Generally there are two types of programs -- ones that pay for school while you're in school and then programs relating to existing loan forgiveness. You should speak with a recruiter about the different plans out there. Find out more information at Military.com.

Profession 
The most common professions eligible for loan forgiveness tend to be in the health and teaching fields. Mayotte says some states are really thirsty for nurses, doctors, teachers, or public defenders -- and may have forgiveness programs to attract those types of workers. You can find more career-based forgiveness programs with an online search or by talking to your employer. Find out more information at FinAid.org.

State specific You may be eligible for a program in a particular state if you are a legal resident in that state, work in one of the selected jobs, have a license for one of the jobs in the state, or went to school there. Search online to see what programs are available to you. Go to the state's website and search around. State specific programs can change or be eliminated based on budget, so keep an eye out.

The types of loan discharge options include:
Closed schools/school errors
Borrowers may be eligible if their school closed while they were attending or within 90 days of leaving it. They may also be eligible if they withdrew from school and were not refunded the correct amount. Borrowers are only eligible if they received their loans on or after January 1, 1986.

Disaster
There's a discharge option for spouses of eligible public servants or other eligible victims who died or became permanently and totally disabled due to physical injuries suffered as a result of the September 11, 2001 attacks. Financial hardship Borrowers who face financial hardship based on income or debt could be eligible for these options:

Financial hardship 
Borrowers who face financial hardship based on income or debt could be eligible for these options: 

Bankruptcy 
Contrary to popular belief, you can get rid of your loans in bankruptcy. But it's difficult to do so. You must prove to a bankruptcy judge that repaying your loans would be an undue hardship. This standard generally requires you to show that there is no likelihood of any future ability to repay. Learn more. 

Income-based repayment  
To qualify you must have a partial financial hardship, which means that payments to your eligible loans exceeds 15 percent of your discretionary income. After 25 years -- 10 working in public service -- any student loan debt left over is forgiven. Learn more. 

Income-contingent repayment 
Similar to the income-based repayment program, but payments are capped at 20 percent of discretionary income. Learn more. 

Pay as you earn forgiveness 

Only for newer borrowers. You must be a new Direct Loan borrower as of October 1, 2007, with a disbursement made after October 1, 2011. Any Direct Consolidation loan made on or after October 1, 2011, that does not include a Parent PLUS loan or a loan made prior to October 1, 2007 is eligible. Learn more. 

Fraud 
If someone fraudulently obtained the loan in your name you may be eligible to have your loan discharged. 

Medical 
For borrowers who suffer from physical or mental impairments or have died. Mayotte said it's important to note that for many of these loan programs, the amount that's forgiven can be taxed as income. She says the best way to find out what programs are available to you is searching online and asking. "Ask a potential employer if student loan repayment is part of a benefit. Ask a school that you're attending if the school is aware," says Mayotte. "I wouldn't be surprised if there were some super secret programs out there that weren't online."

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