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Military Student Loan Forgiveness and Discharge Programs

January 26, 2012 By

More and more at GetOutOfDebt.org we are getting questions about how to get your student loans eliminated, forgiven, or discharged if you are in or served in the military.

It is absurdly ironic that members of the military can go into harm’s way, fight in combat and yet return home only to struggle to escape the invisible bondage of student loan debt.

However, there are some real options that can help you do this, but like the military, there are rules to follow and hoops to jump through.

[Article: Feds: Mortgage Companies Still Violating Military Families' Rights]

Public Service Loan Forgiveness Program

One overlooked program is the Public Service Loan Forgiveness Program. Under this program members of the military that have been employed by the military or a qualifying public service job for the last ten years may have their federal student loans FULLY discharged.

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Public service qualifying occupations include:

  • Emergency management,
  • Military service,
  • Public safety,
  • Law enforcement,
  • Public interest law services,
  • Early childhood education (including licensed or regulated childcare, Head Start, and state-funded pre-kindergarten),
  • Public service for individuals with disabilities and the elderly,
  • Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations),
  • Public education,
  • Public library services, and
  • School library or other school-based services.

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You need to be employed in these position at least full-time, which is considered to be at least 30 hours a week or what the employer considers to be full-time.

The benefit of this program is it allows you to discharge your debt after it has been consolidated for a low payment. You can use the online student loan consolidation calculator here.

The way the program works is that after making 120 monthly and on-time consolidated and reduced payments you remaining balance will be forgiven. – (Source: Public Student Loan Forgiveness Program Questions and Answers)

Not all student loans are eligible for consolidation. Private student loans are excluded. Loans that are eligible to be consolidated can be found here.

Direct Loan payments that qualify include:

  • The Income Based Repayment (IBR) Plan;
  • The Income Contingent Repayment (ICR) Plan;
  • The Standard Repayment Plan, with a 10-year repayment period; and
  • Any other Direct Loan repayment plan, but only payments that are at least equal to the monthly payment amount that would have been paid under the Standard Repayment Plan with a 10-year repayment period may be counted toward the required 120 monthly payments. (February 3, 2010)

And you may actually be able to have zero dollar loan payments count towards your required 120 payments. If you qualify for a zero monthly payment under the Income Based Repayment or Income Contingent Repayment programs then those payments, or lack thereof, will actually count. Pretty cool, huh?

For more information on this program read this publication by the U.S. Department of Education.

National Defense Student Loan Discharge

If you helped to pay for college with a National Defense Student Loan it may be partially discharged.

Recipients of a National Direct Student Loan and Perkins Loan may receive partial cancellation of their loan for their service in the United States Armed Forces if his/her military service was for a full year in a hostile fire/imminent danger pay area.

If you believe that you may qualify for cancellation of your loan(s) due to your military service as described above, you should send a copy of your DD214 (discharge form) and letter of explanation to the agency servicing your loan.

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Have More Tips and Information?

We want to continue to help and assist members of the military with information on dealing with student loans so please post any tips and information you can to help in the comments section, here.

This article was contributed by GetOutOfDebt.org, a site that provides free debt consolidation help and debt relief advice for people looking for answers. @GetOutOfDebtGuy

Source: Military Student Loan Forgiveness and Discharge Programs

Image: jamescollins, via Flickr.com

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Under 21? How to Get a Student Credit Card

January 19, 2012 By

If you’re under the age of 21 and want to acquire a credit card with your name on it, you’ve probably found that doing so isn’t easy.

That’s because new federal laws place a number of restrictions on the access to credit for consumers under the age of 21, which may make it difficult for you to get a student credit card. So what are these restrictions?

[Article: College Grads Face Record Debt]

Well for one thing, you are simply barred from getting one unless you have either an adult co-signer—someone over 21 who will be financially responsible for the account along with you—or can otherwise prove that you have sufficient income to afford the payments by yourself. However, you should know that the law does not state what constitutes “sufficient income” and therefore the proof you’ll have to provide may be different for each lender.

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Of course, most young adults, particularly those who are still in college, probably don’t have a large enough income on their own to afford payments, so it’s recommended that you find an adult co-signer who does. That will probably mean parents, rather than older siblings or friends, which might be a good idea anyway, because older consumers likely have significantly better credit ratings, which would give you access to better credit card offers.

[Free Resource: Check your credit for free before applying for a credit card]

One mistake many students may also fall into when applying for credit cards for the first time is getting more than one within a short period of time. For most people, this is a time when they’re just learning how to use credit cards, and therefore it’s important to get a feel for what it takes to manage an account properly before committing to more than one of them.

Numerous studies have found that, in addition to student loan debt, the average college student these days is graduating with several credit card accounts in their name and thousands of dollars worth of debt (though both the number of cards and the amount owed on them are falling). For this reason, it’s a good idea for students to manage credit cards as responsibly as possible.

