Nelnet is one of the major student loan servicers. Although its contract with the Department of Education was not extended, it will still serve for some time till the transition process ends. This huge loan servicing organization faced some claims against its operations during its contractual period.
However, it continued providing high-level service and informed students about financial matters. Nelnet is one of the companies that taught students about their forgiveness options. In this guide, we will present these Nelnet Student Loan Forgiveness opportunities in detail.
Before moving to the forgiveness programs, we will also briefly introduce Nelnet and discuss the recent events the loan servicer was involved in.
Usually, when students take loans, they get assigned to a loan servicer, and Nelnet is one of the federal loan servicers. It helps borrowers effectively repay their debt and maintain communication between the Education Department and the borrower.
Besides, Nelnet is the loan servicer that deals with Total and Permanent Disability Discharge; hence, borrowers who want to take advantage of this forgiveness program will be directed to Nelnet.
As a loan servicer, Nelnet ensures a smooth repayment process. Borrowers use Nelnet’s online platform, application, or call center to make payments for their loans. When they face financial challenges, they can also contact Nelnet to get assistance. In such cases, Nelnet provides options such as more affordable repayment plans, loan forbearance, or deferment statuses to ease the repayment process for a particular period.
Changes in Loan Servicing
In summer 2020, the U.S Education Department announced a change in the loan servicers’ list. The officials added five new loan servicers while ending an agreement with Nelnet and Great Lakes. The Education Department mentioned that they do changes to increase customer service quality and keep the loan servicer responsible for their actions. However, Nelnet is one of the highest-rated services. Hence, Nelnet stated their disappointment with the decision.
The contract of Nelnet should end in December 2020. However, the transition process from one loan servicer to another usually takes much time. Therefore, extensions up to a year are possible.
Unfortunately, when the transition process starts, data can be lost, customers can face unexpected penalties, late payments, etc. In general, such a change leaves borrowers confused. For these reasons, the Education Department should ensure the new loan servicers have proper training and assets to manage the data and payments. The transition process should eliminate errors and be smooth for the borrowers. Therefore, some time is required until Nelnet’s service is fully stopped.
Compared to some other loan servicers, Nelnet faced fewer claims against its operations during the last decade. One of the most recent lawsuits against Nelnet was filed in June 2020. Five borrowers started this case by mentioning that Nelnet was responsible for negligence and contract breach.
According to the plaintiffs, the loan servicer did not process the required documents, certificates for Income-Driven Repayment plans on time. Hence, some of them lost their progress toward forgiveness programs.
Nelnet Student Loan Forgiveness
Despite a few claims against Nelnet, it provides high-level service to borrowers dealing with financial challenges. It is possible to get much information about the repayment plans, processes, or forgiveness options on Nelnet’s official website.
As mentioned before, Nelnet is the federal loan servicer of Total and Permanent Disability Discharge. Hence, we will first start discussing this Nelnet Student Loan Forgiveness option. However, Nelnet also advises several other forgiveness opportunities on its website. Therefore, we will present these programs in detail, too.
Total and Permanent Disability Discharge
This Nelnet Student Loan Forgiveness program helps borrowers eliminate Direct, FFEL, Perkins loans, or avoid meeting TEACH Grant’s service obligations. In return, borrowers need to prove their total and permanent disability through documentation and apply for discharge. As mentioned, Nelnet is the loan servicer for this discharge program. Hence, if you want to benefit from this program, you need to submit the application to Nelnet.
Eligibility Requirements for Nelnet Student Loan Forgiveness
The eligibility conditions for this discharge program is easy to meet if the borrower is disabled. The program requires documentation, which is the most important part of the eligibility process. Borrowers can get this document proving their disability conditions only from three sources-Veteran Affairs Department, Social Security Administration, or a Physician.
Depending on which source you choose, the application process can change. Veterans can qualify for this Nelnet Student Loan Forgiveness program if they get a document from VA, showing a total – 100% disability- based on a service-connected incident or unemployment ability rating.
Borrowers eligible through Social Security Insurance for Disability should submit a copy of the notice of award. Alternatively, they can provide the Benefits Planning Query. This query should present information that the borrower has a schedule for review in five to seven years.
The good news is that the Education Department works closely with Veteran Affairs and Social Security Administration. Hence, if a student loan borrower is registered in these departments, and he/she qualifies for discharge, the Education Department will automatically shortlist the debtor for forgiveness. In this case, the debtor does not need to prove disability through documentation. All the borrowers need to do is submit an application.
If you want to get disability proof from a physician, you need to receive a certification that shows your disability could lead to death, continued for a minimum of 60 months, or is expected to continue for a minimum of 60 months. Physicians should ensure that due to the disability conditions, the borrower cannot engage in gainful employment activity. If you use this source, also make sure that the Physician has a valid license.
