Will Your Student Loan Forgiveness Program Last?
The tough reality of student loans is that if your chosen career path is less than lucrative, you may face a lifelong struggle in paying back those loans. What’s really unfortunate is that student loan debt can keep some civic-minded students from entering professions that benefit the greater good—but don’t provide a six-figure paycheck.
Luckily, there are loan forgiveness programs available—programs designed to remove or reduce that challenge for some professions. Teachers, particularly in high-needs school districts and subjects, can get a significant portion of their student loans paid off. Those who work in public service can get government-administered loan forgiveness for federal loans—and some schools offer forgiveness programs for private loans as well.
But the tight economy is affecting these loan forgiveness programs—and some students have already had their payments reduced. Many loan forgiveness programs are given directly by your state or the federal government—and government budgets throughout the country are suffering with the reduction of income taxes and business closures that have resulted from the recession. In addition, many nonprofits that administer loan forgiveness programs get their funding from government sources, and they face funding shortages for the same reasons.
In addition, the federal government has been making an attempt to reduce the high price tag of the federal student loan program by cutting subsidies to lenders altogether. Reducing subsidies has also reduced some loan forgiveness programs.
Here are a few of your options if you’re currently in a loan forgiveness program—and you’re worried about the rug being pulled out from under you.
Student loans can be difficult to repay—even in the best of times, and even with student loan forgiveness programs.
Some loan forgiveness programs are in more jeopardy than others. If you’re getting assistance from a privately funded endowment, you have more to worry about than if your loan forgiveness program is funded by a large, federal-level organization. Programs like Teach for America, the military’s education benefits, and AmeriCorps are large priorities for our country and the government would likely face public backlash if they were cut; so you’re safer if your program is administered through one of these organizations.
Talk to your school
Some student loan forgiveness programs are backed by colleges and universities themselves. Talk to your school about the forgiveness program you’re working under—how committed is your school to keeping the program funded, and how hard will they work to find replacement funding if they lose what they have? Check to see if an individual endowment is set aside for loan forgiveness programs—this is often a good sign of a school’s commitment.
Get a backup plan
Some student loan forgiveness programs have been cut because of the recession and stock market crash, but others are getting started—to help students facing an uncertain future. You can apply for other loan forgiveness programs rather than the one you have. Your best place to start researching is your company’s Human Resources department. Check with a knowledgeable human resources employee for a list of loan forgiveness programs that might apply to your employment situation. This person may also be able to give you a realistic assessment of how much risk you face with your current loan forgiveness program.
Talk to your lender
You may not have planned to have to assume the full burden of your student loan payments because of a loan forgiveness program—and you’re facing tough financial straits if your situation changes. If it does, talk to your lender and explain your situation. They may be able to work with you to reduce your monthly payments to a level you can afford. They can also tell you about student loan consolidation, forbearance, and possible deferment options.
Student loans can be difficult to repay—even in the best of times, and even with student loan forgiveness programs. If your student loan forgiveness program looks like it’s in trouble, do your research and see if you can find a replacement. If not, talk to your lender—this expense was completely unplanned, and your lender may be able to help you manage your payments, as well as your budget and savings.
New York Times: Students Relying on Loans Wonder Whether Forgiveness Will Last
New York Times: Recession Imperils Loan Forgiveness Programs
Forbes.com: New Rules for Ditching Student Loans
NASFAA.com: Senate Passes Bill Increasing Pell, Cutting Lender Subsidies
New York Times: State Cutbacks and Loan Forgiveness
Bankrate.com: Student Loan Forgiveness Programs in Peril
More About Understanding Student Loans
- Credit Repair Services You Should Never Pay For
- Questions You Should Ask Before Applying for Student Loan Forbearance
- The Bank on Students Act: What It Is, and How It Could Help Student Borrowers
- How the Death of a Co-Signer Can Affect Your Student Loan
- Peer-to-Peer Student Loans: What They Are, and How They Can Help You Pay for College
- If You're Unable to Work Because of a Disability: What Happens to Your Student Loan?
- New Rules for Debt Collectors: How They Could Affect Your Student Loan
- Having Trouble Repaying Loans? The Department of Education May Be in Touch