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This is the third article detailing different ways that you can use student loan forgiveness to get out of your student loans. The previous two articles focussed on the tax implications involved with having your student loans forgiven and the ways to have your federal direct loans forgiven. I have also detailed our journey out of debt by using student loan forgiveness. You can find the link to that article below.
In this article of Student Loan Forgiveness Info, we are going to focus on the Federal Perkins Loans Program. I will be defining the loan and listing all the possible ways that you can utilize student loan forgiveness.
The Federal Perkins Loan is a low-interest (currently 5%) loan option for students with exceptional economic need. The economic need is calculated by finding the difference of the cost of attendance (COA) and the Expected Family Contribution (EFC).
The Perkins Loan is available to undergraduate, graduate and professional students. The school of attendance is the loan servicer, but not all schools offer a Perkins Loan. All payments of the Perkins Loan will be made to the school of attendance. The amount of loan is dependent on economic need (for example - I had a loan of $5,700 after 4.5 years of college or Approx. $1,267 per semester).
Ways to Have Your Loan Forgiven
Just like with a Direct Loan, the Perkins Loan also has multiple programs available to people depending on situation or career field. Below is a list of programs that can be used to have your student loans forgiven.
- Closed School Discharge
- Allows for 100% discharge of student loans if a school closes
- Only eligible if the school closes while enrolled or the school closes 120 after withdrawing
- You must notify loan servicer and start the process of filling out paper work
- You must fill out an application for loan discharge
- You must continue to make monthly payments until you are notified that the loan has been discharged
- Once application has been approved, you no longer owe the debt
- Perkins Loan Cancelation and Discharge
- Depending on certain factors, you may be able to cancel all or some of the loan.
- Eligible for cancelation if you served in the following: (1) Peace Corps, (2) ACTION program (including VISTA), (3) Member of U.S. Armed Forces (served in areas of hostility), (4) Nurse, (5) Medical Technician, (6) Law Enforcement, (7) Correction Officer, (8) Head Start Employee, (9) Family Services Worker, (10) Child Services Worker, (11) Professional Provider of Early Intervention Services and (12) Teacher.
- There is no standard application, you must contact your institution (or loan servicer assigned by the institution) and complete the form that they request. (For example - my institution used mycampusloan.com as the loan servicer and they had the form listed on their website with instructions).
- Must make payments while the cancellation application is being reviewed.
- Loans are deferred while you are performing the services listed above.
- Total and Permanent Disability Discharge
- Discharge of loan due to a disability
- Must be able to prove that the disability
- Must apply for the discharge
- For more information visit disabilitydischarge.com
- Discharge Due to Death
- If you die, your student loans can be discharged
- Discharge Due to Bankruptcy
- Very rare, but is possible if you file an "adversary proceeding"
- The adversary proceeding will request that the bankruptcy court to determine that repaying student loans would impose a hardship
Amount Eligible For Cancellation or Discharge by Service or Situation
- Disability of Death: 100% of loan balance
- Bankruptcy (rare cases in which the court rules the loan would cause a hardship): 100% of loan balance
- Closed School: 100% of loan balance
- Service in U.S. Armed Forces: 50% of loan balance for service ended before Aug. 14, 2008 or 100% of loan balance for service ended after Aug. 14, 2008
- Full-Time Firefighter: 100% of loan balance for service on or after Aug. 14, 2008
- Full-Time Law Enforcement or Corrections Officer: 100% of loan balance
- Full-Time Nurse or Medical Technician: 100% of loan balance
- VISTA or Peace Corp Volunteer: 70% of loan balance
- Librarian with Master's Degree working in a Title-I school or Public Library: 100% of loan balance for service on or after Aug. 14, 2008
- Full-time Attorney employed as a public or community defender: 100% of loan balance for service on or after Aug. 14, 2008
- Full-Time Teacher at a preschool or child care program that is licensed or regulated by the state: 100% of loan balance for service on or after Aug. 14, 2008
- Full-time speech pathologist with a master's degree working at a Title-I school: 100% of loan balance for service on or after Aug. 14, 2008
- Full-Time teacher or special education teacher at an educational service agency: 100% of loan balance for service on or after Aug. 14, 2008
- Full-time faculty member at a tribal college or university: 100% of loan balance for service on or after Aug. 14, 2008
- Full-time professional provider of early intervention services for the disabled: 100% of loan balance
- Full-time staff member in the education component of Head Start: 100% of loan balance
- Full-time Teacher in areas of shortage (include Math, Science, foreign language, bilingual education and special education): 100% of loan balance
In my opinion, the loan forgiveness program involved with the Perkins Loan is much better than the program for direct loans. With the Perkins Loan Cancellation, your student loans are placed in deferment during the service years. This allows you to use money that would have been sent to pay for your student loans for something else. Oppositely, the Direct Loans Forgiveness Program requires payment during the five years of service.
It really is amazing, that the government offers so many programs for student loan forgiveness or discharge. If you are interested in more information on these programs you can e-mail your loan servicer questions about any of these programs or you can contact me. I am more than happy to answer any questions.