Student loan forgiveness programs such as Public Service Loan Forgiveness are usually considered the best for students to get out of debt. But is the student loan forgiveness worth it?
According to the U.S. Education Department’s new data, most students who apply to some student loan forgiveness program get denied.
For example, the data shows that 98% of people that applied for PSLF from November 2, 2020, to April 30, 2021, were rejected.
In other words, for every hundred applicants, only two get approved! Even though the Public Service Loan Forgiveness seems pretty straightforward, its qualifications are complicated. And the program has gone through numerous problems for years.
So is the PSLF, including other forgiveness programs, worth it, or should you save for college? Let’s take a closer look at some of the potential downsides of student loan forgiveness programs. And find out whether you should apply or save for college.
2 Potential Drawbacks To Loan Forgiveness Programs
Getting your student loan debts forgiven is like a dream come true. But, unfortunately, the path to forgiveness comes with its problems. So before you opt for student loans for your college, consider the following downsides first.
1. You may have to wait a long time to get your loans forgiven.
The federal government provides several loan forgiveness alternatives such as income-driven repayment plans, Teacher Loan Forgiveness, and Public Service Loan Forgiveness. But all these plans require that you work or repay before your student loans can be canceled.
The loan forgiveness program that requires the shortest repayment or years of service before forgiving your debt is the Teacher Loan Forgiveness.
The program requires five years of service. But it only offers either up to $5,000 or $27,500 toward your student debt. And that depends on the subject you teach.
Other Loan Forgiveness To Look At
PSLF promises to forgive all your student loans. But only after you’ve worked for a solid ten years in a qualifying non-profit, government agency, or other qualifying companies. If your career does not line up with this kind of career, PSLF might not be worth it.
With the income-driven repayment plan, the government will forgive the balance you still owe at the end of your term.
But your term can be 20 or 25 years, depending on the plan you choose. So if you opt for this plan, it will take you quite a long time to get loan forgiveness.
Instead of relying on loan forgiveness after 20 or more years, it might be better to save for college. Otherwise, you could have massive debt hanging over your head for most of your life. Moreover, it might put certain crucial parts of your life on hold.
2. Your private student loans might not qualify.
If you have private loans, getting private student loan forgiveness can be a challenge. In other words, you don’t have many alternatives available. Regardless, you can still find some student loan repayment assistance programs (LRAPs) to help you get rid of your student debt.
Some private and state organizations provide partial debt relief if you agree to provide a service. Usually, the LRAPs only need two or three years of service instead of the PSLF’s ten years of service. Some careers that are eligible for LRAPS include nurse, lawyer, doctor, and teacher.
Another alternative is to search for an employer that offers a student loan repayment assistance benefit. Again, keep in mind that it’s rare, but some jobs can offer to help you pay off your student debt.
If you’re burdened with private student loan debt, a federal forgiveness program can’t be of much help. You may have to find other options to save for college. Saving for college can help you stay away from all these.
Student Loan Forgiveness Is Hardly A Quick Fix
Before you either save for college or rely on student loan forgiveness, it’s better to consider the pros and cons of each. Then you can compare with your current situation and choose the best course.
Please remember: we’re not trying to scare you away from student loan forgiveness programs. But you should also be realistic and know that loan forgiveness is not a cure-all to your student loan situation. And your loan forgiveness will certainly not happen overnight.
With everything presented in this guide, should you save for college or rely on student loan forgiveness? That will depend on your current financial situation, including other factors like your career goals, etc.
If you don’t want to be paying off your student loans for the next 10, 20, or 25 years to come, it would be best to save for college.
Then, with a well-laid plan, you can strategically cover all your debt or go in for a small loan that you can pay off faster.
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Whatever your decision, remember that being proactive about your student loans puts you ahead. By taking control of your student loans, you can live a life free of debt.