Federal Student Loan Forgiveness

The Federal Government waivers the student loan taken under some conditions. This is called the Federal Student Loan Forgiveness Program. There are various factors which are taken into account, before the loan forgiveness is actually executed. If voluntary work, including medicinal service or military service, has been performed, the student loan is waived off. The student loan forgiveness act is normally admissible for student loans, which have been obtained through Federal Family Educational Loan Program (FFELP) and Federal Direct Loans (FDL).

An act called the 'College Cost Reduction and Access Act', the acronym being 'CCRA', has been brought into existence in 2007. This act has been made by the Congress for high-debt, low-income graduates, by which the loan can be re-paid, in accordance with the salary. In addition to the above provision, there is another provision which has been made, whereby government servants and employees working for non-profit organizations can avail loan forgiveness.

There are two main parts of "College Cost Reduction and Access Act" (CCRA) namely,

1. Income Based Repayment (IBR): With this provision, the Equated Monthly Installment (EMI) is reduced on the federal guaranteed loans. This provision came into existence in July, 2009. Students, who want to apply for IBR, should do so within 2 months from their graduation. For students who have graduated before the ordinance of this act, won't be able to opt for it immediately. They will either have to wait or will have to opt for Income-Contingent Payment(ICP) plan, till they can opt for IBR. Although the ICP EMI is higher than that of IBR, students who opt for IBR have their EMI equated to 15% of the discretionary income, in contrast to the actual repayment amount. This new EMI is many times less than the original EMI. Although a hike in the salary leads to hike in the EMI, it is gradual and never steep.
2. Loan Forgiveness for Public Service: Government servants, who have served full-time for a period of 10 years and have also made 120 repayments to the Federal Direct Loan, can ask for loan forgiveness. Teachers also come under the purview of this provision however they also have to serve for a period of 10 years, before they become eligible for the loan forgiveness. The unpaid amount, inclusive of the principal amount and the interest accumulated, is forgiven by the federal government.

The federal student loan forgiveness for teachers, along with the above mentioned criteria, also have to fulfill the criterion of teaching in low-income school for a period of 10 years. The student loan forgiveness act is also applicable for teachers who teach subjects, for which there is a shortage of teachers. Such subjects are mathematics, science, foreign languages or special subjects like that for disabled children, etc.

Law school and medical school graduates also come under the purview of this act. They are supposed to serve in public interest or in areas where there is a shortage of professionals.

The Peace Corp volunteers are those people who serve for 2 years and make a difference to the lives of people in more than 70 developing nations. Volunteers, who work in the field of illiteracy, hunger or homelessness eradication, are also eligible for forgiveness. Students who serve in AmeriCorps, are paid a stipend along with a certain amount, which goes towards loan repayment.

Students who opt to work in the Army National Guard, qualify for the Student Loan Repayment Program. This program can be compared to the Federal Student loan forgiveness program, although they are two different programs.

There are other methods through which the loan can be waived:

• Students who graduate from Baker University's College of Arts and Science, also qualify for the loan waiver program.
• Students who were aided through the Michael Murphy scholarship for law and allied subjects, can avail a waiver of one fifth each year working in the field of law and allied fields, in the State of Alaska.
• Employees of Maryland state and local government can opt for loan repayment program, if they choose to study law, medicine, social work or occupational psychology and currently earn less than $40,000 a year.

The Federal government helps the citizens in one or more ways, so that they can lead a peaceful and stress-free life. There are clauses which need to be fulfilled for student debt to be forgiven, but looking at the amount that is eventually waived off, these clauses are not very difficult to fulfill.