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Misconceptions about Student Loan Forgiveness

July 26, 2017

When students start college, they are probably more concerned about how they’re going to cover the cost of tuition and classes than how they’re going to pay off student loans down the line. One problem at a time, right?

Of course, there are also students that carefully consider the loans they take out, the schools they attend, and their intended profession, all in an effort to reduce the costs of their education as much as possible.

For some students, a major part of their plans for eliminating education debt includes qualifying for student loan forgiveness. The premise behind these programs often assumes that college graduates make payments on their loans for a specified amount of time until certain qualifications are met to erase the remainder of the debt. While these programs can be rewarding for the borrowers who are eligible, there are, however, many misconceptions and potential pitfalls associated with banking on student loan forgiveness that could end up costing graduates in the long run. Here are a few common misconceptions cleared up.

Misconception #1: Everyone is Eligible for Loan Forgiveness

Although there are several instances in which students may become eligible for student loan forgiveness programs, you should not automatically assume that this is a possibility for you. For starters, loan forgiveness programs (as well as loan discharge or cancellation) generally apply to specific loans, specific professions, and/or specific sets of circumstances, according to the Office of Federal Student Aid.

Direct Loans, FFEL (Federal Family Education Loan) Program Loans, and Perkins Loans may all qualify for forgiveness, discharge, or cancellation, but only in certain circumstances, such as:

  • Public service loan forgiveness
  • Teacher loan forgiveness
  • Perkins Loan cancellation and discharge
  • Total and permanent disability discharge
  • Discharge due to death
  • Closed school discharge
  • Unpaid refund discharge
  • False certification of student eligibility or unauthorized payment discharge
  • Borrower defense discharge
  • Discharge in bankruptcy

It’s important to understand that these reasons may not apply to every type of loan, and some of them apply to very specific sets of circumstances. For example, the borrower defense discharge specifically relates to students seeking loan forgiveness because a school they attended misled them or engaged in other misconduct or violation of applicable state laws. This clearly doesn’t apply to every student, every school, or every loan.

Furthermore, you have to fill out an application for loan forgiveness, discharge, or cancellation and receive approval. Until then, you must continue to make payments in good faith, unless you are able to defer payments or you are granted forbearance in the meantime, according to the Office of Federal Student Aid.

If you want to find out if you qualify for student loan forgiveness, you need to do some research. It’s a good idea to check with lenders, with your school, and with the U.S. Department of Education, or more specifically, the Office of Federal Student Aid.

Misconception #2: Public Service Professions Are Automatically Eligible

According to the Office of Federal Student Aid, “The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.” In addition, the Teacher Loan Forgiveness Program allows for forgiveness of Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans and cancellation of Federal Perkins Loans.

However, there are several criteria attached to these forms of forgiveness. Simply becoming a teacher, a government employee, an employee of a non-profit organization, or a member of the Peace Corps doesn’t mean you automatically qualify for student loan forgiveness.

For example, in order to qualify for loan forgiveness under the Teacher Loan Forgiveness Program, teachers must work for five “complete and consecutive” years at a qualifying institution that serves low-income families, as well as meeting other criteria. Even so, teachers may only be eligible to receive forgiveness for a portion of loans, and this doesn’t include PLUS or private student loans.

Misconception #3: Once I’m Approved for Loan Forgiveness, It Can’t be Rescinded

Unfortunately, it’s not entirely uncommon for professionals that thought they were eligible for student loan forgiveness to find out they were wrong. According to a report issued by The New York Times, a legal filing by the U.S. Department of Education in March suggests that approvals issued by FedLoan, the administrator of the PSLF Program, may be subject to rescindment. This particular case has led to at least one lawsuit so far, but it’s not the only reason why graduates may find that forgiveness they were counting on is beyond reach.

As noted above, qualifying students must not only have the correct loan type to be eligible for forgiveness under the PSLF Program, but they must also meet criteria for qualifying employment and qualifying payments (and payment plans). After all that, borrowers still have to apply and continue to meet qualifications until such time as they’re approved. In other words, there are a lot of hoops to jump through, and a lot of ways to make mistakes that could make you ineligible for loan forgiveness.