As mentioned, Nelnet is the loan servicer dealing with this discharge program. Hence, borrowers are required to collect all documents, fill the application form, and submit it to Nelnet. In turn, Nelnet will assist the Education Department to review the process and communicate with the applicants on behalf of them.
Borrowers have an option to contact Nelnet by phone or email to inform them of the intent to apply for this Nelnet Student Loan Forgiveness program. In this case, the loan servicer will grant a 120 days stopped collection period. During this period, borrowers do not need to make any payments. The loan servicer grants this benefit to assist the applicants to easily collect the documentation.
It is understandable that some disabled people will not be able to fill the form or submit it. In this case, the original borrower can assign a representative to act on his/her behalf. The applicant and the representative should complete a designation form to make this process legal. Next, the designation form should be sent to Nelnet before the representative starts acting on behalf of the applicant for this Nelnet Student Loan Forgiveness program.
After Nelnet receives your application, it will explain the following process. In general, keep in mind that you do not need to worry about the payments till Nelnet and the Education Department review your case. During this period, you are free of the payments.
If the application is successful, the following processes will depend on how you provided the disability proof. For example, if a borrower provided VA documentation, he/she will get rid of the debt and receive the refunds for the payments after the disability determination date. In the case of SSA or Physician documents, the borrowers will face the same conditions.
However additionally, the borrowers will face a three-year monitoring period. It means, during this period, the debtor will be monitored. If the debtor becomes non-qualified for the forgiveness, he/she will be required to meet debt obligations.
More Details on Post-Monitoring Period
As mentioned before, during this period, your eligibility conditions will be examined regularly. In case the borrower gets better and does not suit this Nelnet Student Loan Forgiveness, her/his debt obligations will resume. Such a change can happen in several situations.
First, if the borrower gets employment or, in general, the annual income from gainful activities passes the maximum allowable level, the borrower will be dismissed from the discharge. The officials check this information by collecting data from the borrowers. The beneficiaries of this discharge program are obliged to fill and submit an annual earning income form to Nelnet. In turn, Nelnet checks the information and decides on the fate of the discharge. There are two main things to keep in mind:
- The actual family size does not matter for this condition. Regardless of your expenses for family size, you can be required to repay the debt if the income is higher than the qualified level.
- You are obliged to provide income information. If you miss this step and do not submit the form to the loan servicer- Nelnet, you will be dismissed from the discharge.
Additionally, if you get a new loan or a document that shows you are not disabled anymore, you can lose the discharge benefits. More details about this period and the conditions that can cost the loss of discharge can be found on the official website.
Rejection from This Nelnet Student Loan Forgiveness
Unfortunately, some borrowers can still get a rejection from this forgiveness opportunity. Usually, after the application and review process, the loan servicer sends a notice about the final decision. This notice will gather some critical information, such as the reasons for rejection. It will also explain to the borrower that they can request reconsideration if they get new proof to support the discharge claim within 12 months. After this period, if the borrower still wants reconsideration, he/she should apply like it is a new application.
As mentioned before, debtors do not need to make payments during the review process. However, in the case of rejection, the borrower’s debt obligations will resume. It means the borrowers will continue making payments.
Taxation in TPD
One of the main issues that borrowers are interested in forgiveness processes is whether they will pay taxes or not for the benefit received. In this Nelnet Student Loan Forgiveness program, the taxation issue depends on the discharge date. All the discharge benefits received after January 2018 till the end of 2025 are free of federal taxes. However, if you received the benefit before this period, you will be obliged to pay taxes.
Another crucial point is that the date of discharge received can be different depending on the source you got your disability proof. People getting their documents from Veteran Affairs are considered to get discharge when the Education Department approves the forgiveness.
However, as mentioned before, with SSA or Physician’s certificate, the borrowers are entitled to a 3-year monitoring process. Hence, the borrowers are not considered to receive the discharge until they finalize this period successfully. Therefore, for tax purposes, the discharge date is when the debtor completes the post-monitoring period.
For example, imagine a borrower, with SSA or Physician’s certificate) receiving discharge benefit in 2023. The 3-year post-monitoring period will end in 2026. It means there cannot be a guarantee that the discharge will be tax-free as it exceeds the current period for the non-taxable income of 2018-2025. Only based on the following updates covering the period after 2025 we can come to the right conclusion.
Public Service Loan Forgiveness
Another important program that Nelnet presents in its platform for federal loan borrowers is the Public Service Loan Forgiveness. This program allows borrowers to get rid of their debt in around 10 years after making 120 qualifying payments. The way the program works is simple to understand. Once a borrower makes 120 payments, or repayes the debt for around 10 years, the rest of the debt gets canceled.
However, what makes this program confusing is its extensive eligibility conditions. There are conditions for every aspect of forgiveness, including the debt type, the repayment plan, workplace, job type, etc. Hence, borrowers need to be careful with the qualifications before applying.
