Welcome to Student Loans Reserved FAQs. We understand that the management of debts, forgiveness programs, and loan debts, can be a daunting process. Our goal is to give you the quality frequently asked questions (FAQs) section where you can get all the answers you need about loan forgiveness. 

Please note: the FAQs will be updated regularly to reflect any current updates on student loan forgiveness and loan repayment. 

Q: How do I get out of student loan debt without paying? 

A: Several forgiveness programs give you the option to pay a percentage, generally 10%, of your discretionary income. If your income is below that, it’s possible to make $0 on your monthly repayment until your debt is fully repaid. Since you’ll be required to pay income tax on your forgiven balance, you can use the insolvency rule to avoid paying them. Another way is through the PSLF. But you can’t come out of debt without paying if you have private student loans.

Q: When can I get forgiveness on my federal student loans? 

A: If you graduate, drop out, your institution closed down, or other numerous issues, you can still qualify for student loan forgiveness. Even if you were not able to complete your education, find a job in your preferred field, or another matter, you are still required to make payments on your loans. However, multiple factors determine your eligibility.

Q: How can I determine the type of loan I have and the student loan forgiveness options available to me? 

A: First, if you have a federal student loan, apply for an FSA ID. It’s a mandatory process put forward by the government. You can use the NSLDS to check the type of federal loans you have. 

Secondly, find out your loan status with financial experts. They will sit down with you, and get to know more concerning your situation and show you the best forgiveness programs for you. If you need help, contact us right now: 800-881-0687. We will gladly assist you. 

Q: What’s the difference between loan forgiveness, discharge, and cancellation? 

A: The terms almost have the exact meanings, but there are different ways of using them. If you stop your monthly payments on your loan debt, it’s generally referred to as forgiveness or cancellation. However, if you stop your monthly payments because of other issues, it’s usually referred to as discharge. 

Q: I was not able to complete my college education, but I’m in debt. Am I still eligible for loan forgiveness? 

A: Yes. Graduating from college or not is irrelevant. As long as you have federal student loans, you can qualify for loan forgiveness. 

Q: I dropped out of school because I couldn’t pay my tuition. Can I qualify for loan forgiveness? 

A: Yes. You may still qualify for loan forgiveness. 

Q: My institution was shut down so I couldn’t graduate, but I have student loans to pay. How can I get my loans forgiven? 

A: First of all, find out if your student loans are in current or default. Sadly, most student’s who couldn’t graduate get into default on their loans. If you’re current, you have to select the right forgiveness program suitable for your situation. If you’re in default, you have to get out of default first before you can begin your progress on your student loans

We recommend that you contact us 800-881-0687 and speak to our professional advisers. We will give you the best option to come out of debt quickly. 

Q: My degree is worthless because I can’t land a job in my preferred field. My school closed down, and I owe a massive amount of money. Why do I have to pay my loan debts? 

A: Unfortunately, almost 100% of the time, you’ll have to pay back your loans if you took out federal or private loans. But you don’t have to worry because you may still qualify for federal loan forgiveness. You can contact your creditor or lender and figure out if you’re eligible for discharge or debt consolidation. 

Q: I have a loan that’s more than ten years old. Why should I pay them back? 

A: It doesn’t matter the age of your loan; you must pay them back. As long as you borrowed from a private lender or went in for a federal loan, you have to pay them. 

Q: I went in for a PLUS loan to help pay for my child’s education tuition. Can I be forgiven for such a student loan? 

A: Yes. PLUS loans are federal student loans, which means you may be eligible for loan forgiveness. 

Q: Can I get my private student loans forgiven? 

A: No. There is no legal or official loan forgiveness for private student loans. However, there are numerous ways you can use to get rid of your debt. Some of the ways are: 

  • Deferring your student loans 
  • Applying for forbearance
  • Refinancing 
  • Bankruptcy

But before you make a decision, you need to talk to a professional advisor who can help you make the right decision. Otherwise, you get into deeper debt, almost impossible to come out of. 

Q:  What is the difference between FFEL and Direct loan programs? 

A: The Department of Education is solely responsible for direct loans. They are made for students and it does not include private lenders. Before July 2010, the FFEL existed. Private lenders made such loans and were certified by the federal government. 

Most of the conditional terms for Direct loan programs are the same as the FFEL programs but they are different in repayment options. Currently, FFEL loans exist, but the authorities haven’t enacted current FFEL loans since July 2010. 

Q: What are the differences between federal and private loans? 

A: The federal government funds and actively regulates federal student loans. And it doesn’t matter if it’s through the bank (or private lender) or the Department of Education. However, the government does not subsidize private loans, and therefore, they do not closely monitor its regulation. Generally, you should maximize your federal loan options before you resort to private loans. 

Q: Who is eligible for federal student loans? 

A: If you’re a U.S. citizen or a qualified non-citizen who enrolls in a certificate, degree, or any other certified program at an accredited institution, you can be eligible for a federal student loan. Also, most of the time, you should have a high school diploma or equivalence. 

Some situations can prevent you from acquiring federal student loans. For example, if you’re put in jail or convicted on illegal possession of drugs. But there are some federal loan exceptions such as PLUS loans, if you meet its requirement conditions. 

Q: How will I know if I should consolidate? 

A: Consolidating your loan debts into one payment will extend the period of your repayment. And will increase the overall interest amount throughout the loan life. When you consolidate, you will lose some benefits. If you don’t know which way to go, talk to a financial advisor. 

Q: Can I consolidate multiple times with the government? 

A: Yes. But only in rare cases. An example if you want to enroll in the PSLF program. 