Misconception #4: If I’m Not Eligible for Forgiveness, I’m Stuck Paying My Loans

This is partially true. If it turns out you’re not eligible for any form of forgiveness for your student loans, for whatever reason, you’re still responsible to repay the money you borrowed. Even filing for bankruptcy won’t automatically discharge student loan debt. Of course, when you’re in good shape financially and perfectly capable of paying loans, you will be required to do so. Unfortunately by the time that borrowers learn that they are no longer eligible for student loan forgiveness, they have often already accrued higher interest costs resulting from making smaller payments in the early stages of repayment.

The good news is that you have options to reduce your debt if loan forgiveness is not on the table. Once you have established a reliable income and credit history, you can, for example, explore the possibility of refinancing your student loans. This course of action gives you the opportunity to consolidate loans, reduce interest rates, and potentially reduce monthly and overall payments in the process. Whether you refinance your education debt or not, you can also cut down on the overall interest costs and time spent in repayment on your loans by making more than the minimum payments each month.

Even if you do everything you can to secure a path to loan forgiveness after a set number of years of faithful payments, you may at some point discover that forgiveness isn’t an option for you. Naturally, the earlier you can confirm your situation, the better. If you aren’t eligible for loan forgiveness, it’s best to explore other options early on so that you can save as much as possible through refinancing.

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2019-03-11
Medical Match Day Finance Tips

Congratulations you’ve worked hard been through multiple interviews and finally, your hard work has paid off! You’ve been matched and you’re getting ready for residency. It’s so exciting to jump into residency and see what having this career will really be like. You’ll have the ability to learn from experienced professionals in your field of interest. Getting yourself prepared for your residency can feel stressful, but it doesn’t need to be. Here are some financial tips to help you get settled and make good choices for your future.  

Set Up Loan Payments

Once you are done with school, you should start paying on student loans. Residency can take several years to complete. It’s likely that your residency isn’t paying you what a full-time position in your career will so all the medical school debt that’s accumulated, can be difficult to sort through. If you find yourself with a large amount of federal
student loan debt, look into income-based repayment plans. We would recommend this as a temporary solution until you’ve completed your residency program.  This will assure that you’re making student loan payments towards your medical school debt, but that those payments are not impossible to complete. You may eventually qualify for public loan forgiveness on your federal student loans. If you qualify to get on an IBR plan in residency after completing the program you may only have a few years remaining.     If you also have private student loans there is no need to worry. Most private student loan lenders will work with you to offer some type of payment plan. You may want to consider refinancing your medical student loan debt. In order to qualify for student loan refinancing, you may need to add a cosigner due to income you’ll be making in your residency. Regardless of which route you chose, in the first few months after graduation, you’ll want to have your payment plan set up. Don’t let this task fall off your radar—in-school deferment ends shortly after graduation for most kinds of medical school debt.  

How to Reduce Medical School Debt

   

Make a Budget

The average income for first-year medical residents is about $55,000, according to a recent report. That money may not go very far with your loan payments and other living expenses. It’s crucial to set your budget and stick to it. Many medical professionals suggest living with roommates, carpooling, using public transit, and setting a budget to keep other spending at a minimum.    

Look Into Your Benefits

If you’re starting off pretty frugal until you get accustomed to your new budget, that doesn’t mean you shouldn’t think about saving for the future. When it comes to saving for retirement, the sooner the better. Employer matches and retirement programs should be on your list of things to do early in your residency. Take advantage of match money for retirement if your employer offers it. Match money from your employer is free money! Don’t miss out on that opportunity, and check out the rest of your benefits while you’re at it. There are usually several perks and programs you can look into that might help make your transition to residency more comfortable.  

Set Up Housing

Speaking of housing arrangements, there is conflicting advice on whether or not it makes sense to buy a home vs. renting while in residency. Since most residents spend long hours working and don’t have time for household maintenance or upkeep, buying a home can be a difficult choice. Plus knowing that you might not choose to live in the same place long term cause many experts to advise renting. Look at your unique situation and make sure you’re weighing all of these factors when you decide what to do for housing.   As far as finding somewhere to live, location will probably be top of your list. After working long hours and several days in a row, having a long commute is the last thing you want. If the area near your work is not cost-effective, look for ways to get connected with a good roommate or two. Research the area before you relocate and stick to your budget for housing costs so that you don’t end up being rent-poor or house-poor.  