As its name suggests, this Nelnet Student Loan Forgiveness program requires a public service in return for the benefit. Hence, if you work in the public sector- in a federal, local, or state organization and not-for-profit establishment- you can apply to this opportunity. Generally, full-time work is obligatory, which is defined as a minimum of 30 hours per week.
It is possible to work part-time and still progress toward forgiveness. However, in this case, the borrower needs to work in more than one job to fulfill the full-time criteria with the half-time positions. The total hours worked in multiple part-time public works should equal a minimum of 30 hours per week. People in non-profit organizations should be aware that their time devoted to religious practices or worship services might not be included in the hourly requirement.
Sure, there also exist conditions for the debt that can qualify to this Nelnet Student Loan Forgiveness. First, only Direct Loans qualify for the PSLF. If you have the FFEL, Perkins, or private loans, you cannot benefit from this opportunity. Instead, keep reading for other opportunities.
Some borrowers consolidate their loans to make payment easier and simpler. The PSLF can be applicable to such loans. However, keep in mind that only the payments made after consolidation will be counted. Therefore, if you made qualifying payments before the consolidation, the earned credits toward 120 will disappear.
What is a Qualified Payment?
In this Nelnet Student Loan Forgiveness option, we frequently mention the importance of ‘qualified payments,’ but what makes these payments eligible? A qualifying payment has some conditions. First, the borrower should make it after October 2007 in the full amount and on time. It means borrowers have a maximum of 15 days after the due date to repay.
Next, the payments should be on eligible repayment options, which are Income-driven repayment plans. Lastly, you need to meet all other eligibility requirements during the repayment period- conditions related to loan types, employment, working hours, etc.
Some borrowers mistakenly think that if they make payments in higher amounts, they will qualify for this Nelnet Student Loan Forgiveness fast. However, it would be a major mistake. As mentioned before, the requirement is making the payment in the amount shown in the bill. What matters is how many times a borrower makes a payment, rather than the amount in excess of the required. You can still pay several months ahead, but you will only get credits for each of these months. You will not receive additional credits.
Additionally, keep in mind that your payments do not need to be consecutive. Hence, after making some progress, there can be times when your conditions do not meet the ‘qualifying payment’ requirements.
For example, you can work for some time in the private sector. During your employment in such an area, your payments will not be counted for the 120 payment requirements. However, once you change the job and become qualified again, you can continue to credit collection for the PSLF from where you stopped.
Another great benefit of this forgiveness program is that borrowers do not need to pay taxes. Usually, federal aid can be taxable under the Internal Revenue Codes. In this case, borrowers pay income tax from the aid in the annual filing. However, the PSLF benefit is not taxable. Therefore, debtors do not need to pay additional taxes from their income.
If you think that you can be qualified for this program, do not rush. Before making payments, borrowers should ensure that they really meet the eligibility criteria. Otherwise, all the efforts will be for nothing. Debtors can achieve this goal by talking to a third-party debt specialist to get recommendations. After that, borrowers need to fill a PSLF form and submit it to the loan servicer. In this program, the loan servicer is not Nelnet but FedLoan Servicing.
During the time of application, employment certificates will also be required. The certificate shows the income, working hours, employer, etc. If the borrower does not provide the certificate at the time of application, he/she will be obliged to submit one certificate for each employer.
Changes to the PSLF
As this Nelnet Student Loan Forgiveness program brings huge benefits, it is in the focus of borrowers, media, and the government. Therefore, it is not surprising that this program is also covered in the Biden Administration’s student loan plan.
According to the plan, the officials want to simplify the Public Service Loan Forgiveness opportunity so that more people can take immediate benefits. Therefore, they plan to change the structure. Instead of making 120 payments and waiting for at least 10 years, debtors will be able to get the direct benefit for each year of service. In particular, it can be possible to receive $10,000 forgiveness after a year of service. The maximum amount of service-year can be 5.
However, do not forget that this change is only proposed. Hence, there is no guarantee that it will be accessible by law. We still need to wait for Congress’s approval for the proposed change to the PSLF to put into law.
Borrower’s Defense to Repayment
Another program mentioned in Joe Biden’s plan is the Borrower’s Defense to Repayment. Nelnet also presents this program as a solution to the debt repayment process on the official website. In this section, we will discuss some details about the program.
Borrower’s Defense is a rule protecting students who become victims of school’s fraudulent activities. Sometimes, educational institutions lie to the students to make them enroll. These lies can be false advertising messages, incorrect job replacement rates, or lower than the true cost of the loans for educational purposes. In such cases, students make a decision based on the wrong information.
Hence, during the Obama administration, the Borrower’s Defense rule was developed, which granted forgiveness to students that faced a school’s misconduct. Keep in mind that this rule is only applicable in case the school or other education institution takes actions against the law. Therefore, if you complain about the loan servicer, you cannot utilize this program.
