Student Loan Forgiveness Info: Where Do I Start?

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Just imagine....You are a recent graduate, with student loan debt. You have landed your first 'adult' job and this job allows you the benefit of student loan forgiveness. You picked this job specifically for the student loan forgiveness, but you are kind of lost on the best way to receive this benefit.

You may be feeling overwhelmed and not sure where to start. This article is designed to give you a detailed step-by-step process on preparing for student loan forgiveness and making sure that you receive every benefit that is available to you.

Step 1: Find out if You are Eligible for Student Loan Forgiveness

I knew that I would be eligible for Student Loan Forgiveness when I started working in my teaching position, but not everybody may know the eligibility requirements. You can read the following articles on student loan forgiveness to help you determine if you are eligible or not.

Step 2: Contact Each Loan Servicer

I missed the boat on this step and lost out on $700. Make sure you understand the terms of each loan forgiveness program, because some programs defer payment during the service years (specifically Perkins Loans).

In my situation, I paid on my Perkins Loans for 1 year, before contacting the loan servicer. Once I contacted the loan servicer, I was notified that my loans could be deferred during the service years and each year a portion of the loan would be paid off (read about it here). 

Your loan servicer will be able to help you with any questions and can help direct you to the correct forms to fill out. Make sure to contact them as soon as you start working in a forgiveness eligible position.

Step 3: Make Your Minimum Monthly Payments

It's important to stay up-to-date with your loans every month. In the case of student loan forgiveness, only pay the monthly minimum payment. To be eligible for loan forgiveness (direct loans), you must be up-to-date on all loan payments. 

Step 4: Pay Yourself a Student Loan Payment (in addition to your other payments)

Don't just assume that you will be able to receive the loan forgiveness. There are some funky things that can happen with a student loan forgiveness program and the best thing that you can do for yourself is to have the money in a savings account to pay off the student loans at any time.

What could happen?

  • Loss of Job
  • Can't Stand Your Job
  • Government Ends the Student Loan Forgiveness Program

You never want to put yourself in a position to keep a job, just because of Student Loan Forgiveness. Something better could come along that offers more money, but you won't be able to receive loan forgiveness. Would you move to that higher paying job or would you stay at the government job just because of student loan forgiveness?

Paying yourself a student loan payment every month, allows you the option of choice. You can choose to work at a different job and pay off your loans yourself.

My wife and I used this plan before receiving student loan forgiveness. We had the money to pay off my loans in a savings account, just in case. Luckily, I was able to receive the benefit and turned that savings into money for our down payment on our house.

Related: Saturday Special: We're Debt Free!

You can't assume that you will keep that same job for the entirety of the program or you can't assume that the program will always be there. Some of these loan forgiveness programs take ten years of service. You can't be assured the program will still be there in ten years (President Trump's Administration has even cut out student loan forgiveness in the latest budget projection).

If that budget goes through, you have to be prepared to pay off your student loans yourself. The only way to do that is to pay yourself a student loan payment every month, just in case you have to pay back the loans because of some unforeseen circumstances.

Step 5: Prepare for Possible Taxes

Not everybody needs to worry about a tax hit, but some occupations that can receive loan forgiveness may still be hit with a tax bill. Make sure to read my article titled, "Student Loan Forgiveness Info: Are There Any Tax Implications?" This article details the occupations that will be hit with a tax bill after loan forgiveness.

In this instance, the loan forgiveness will be considered income and you will be taxed based on your income tax bracket. I would suggest using the money that you saved in step 3 to pay the tax bill. This way you kill two birds with one stone. The money can be used for paying off the loans in case you don't receive loan forgiveness or it could be used for paying the tax bill if you receive loan forgiveness.

Step 6: Make Sure to Fill Out the Forms on Correctly and On Time

I have heard this is a big deal. To receive student loan forgiveness, your forms must be filled out correctly and turned in on time. If they aren't filled out correctly, they will be returned (this is pretty common). 

With the Perkins Loan, you will need to fill out a form every year of service. From my experience, the Perkins Loan Forgiveness was a much easier process and the people I talked to were helpful. The direct loans program was more challenging.

Your loan servicer can help you fill out the form. I got help over the phone, when it came to filling out my first year of Perkins Loan Forgiveness. Each of the next four years, I filled it out the exact same way as year one and I never had any problems.

Step 7: Celebrate!

At some point after filling out the forms, you will receive a notification that your loans are forgiven. It took about two months for my loan forgiveness to be completed. In August of 2015, we were able to celebrate the fact that we were debt free!

By following these steps, you will be able to celebrate receiving student loan forgiveness, too. Don't feel overwhelmed, because the process was pretty simple and the forms were easy to fill out. 

Don't be afraid to send me any questions if you still have questions about student loan forgiveness.

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