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Question: Do dependents of first responders also qualify for the loan forgiveness? Do all of the loans need to be parent-plus loans to qualify?
— Matt in Pennsylvania
[Debt.com founder Howard Dvorkin] Loan forgiveness is both amazing and confusing. If you work in certain professions, you can get your student loan balances wiped clean, but there’s a catch. Actually, there are several.
First, you need to work as a first responder, teacher, or be in the military.
Why? Because these money-saving programs were created by the federal government, and they want to reward those who sacrifice and care for their country.
If you qualify for these programs, you still have to make student loan payments for a 10 years, but you do that inside another money-saving student loan program.
The government has several of these programs — all slightly different even though they have similar-sounding names. We’re talking about names like “income-based payment program” and “income-contingent repayment program.”
Knowing what program to use and which ones you qualify for can be very confusing and I don’t recommend that you try to navigate these programs on your own.
Just like you’d hire a CPA to do your taxes, you can consult a student loan expert.
Loan forgiveness is both amazing and confusing. So let’s start with the short answer and work backward from there: No, loan forgiveness is only for first responders, not their spouses, children, or other relations.
That means you can’t use this benefit for your dependents, regardless of the type of loan you secure. Why? Because loan forgiveness for first responders is about education, not just debt.
In other words, the federal government has extended this benefit to first responders so they can earn a degree. The loan forgiveness program simply helps them shed their student loan debt in that pursuit.
Actually, I shouldn’t use the word “simply” when it comes to loan forgiveness. If you read the Debt.com’s Student Loan Forgiveness Program report, you’ll see just how involved the process is. Perhaps I’m biased, but I believe our report is written more clearly than anything else you’ll find online.
The problem is this: Student loan forgiveness works in tandem with other existing student loan programs designed to reduce your payments. You must be enrolled in one of those before you can take advantage of actual loan forgiveness. They have confusing and similar-sounding names like income-based repayment and income-contingent repayment.
Then you need to make 120 “qualified payments” under the program you choose. After 10 years, you can have the rest of your balance wiped off your books. To make matters more confusing, every time you change jobs in those 10 years, you need to “recertify.”
It gets even more confusing, because President Trump has proposed getting rid of this program or changing it — or leaving it alone. It’s difficult to tell, because no actual legislation has been released.
Finally, you mention parent PLUS loans. These are a special kind of student loan. They allow parents to borrow at favorable rates so they can pay for their dependents’ undergraduate education. While those loans can’t be forgiven, they can still take advantage of other federal programs that can ease their burden.
Then again, it’s very confusing. Here’s how the federal government’s own student aid website describes that…
Although PLUS loans made to parents can’t be repaid under any of the income-driven repayment plans (including the ICR Plan), parent borrowers may consolidate their Direct PLUS Loans or Federal PLUS Loans into a Direct Consolidation Loan and then repay the new consolidation loan under the ICR Plan (though not under any other income-driven plan).
Got that? This is why I suggest you consult an expert before doing anything — or nothing. Debt.com can give you access to such an expert for a free consultation. Just call us at 1–800–810–0989.
Have a debt question?
Email your question to email@example.com and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of Debt.com, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.
Originally published at www.debt.com on June 13, 2018.