[Credit Cards: Research and compare student credit cards at Credit.com]

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Student Loan Default Realities

May 9, 2011 By

Next: Slide 2 of 9 »

Image by Cindy Maddera — Slide 2 of 9

It’s been famously identified as “good debt,” but if borrowers ever fall behind on their student loans, “good” can quickly turn into “evil.” And these days more borrowers in default are experiencing severe consequences. The federal government has recently increased legal action with the Department of Education reporting twice as many loan defaults to the Department of Justice between 2009 and 2010.

Tragic student loan stories pour in from Credit.com readers each week:

  • “With fees and penalties and interest accruing on interest, my $20,000 has ballooned into $85,000,” says Joseph.
  • “I have the order of the court in my favor and they still call, send notices, threaten collection and legal action and threaten to list me in default,” says “Still Hoping for Change.”
  • “My loan is up to $250,000 in an economy that has slowed down in drastic ways,” says Sophia.

For those considering taking on federal or private student loans—or considering giving up on the payments—take it from these folks: Your life could turn upside down if your debt gets out of hand.

I recently interviewed Mark Kantrowitz, Publisher of Fastweb.com and FinAid.org and the author of the new book Secrets to Winning a Scholarship on the consequences following student loan delinquency and default. He offered extensive details and a thorough rundown of unfortunate events…

Next: Slide 2 of 9 »

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Student Loan Default Realities

May 9, 2011 By

Next: Slide 2 of 9 »

Image by Cindy Maddera — Slide 2 of 9

It’s been famously identified as “good debt,” but if borrowers ever fall behind on their student loans, “good” can quickly turn into “evil.” And these days more borrowers in default are experiencing severe consequences. The federal government has recently increased legal action with the Department of Education reporting twice as many loan defaults to the Department of Justice between 2009 and 2010.

Tragic student loan stories pour in from Credit.com readers each week:

  • “With fees and penalties and interest accruing on interest, my $20,000 has ballooned into $85,000,” says Joseph.
  • “I have the order of the court in my favor and they still call, send notices, threaten collection and legal action and threaten to list me in default,” says “Still Hoping for Change.”
  • “My loan is up to $250,000 in an economy that has slowed down in drastic ways,” says Sophia.

For those considering taking on federal or private student loans—or considering giving up on the payments—take it from these folks: Your life could turn upside down if your debt gets out of hand.

I recently interviewed Mark Kantrowitz, Publisher of Fastweb.com and FinAid.org and the author of the new book Secrets to Winning a Scholarship on the consequences following student loan delinquency and default. He offered extensive details and a thorough rundown of unfortunate events…

Next: Slide 2 of 9 »

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Manage Student Loans With Your Smart Phone? Eh.

May 6, 2011 By

Smartphone_Johan_Larsson_CCFlickrThere are some great mobile apps and phone-friendly websites sites that help us better manage our money and credit, many of which I’ve written about for Credit.com. But I’m not convinced a new mobile service intended to help borrowers manage their student loans is really going to help stem the growing rate of student loan defaults.

Here’s the news: The American Education Services and FedLoan Servicing, now allows borrowers manage and review their student loans and make payments via their smart phones by hopping onto MyFedLoan.org or AESSuccess.org.

[Related Article: Boost Your Credit Score: 7 Helpful Apps]

Here’s the reality: Students are graduating with an average $24,000 in student loans. The amount of student loan debt is—for the first time ever—more than our country’s total amount of credit card debt. The weak job market is making it tough for graduates to find work, and those who are lucky to find work still have a tough time making ends meet, as the cost of living rises faster than wages. It’s no surprise then that the student loan default from 2008-2009 was about 7 percent, compared to 5.2% in 2006—an extremely conservative number in my view. Many more are falling behind on their payments. According to new research from the Department of Education, more than a fourth of borrowers surveyed had fallen behind on their student loans but hadn’t defaulted.

The ability to pay back student loans is not for lack of technology. It’s for lack of money.

Of course, the companies involved don’t pretend their technology is going to solve all the world’s problems with student loans. They’re likely just trying to keep up with the times and do what they can to address what they know is a crisis, which is respectable.

[Related Article: Student Loan Default & Delinquency Rates “Worrisome”]

If only there was more effort placed on creating real, effective solutions to help struggling borrowers either modify their student loans or, I dare say, get a bailout. Federal student loans do have some flexibility, but private loans are still likely to turn into a nightmare if a borrower can’t pay them back. Neither federal nor private student loans are dismissible in a bankruptcy unless you can prove extreme, dire financial circumstance—and even then it’s up for debate.

Image: Johan Larsson, via Flickr.com

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