Student loan debt has become a prominent issue, with the U.S. Supreme Court currently reviewing the administration’s proposal for student debt forgiveness. The impact of the coronavirus pandemic has led to a pause on payments and 0% interest, which will remain in effect until the end of the court’s term on June 30, 2023.
The Committee for a Responsible Federal Budget estimated that the debt suspension proposed as part of the debt forgiveness would cost $155 billion.
Under the Biden Administration’s proposal, federally held student loan debt up to $10,000 would be canceled, with up to $20,000 for individuals with Pell Grants. Borrowers with an income below $125,000 ($250,000 for married borrowers) would qualify for student loan debt cancellation.
It is troubling that nearly one-third of American students accumulate debt to complete their college education, bringing the total student loan debt to over $1.7 trillion in federal and private loans. According to a 2021 NerdWallet survey, U.S. households with student loan debt owe an average of nearly $59,000.
The U.S. Department of Education’s plan to establish an online application process for debt relief claims is currently on hold due to ongoing Supreme Court litigation.
Aside from the debt forgiveness proposal, teachers and other individuals in public service fields may be eligible for full or partial forgiveness or favorable loan repayment options.
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Start by Checking Your NEA Student Loan Forgiveness Options
As a member of the National Education Association (NEA), you have access to the NEA Student Debt Navigator, a valuable membership benefit that can help you identify options to reduce or eliminate your student loan debt obligations. By using the free interactive calculator tool, you can explore potential savings and find suitable refinancing or forgiveness programs based on your individual circumstances.
In addition to forgiveness options, the White House has announced plans to expand income-driven repayment (IDR) plans, making student loan debt repayment more affordable, particularly for borrowers with lower incomes. The NEA Student Debt Navigator can assist you in exploring these IDR options.
If you require further assistance, our partner Savi provides access to student loan experts via telephone or email through the tool.
Filing your paperwork electronically can help minimize errors and expedite the process of enrolling in a refinancing or forgiveness program, ultimately saving you money. Savi offers an official application where you can input your information. As an NEA member, the platform allows you to file for free in the first year, with a significant discount in subsequent years.
Learn more about how the NEA Student Debt Navigator functions and how it has helped numerous NEA members reduce their student loan debt significantly.
Big Savings Are Possible for Those Who Qualify
One potential path to loan forgiveness is through the Public Service Loan Forgiveness (PSLF) program. It is important to note that this program only takes effect after 120 payments or ten years. The forgiveness window began in October 2017 after the program was initiated in 2007. To benefit from forgiveness under PSLF, borrowers need to lower their payments by enrolling in an income-driven repayment (IDR) plan or another form of extension.
During the Covid-19 student loan relief, debtors are credited for monthly payments even during the suspension, as if they had made payments. If you made payments during this period, you can receive a refund and still be credited for those payments.
In 2012, the U.S. Department of Education introduced the Employment Certification Form (ECF), allowing borrowers to track their eligibility for loan forgiveness under PSLF. The process and reporting were simplified during the Covid-19 pandemic, making it easier to submit the form and provide additional data.
Teachers have access to other loan forgiveness options that are worth exploring. The demand for hundreds of thousands of teachers to replace retiring baby boomers, coupled with an average starting salary of $41,770 according to NEA data from the 2020-21 school year, has led to these extended opportunities.
For example, educators can have up to $17,500 of a subsidized or non-subsidized loan forgiven through the federal Teacher Loan Forgiveness program. Eligibility for this program requires teaching full-time in a low-income elementary or secondary school or an educational service agency for five consecutive years.
Please note that, as a rule, you cannot count a period for both Teacher Loan Forgiveness and Public Loan Forgiveness. However, a limited temporary waiver until October 2022 allowed for this exception.
Additionally, the Federal Perkins Loan program permits loan cancellations of up to 100% after five years for teachers who serve full-time in a public or nonprofit elementary or secondary school system. Special education teachers or teachers in fields such as math, science, foreign languages, bilingual education, or other areas determined to have a shortage of qualified educators by the state are also eligible.
Keep in mind that schools are no longer able to issue Perkins loans after September 30, 2017.
Other special circumstances can result in loan forgiveness, cancellation, or discharge, relieving borrowers from repayment obligations. These circumstances include total and permanent disability and, in certain cases, bankruptcy.
If loan forgiveness is not an option, an Income-Based Repayment (IBR) plan, such as the Income-Based Repayment (IBR) plan, can set your monthly payment at a fixed percentage of your income, making payments more manageable. As your income increases, your monthly payments will also rise.
How to Claim Your Student Loan Forgiveness
To be considered for any forgiveness option, you must contact your student loan servicer and express your interest in a specific program. It is essential to complete all necessary paperwork and follow through, including obtaining forms that your employer must sign.
If you have taught at multiple schools or have multiple loans from different companies, you must complete the same process for each one.
The potential savings that can be achieved are remarkable. For instance, a borrower with $30,000 in debt and currently paying around $350 per month (an average cost) would spend nearly $42,000 over ten years to repay the loan, according to estimates by Robert Farrington, founder of The College Investor. With $17,500 forgiven, the monthly payment would decrease to $248 after the fifth year. Overall, the borrower would spend only $14,900 on the original $30,000 loan, resulting in substantial savings.
“It may seem complex, but it is undoubtedly worth it,” says Farrington. “You should never pass up ‘free’ money!”
Due to the Covid-19 forbearance, there has been no accrual of interest or requirement for payments on federal loans since March 2020, providing relief to many federal borrowers.
One More Option to Ease Your Payments
Even if you are not eligible for student loan forgiveness programs, you may still have the opportunity to lower the interest rates on your loans. Although there are no federal programs that can reduce interest rates, many student loan servicing companies offer incentives to do so.
Signing up for automatic payments, for example, can result in a reduction of rates since the servicer is assured of receiving the monthly payment on time. This typically leads to a 0.25% reduction in interest rates, with some lenders offering an even greater discount of up to 0.50%. Some lenders also provide additional loyalty discounts.
For more information on federal loan forgiveness options, visit the Federal Student Aid site. Additionally, the Consumer Financial Protection Bureau offers a student loan debt toolkit specifically tailored for teachers and other public servants.
Remember, as an NEA member, you have access to the NEA Student Debt Navigator, which can guide you through your options and help alleviate the burden of student loan debt. Get started today and take control of your financial future.