August 21, 2014 | By RGR Marketing Blog

Got the Student Loan Debt Blues?

It has become exceedingly difficult to graduate from college, with a debt-free status. More than 66% of graduates earning bachelor’s degrees have substantial educational debts to repay after graduation. Depending on these newly minted graduates’ field of expertise, these debts can take years or even decades to repay. This is especially true for those entering fields where entry-level pay is low, such as education and the arts, where positions are hard to come by in general.

For many, paying down these debts throughout the course of their careers is the only option, but for some, student loan forgiveness programs may be able to provide much-needed debt relief.

So how do student loan debt forgiveness programs work? What should cash-strapped graduates be aware of before seeking them out?

Public Service Student Loan Forgiveness

The Public Service Loan Forgiveness program is a federally sponsored loan forgiveness initiative that requires applicants to work in qualified public service jobs for a period of ten years. After this 10-year period has ended, the remainder of their student debt will be written off or canceled by the federal government.

It is required that graduates who take advantage of this program make monthly payments toward their educational debt while undergoing the program. These installments must be made no later than 15 days following the scheduled due date. The payments are calculated on a sliding scale, making them affordable for graduates without high paying careers.

In order to qualify for the Public Service Loan Forgiveness Program, graduates must be able to demonstrate high student debt-to-income ratios, and must be employed full-time by a qualifying public service organization, such as a tax-exempt non-profit organization; a state, local, or federal government agency; or a private non-profit employer such as a law enforcement or public health organization.

It’s also important to note that only loans made under the William D. Ford Federal Direct Loan Program are eligible for the Public Service Loan Forgiveness initiative.

Loan Repayment Assistance Programs

A loan repayment assistance program, also known as an LRAP, is an assistance program offered by certain public service organizations such as Teach for America and Americorps, or the Peace Corps.

The time commitments required by LRAPs tend to be shorter than those required by the Public Service Loan Forgiveness program. They may only require a 1-3 year commitment, but the loan forgiveness they offer is only partial.

Also, it’s important to note that while completing an LRAP, student loans are often placed in forbearance, which means interest still accrues on outstanding balances. That said, most LRAPs pay monthly stipends in addition to offering loan repayment assistance, some of which can be fairly lucrative for recent grads already struggling to find work.

What if Forgiveness Isn’t an Option?

Student loan debt forgiveness programs only accept a certain number of applicants. Plus, they require substantial commitments that may not be feasible for all graduates. Fortunately, there are other options for those struggling to repay educational debt and make ends meet. Student loan debt consolidation programs can provide much-needed cash flow relief, and they can often consolidate multiple debts into a single monthly payment.

[Photo Via: School Fusion]

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