When Will Student Loan Forgiveness Programs Actually Start Paying?

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Although you might be eager to have your student loans forgiven right away, most legitimate forgiveness programs take a long time. The Public Service Loan Forgiveness (PSLF) program, for example, requires 10 years of service, and most income-driven repayment plans offer student loan forgiveness after 20 or more years of repayment.

To get more details on when student loan forgiveness programs actually start paying, let’s answer these questions:

Are student loans forgiven after 20 years?

The government offers several loan forgiveness programs. Some will forgive your loans in exchange for qualifying service, whereas others will forgive your balance after a certain number of years on a qualifying repayment plan.

Here’s when the income-driven repayment plans forgive your student loans:

  • Income-Based Repayment
    Student loan forgiveness is available after 20 years if you were a new borrower on or after July 1, 2014. Otherwise, forgiveness won’t occur until after 25 years.
  • Pay As You Earn
    Student loan forgiveness is available after 20 years
  • Revised Pay As You Earn
    Student loan forgiveness is possible after 20 years if you’re only repaying undergraduate loans, or after 25 years for any of the loans you’re repaying from graduate school or professional study.
  • Income-Contingent Repayment
    Student loan forgiveness is possible after 25 years of repayment.

This assumes you still have a balance after two decades or more of repayment and that you’ve kept up with your payments over the years. Note that even though your balance will be discharged, you might still have to pay taxes on the forgiven amount.

Alternatively, you could pursue a forgiveness program that’s based on qualifying service. The Public Service Loan Forgiveness program, for example, will forgive your remaining loan balance after 10 years of service in an eligible organization, such as a nonprofit or government agency, and 120 qualifying payments.

Teacher Loan Forgiveness is another popular program that provides $5,000 or $17,500 in loan forgiveness (depending on the subject you teach), typically after five years in an eligible school. This program promises to help you with your student loans sooner than PSLF does, but it only offers partial forgiveness, rather than full forgiveness.

While these federal forgiveness programs typically require five or more years of repayment before offering forgiveness, some state-run loan repayment assistance programs (LRAPs) offer rewards much sooner. LRAPs assist doctors, lawyers, nurses, teachers and several other qualifying professionals, and they usually only require a couple of years of work in exchange for the award.

What’s more, you can often use that money toward both private and federal student loans. If you can qualify, an LRAP could offer financial relief even sooner than a federal student loan forgiveness program.

What’s going on with the PSLF program?

If you’ve seen PSLF in the news lately, you know that the road to loan forgiveness hasn’t been smooth for a lot of borrowers.

PSLF started in 2007, with the first borrowers becoming eligible for loan discharge in 2017. But many of these borrowers found out they had been misinformed about the requirements of the program. For example, some had their applications denied because they weren’t on the right repayment plan — you have to be on an income-driven plan, as graduated and extended repayment plans don’t count.

What’s more, many borrowers didn’t realize they were supposed to submit an Employment Certification Form every year, or at least every time they changed to a new employer.

Fortunately, the Department of Education made some moves to address this issue in early 2018 with the introduction of Temporary Expanded PSLF (TEPSLF). This program set aside $350 million for borrowers who had been on the wrong repayment plan.

Hopefully, the requirements for PSLF will be more clear going forward so that public service workers can receive loan forgiveness after 10 years of service, rather than just running into a lot of red tape.

Are the days of the PSLF program numbered?

Although there are many hoops to jump through, PSLF does offer a path to student loan forgiveness. But since it’s a federal program, it could still be eliminated in years to come.

“The PSLF program has been under threat for the last several years by policymakers concerned about the potential cost,” said Nancy Conneely, director of policy at AccessLex Institute.

With this controversy over funding, no one can guarantee that PSLF will stick around forever. But despite this, personal finance expert David Bakke is hopeful about the future of the program.

“Going forward, I think the program will finally begin to kick in for a lot of borrowers, the forgiveness numbers will go up, and people will realize what an excellent program it is to help defray the cost of college,” said Bakke. “You might even see more people interested in careers in public service because of this program’s benefits.”

Travis Hornsby, CFA and founder of Student Loan Planner, is also optimistic about the program, at least for now.

“I’m actually seeing very encouraging signs, such as borrowers who have received forgiveness getting refunds for overpayments,” he said. “One woman I spoke with got 16 payments given back to her. I didn’t expect that in my wildest dreams.”

PSLF remains subject to the changing tides of politics, but as of now, it is still a viable option for student loan borrowers committed to careers in public service.

What are some alternatives to student loan forgiveness programs?

While some finance experts are hopeful about the future of PSLF, Joshua Hastings, founder of the blog Money Life Wax, encourages borrowers to consider alternatives, just in case.

“Borrowers should have a backup plan when it comes to using PSLF,” Hastings said. “If you are hell-bent on paying the minimum and waiting 10 years to see if you get your student loans forgiven, realize a lot can change in 10 years.”

Before committing to PSLF, take time to consider your alternatives. Take a look at what your monthly payments would be if you stayed with the standard 10-year plan. If your bills aren’t too burdensome, sticking with a 10-year repayment schedule might be a safer strategy.

Along the way, you could even throw extra payments at your student loans when and if you have the funds, and end up paying them off ahead of schedule.

And once you have a steady income and decent credit score — or can apply with a cosigner who does — you could consider refinancing for new terms and a lower interest rate. (Note, however, that refinancing federal student loans turns them private, meaning you become ineligible not just for PSLF, but also other federal programs like income-driven repayment.)

How can you stay up to date on federal forgiveness program developments?

If you owe a large amount in federal student loans, a forgiveness program could offer the financial relief you need. But make sure you understand exactly what the program’s requirements are, so you don’t find yourself out of luck after years of service.

And remember, too, that policies can change, so stay updated on PSLF news, as well as developments around any federal forgiveness programs or repayment plans. Beyond keeping informed, try to have a plan B in case loan forgiveness doesn’t work out.

Look into other strategies for paying off debt or lowering your interest rate, and use a student loan calculator to devise a debt payoff plan that works for your budget.

Eric Rosenberg contributed to this article.

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1.91% – 5.25%4Undergrad
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2.25% – 6.53%5Undergrad
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1 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.

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Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of Feburary 1, 2021.

2 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of October 26, 2020, and are subject to change based on market conditions and borrower eligibility.

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The information provided on this page is updated as of 10/26/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.

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3 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. ‍All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.

4 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 02/17/2021 student loan refinancing rates range from 1.91% APR – 5.25% Variable APR with AutoPay and 2.95% APR – 7.63% Fixed APR with AutoPay.

5 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: 1. Fixed rates from 2.99% APR to 6.99% APR (with AutoPay). Variable rates from 2.25% APR to 6.53% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.12% plus 2.38% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The discount will not reduce the monthly payment; instead, the interest savings are applied to the principal loan balance, which may help pay the loan down faster. Enrolling in autopay is not required to receive a loan from SoFi. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score.Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

6 Important Disclosures for PenFed.

PenFed Disclosures

Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.99%-5.15% APR and Variable Rates range from 2.17%-4.47% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.