Unfortunately, during the Trump administration, the Borrower’s Defense rule lost its advantages. The Education Department expressed dissatisfaction with the way this program works. Hence, there started delays in the application review process. Even when delays were solved, many people still got rejections. The Biden administration currently wants to return this rule to its glorious days.
Borrower’s Defense to the Repayment program only applies to the Direct Loans. There are not many requirements compared to the PSLF. The most important criteria are proving the case. It means the debtors should prove that they faced unfair treatment from the school. Therefore, debtors will need various supplementary documents, such as copies of email communications, advertisement brochures with false information, etc.
Besides, applicants will be required to clearly explain the case in their application forms. You need to write in detail about what happened and why you think the school misled you. Keep in mind that even if you were truly misled by the school, you could not utilize this Nelnet Student Loan Forgiveness program unless fully prove the case.
The Education Department reviews the case and notifies the borrowers via email. It is possible to see the discharge percentage in the notice if the decision is approved. The percentage depends on earnings information. The department compares people’s income completing the same program at your school and other schools. Based on this difference, the discharge percentage is calculated, and it can be up to 100%.
In case of rejection, applicants will be able to find the reasons for denial in the notice. The borrowers will be required to continue making payments. However, debtors also have a right to request reconsideration if they do not agree with the result. When requesting reconsideration, write why you think the result is incorrect and provide more details to support better decisions.
Other Forgiveness and Discharge Programs
If you do not qualify for the above-mentioned programs, do not lose your hopes. There are still several Nelnet Student Loan Forgiveness options for federal borrowers to get rid of their debt obligations. We previously mentioned Total and Permanent Disability Discharge. However, some other loan discharge opportunities also exist, such as discharge for bankruptcy, death, or closed school. These programs do not require a service in return. Instead, it is enough to meet the eligibility criteria.
Speaking of services, they are mandatory in most of the forgiveness plans, compared to the discharges. For example, while making payments for the Public Service Loan Forgiveness, for around 10 years, one needs to work in the public sector. Another similar program can be Teacher Loan Forgiveness. It grants either $17,500 or $5,000 for a year of service. Perkins Loan Forgiveness is also similar, but it grants some percentage of forgiveness per year. It is possible to reach 100% debt cancellation in return for 5 years of teaching service.
Unfortunately, most of the above-mentioned programs are only available for federal loan borrowers. Nelnet Student Loan Forgiveness options do not provide many alternatives for such loans. What we can advise is discussing your challenges directly with the lender. If the borrowers cannot meet the debt obligations for financial or unexpected challenges, they need to first contact the lender and explain the situation.
Some lenders will provide some ease, such as a temporary forbearance period to help the borrowers. However, not all of them will grant favors. Most private lenders do not have any obligation to ease the borrowers’ repayment process. Hence, they can simply ignore the borrower’s difficulty in payment.
What are My Options?
Private loan borrowers might not have as great opportunities as federal loan borrowers can access, but some techniques can still reduce the debt burden.
For example, they can refinance the debt. Student loan refinancing involves getting a new loan to pay out other existing debt. Usually, the new loan has better terms, such as reduced monthly payments. Hence, it offers some ease for financially struggling borrowers. It is also possible to move from variable interest rates to fixed ones through refinancing.
An additional method for private borrowers can be debt settlement. To settle the debt, the borrower usually needs a third-part debt settlement company. This company creates a saving plan for the borrower. Instead of making payments, borrowers save money each month. Once a considerable amount of money is accumulated, the debt settlers start negotiating with the lenders.
Sure, the accumulated amount is lower than the actual debt owed. However, lenders can accept this money as it is a lump-sum amount rather than small monthly payments. One can also negotiate with the lenders, but it is hard to convince them without expert help.
Which Option to Choose?
It is understandable that the options are overwhelming. They involve many technical terms and an extensive list of requirements that confuse the borrowers. Besides, it can be hard to believe that there is a way out of all debt challenges. Luckily, Nelnet presents some options to the borrowers through federal programs. If borrowers are unable to reach these benefits, they can also find other solutions in the market.
However, when borrowers lack financial knowledge, they can make wrong decisions. One of the most important reasons for forgiveness programs’ failures is wrong applications- unclear information, incorrect documentation, lack of papers, etc.
Nelnet student loan forgiveness can be solved with the help of third-party debt specialists, like those in Student Loans Resolved. Our experts do more than just guidance in a chosen program. They actually help the borrowers to make the right selection. By collecting information about the debtor’s financials and analyzing it, the experts find the best option to eliminate the debt or reduce the obligations. Thanks to years of experience and knowledge gathered through active help in forgiveness programs, our specialists have helped hundreds of borrowers.
Remember that if you owe a debt, every second is a loss of money. Act fast and contact our hotline immediately to save money.