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FEDERAL STUDENT LOAN REPAYMENT PLANS

STUDENT LOAN REPAYMENT PROGRAMS

The Public Service Loan Forgiveness program (PSLF) offers complete loan forgiveness to those who work in the public sector. This includes non-profit employees, Peace Corps volunteers, public school teachers and staff, and government employees to name a few.

The Teacher Loan Forgiveness program (TLF) is a form of student loan forgiveness that is separate from the Direct Loan or Obama Student Loan Forgiveness program. This program awards educators with a principal reduction of their federal loans. It was designed to encourage students to enter the education field and to incentivize teachers to continue teaching.

Total and Permanent Disability Discharge program (TPD) helps borrowers suffering from a disability by offering a complete discharge on their federal loans.

Unfortunately, most private lenders do not offer disability discharge for private student loans. The few that do are Sallie Mae, Wells Fargo, Discover, and New York Higher Education Services Corp.

In the Direct Loan program, interest in the IBR does not capitalize on the subsidizedportion of your direct loan. This applies only for the first three years of your IBR payment, and only if your IBR payment is less than what is normally due to interest.

This can amount to many thousands of dollars depending on your loan balance and what type of payment you currently qualify for.

There is also interest forgiveness in the PAYE and REPAYE plans as well.

If you enroll into any of the income-driven repayment plans, your loan balance would be forgiven at the end of the term if you still have a remaining balance.

The term of the loan would be between 20-25 years depending on which repayment plan you choose, and when your loans were originally borrowed.

How much you will be forgiven will depend on your original loan amount, how much you are earning, and how much your earnings fluctuate during your repayment term.

Nurses have access to a number of county, state, and federal student debt forgiveness programs. If you currently work for a hospital or clinic, your employer may even offer assistance with repaying your nursing school loans.

The two main federal programs are the Nurse Corps Loan Repayment Program and the National Health Service Corps (NHSC) Loan Repayment Program.

Colleges and universities do not commonly close, but it does happen. Luckily, in those situations, borrowers are protected thanks to the closed school discharge.

You will no longer have to make payments on eligible federal student loans and any payments you already made will be refunded. If you were in default on any of these loans, the loan holder will also repair your damaged credit history.

To incentivize qualified individuals to join the military or the reserves, many U.S. military branches offer student loan forgiveness programs.

Qualifying borrowers can receive up to $65,000 in loan forgiveness over the length of their service contract.

For active duty members, the military pays the greatest of 33.33% of your remaining principal balance annually or $1,500 for each service year. For reserves, the Army and Navy repay 15% or $1,500 per year, whichever is greater. The Air National Guard repays the greatest of 15% or $5,000 per year.

CLRP benefits are taxable, but 28% of the forgiveness payments are sent directly to the IRS. This means you will not owe any taxes out of pocket related to your CLRP benefits.

Through the Department of Education, several colleges offer low-interest Perkins Loans to financially needy students. If you received a Federal Perkins Loan, you might qualify for partial or full loan forgiveness.

This student loan forgiveness program cancels a percentage of a borrower’s Federal Perkins Loan if they work full-time in an eligible field. You will have a portion of your loans forgiven for each year of service. The specific cancellation terms depend on your line of work, but this program awards up to 100% forgiveness. For the majority of Perkins Loan cancellations, the cancellation terms are as follows:

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The PSLF program is a federal program that forgives up to 100% of your federal student loan debt if you work in a qualifying public service job.  The program was created in 2007, as a way to help people in lower-paying government jobs to able to manage their student loan debt.

 

Only the following types of loan qualify for PSLF:

  • Direct Subsidized / Unsubsidized
  • Direct Consolidated Loans
  • Direct PLUS
  • Direct Stafford Subsidized / Unsubsidized

Private loans, loans in default, and federal loans not listed above do not qualify for PSLF.

Fortunately, there is a way to convert your federal loans into Direct Loans so that they can qualify under PSLF. The Direct Loan Consolidation program works by taking all of your federal student loans and consolidating them into one new Direct Loan.

If you do not have Direct Loans but want to apply for Public Service Loan Forgiveness, you will need to consolidate your loans in this way. Consolidating your federal student loans is free if you apply on your own online at StudentLoans.gov or via paper application, or you can hire a private company to help you through the process.

Currently, there is no maximum amount that can be forgiven under PSLF.

No. Any amount forgiven under PSLF is not considered taxable income, making PSLF very different from income-driven repayment plans without PSLF.

No. You must make 120 qualified payments for PSLF to work, but they do not have to be made consecutively. For that reason, it will take at least 10 years to qualify for PSLF, but it could take longer.

If you work in two separate public sector or non-profit jobs, you are considered to meet the requirement for full-time employment if the combined hours at both positions is 30 hours or more per week.

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