Q: Is it a wise decision to acquire a private consolidation loan? 

A: It depends. Consolidating your private loans can be the right decision if you acquire a better deal. However, we advise against you consolidating your federal loans into a private loan. You will lose some benefits. However, if you want to proceed, we recommend that you discuss with a financial advisor who can get you a better deal. 

Q: Do I need a good credit score to borrow a student loan? 

A: No, except for PLUS loans. The federal government won’t determine your eligibility for a student loan based on your credit score. However, the situation is entirely different when it comes to private loans. The interest rate you acquire will rely on your credit score. 

Q: Are the forgiven loan amounts taxable by the Internal Revenue Service (IRS) under the PSLF? 

A: No. According to the IRS, they don’t consider any loan amount forgiven as income for tax purposes. 

Q: How can I make payments concerning my income? 

A: You have several IDR options you can select from. But it will depend on the type of loan you have, including the disbursement date. 

Q: Is it possible to change to a more affordable repayment plan? 

A: Yes. If you have a Direct loan, you can switch the plan any time you want by alerting your loan servicers. The FFEL loan lenders should permit you to change your plan at least once every year. However, most of them will let you switch as often as you want, if it’s highly necessary. 

Q: What does my federal student loan payment cover?

A: When you make your payments, the first payment goes to accumulated collection costs or late charges. It then moves to the remaining interest, and lastly to outstanding principal. 

Q: I defaulted on my federal loan. How can I come out of default and begin repayment? 

A: The best and effective way to get back into repayment is through rehabilitation or consolidation. If you want to know which option is best for your circumstances, contact a financial advisor. Contact us 800-881-0687, and our advisers will help you make the right decision. 

Q: How can I calculate the interest rate on my federal student loan? 

A: The U.S. Education Department calculates the interest rate on your federal loans daily. You can visit their website to find out more in-depth information to help you understand your federal loans’ interests. 

Q: What is a grace period? 

A: A grace period is a waiting duration after graduation before you begin paying back your loan. There are no penalties during the waiting period. You can repay your loans in the waiting duration, but it’s not a stringent requirement. 

Q: How can I suspend my repayment? 

A: There are government programs and some private creditors that permit you to get a forbearance or deferment before you can postpone your repayment. 

Q: What is a deferment? 

A: Deferment refers to a repayment postponement that is only available if you’ve not defaulted on your loan. There are deferment programs provided by the federal government under specific situations, such as military service, economic hardship, etc. In the deferment period, the interest rate does not accumulate on your subsidized loans. 

Q: What is forbearance? 

A: Forbearance refers to a postponement or suspension of your repayment. 

Q: Will my interest accrue during my forbearance? 

A: Yes. Most of the time, your interest will accumulate during your forbearance period. However, there are some exceptions. A good example is a COVID-19 pandemic. That means your balance will accrue, and you’ll have more to pay over the life loan. 

Q: During the grace period and deferment, do interest rates accrue? 

A: For subsidized loans, no. But for unsubsidized loans, yes. 

Q: Will I get a repayment relief when I enroll in the military service? 

A: The federal government has deferment programs for specific military members, including other programs for the military or National Guard, who serve on active duty. 

Q: How can I pay extra to decrease my principal? 

A: You have to request it in writing before you can pay additional on your principal. There are no penalties involved. You have the right to do so. According to the CFPB, if you’re able to pay extra monthly or pay a lump sum, you can significantly decrease your student loan. 

Q: I have a federal student loan. What are other major repayment plans available to me? 

A: There are three popular student repayment plans available to you. They are the Graduated Repayment Plan, Extended Repayment Plan, and REPAYE Plan. 

Q: How does the Graduated Repayment Plan work? 

A: The repayment plan gives you the chance to lower your monthly payments. Then after every two years, your monthly payments will increase until you pay off your entire student loan debt. You should complete your debt payment in 10 years. If you have federal student loans, then you qualify for this repayment plan. 

Q: What are the advantages and disadvantages of the Graduated Repayment Plan? 

A: When you start working, there’s a high chance that you’ll not have a higher income. Your income will increase as you get more experience. With that, the repayment plan will help you repay your debts every month without getting into default. The disadvantage is that the accrued interest rate of the life loan is bigger than the standard 10-year plan. 

Q: How does the Extended Repayment Plan work? 

A: Your payments every month can be graduated or fixed when it comes to this repayment plan. This repayment plan calculates the loan amount to make sure you clear off your debt in 25 years. However, you can only qualify if you have over $30,000 in your outstanding Direct loans. 

Q: What are the advantages and disadvantages of the Extended Repayment Plan? 

A: This repayment plan can decrease your payment each month by extending it to 25 years rather than the standard 10-year plan. If you’re facing financial challenges, this repayment program can be beneficial. However, you pay a high amount of the accumulated interest rate over the loan life compared to the 10-year standard plan. 

Q: When is the right time to apply for student loans? 

A: Normally, the online application gets opened in June. However, we recommend that you apply before the beginning of August. That way, you will have a high chance of getting the loan before the tuition is due. 

Q: Should I apply for the school loan every year? 

A: Yes. Each academic year, you’ll have to send a new application. We strongly advise that you send your request every year. That’s because your financial circumstances can change every year. So the authorities perform a new assessment based on the details you provide each year. 

Q: Is it possible for my student loans to be discharged if I’m not satisfied with the college I enrolled in? 

A: No. But there are other solutions such as student recovery funds. If your school shut down while you were still in school, you can request a discharge. We advise that you speak to a financial advisor to help you find the right solution.