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How to Eliminate Your College Debt with a Student Loan Forgiveness Program

Sep 25, 2009

College debt can be a true burden after graduation--especially for people who are struggling to find or keep a job. Fortunately, there are ways to lower and possibly eliminate college debt. Read on to learn more about student loan forgiveness programs.

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Income Based Repayment

The Income Based Repayment Program is one of the newest repayment options for federal student loans. This program helps graduates who are not making enough money with required student loan payments. The amount of money you will be required to pay under this program depends on your income, your debt and the number of people in your household. The less you earn, the less you pay.

For example:

If you are a single person who has $50,000 in debt and you only earn $20,000 annually, your payment will be capped at $47 per month.

This is significantly lower than the $575 payment you would be required to make under the standard repayment plan (assuming your interest rate is 6.8 percent).

It is important to note that you don't have to earn a measly $20,000 per year to qualify for this program. Almost anyone who has a significant amount of student debt is eligible--even those who earn upwards of $50,000 or more per year.

If you make your payments faithfully for 25 years, your remaining debt will be wiped out no matter how much is left. To learn more about how the income based repayment plan works or to estimate how much your payments may be if you enroll in the program, visit The Project on Student Debt

Public Service Loan Forgiveness Program

Another student loan repayment option that is relatively new is the Public Service Loan Forgiveness Program. This program is open to students with direct federal loans. It promises to eliminate college debt entirely after ten years. The catch is this: graduates must work for government or nonprofit organizations.

Here's how it works:

You must make 120 scheduled student loan payments while you are employed (full time) by public service employers. After the 120th payment is made, the remaining balance is completely forgiven. Eligible public service fields include nonprofit work, public safety, military service, social work and education.

The best part about this program is that it can be combined with the Income Based Repayment Program so that required payments are kept to a minimum. To learn more about the Public Service Loan Forgiveness program, see this PDF overview from Federal Student Aid.


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