Practice Self-Care and Routine

Residency can be engrossing. You’re so involved in your work role and in living the life of a busy resident, that it’s not uncommon to let self-care fall by the wayside. Remember, you can’t care for others if you haven’t cared for yourself. Make sure you’re doing what you can to stick to healthy habits, even if there are days you’re low on sleep or not making the best food choices. Getting rest on your time off, enjoying your hobbies even in small doses, and exercising or meal planning can help make sure you’re cared for even with a busy schedule.   Enjoy your new life adventure!  

Ways to Save on Student Loan Debt During Residency

  NOTICE: Third Party Web Sites Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.  
2019-03-08
Student Loan Refinancing: How To Avoid Predatory Lending

No one wants to get scammed, but it can be hard to feel confident about whether you’re working with a reputable source or not. In an era when we have access to so many different options and there are countless financial entities available at our fingertips, there are definitely some things to keep in mind so that you don’t end up getting a raw deal.  It’s not uncommon if you’re interested in student loan refinancing, or have been approached by a company to want to see if they’re legit before you move forward. Here are some tips on how to avoid being a victim of predatory lending.  

Check your sources.

It’s not uncommon to find random financing offers around the internet. Maybe you read about it on Reddit, saw a social media post, or even direct mail. Companies regularly send postcards and mailers to try to get your attention. The marketing material can look pretty convincing, too! Don’t let a slick landing page or a nice mailer fool you. You generally want to find suggestions from sources you trust, like a financial expert, or trusted online sources. A good resource would be the Better Business Bureau. You can see online complaints, information about the company, and all provided by an unbiased source. A second site that provides unbiased online reviews is Trustpilot. Websites with unbiased reviews and legitimate accreditation or backing can be an ideal source to verify credibility.  

Never trust dishonest marketing.

It may sound extreme, but we’ve heard of examples where someone was approached by an entity that attempted to look like the government. These scare tactics are used frequently enough by scammy companies for one reason - they work. These companies use this scare tactic because when you think the government is trying to get in touch and you’re in trouble, you answer! These options work similarly to the IRS scams that are always happening with the IRS calling your phone, but in reality, the IRS doesn’t actually call anyone. If the company tried to look like a government program and later you find out they’re not, drop them. A legitimate company won’t send fake notices or use a misleading URL in order to get your business.  

Listen to the old adage.

If it’s too good to be true, it probably is. There’s a reason that this simple advice is so often passed down. Really amazing offers are rare. If something sounds like there’s no way they could offer you such incredible terms or that great of a deal, there is likely fine print that’s missing. Fact check the offer and look for comparable data. Your alarm bells should go off if you’re looking at a company whose reputation is dubious. This especially proves true if they’re claiming to get you unheard of service or savings.  

Requirements to Refinance Student Loans

 

What do I owe you?

There are lots of scams across all kinds of industries. One of the most common is when a person tries to get you to pay something up front with the promise of services to come. Lending is no different. If you have to pay a fee or anything before you can see the offer, chances are that this is a scam. Companies often will offer to facilitate student loan discharge for someone with a permanent disability. The process of applying for student loan discharge if you have a qualifying disability is free. Any company offering to do it for a hefty up-front fee is scamming you!  

Avoid anyone who is too aggressive.

Sometimes a company will aggressively pursue potential borrowers and push them to select a consolidation option that’s not in the borrower’s best financial interest. They might be a legitimate company but will leave out crucial details in order to sign you up. A good general rule of thumb is to be aware of the interest rate and terms. Understand how a lower payment can extend the life of your loans, thus increasing the overall amount due. Always get all the details, so you know the financial implications of your decision.  

Give it a gut check.

Sometimes your intuition is your best tool. If something doesn’t feel right, don’t be afraid to hit pause until you can find more information. Be wary of any company that’s asking for too much personal information before you are sure that they’re legit. Keep an eye out for things that just don’t seem right, like misspellings or a digital presence that seems fishy. You should never be faulted or made to feel bad for giving yourself time to look into the details and read everything over. If you feel like you’re being hurried through or your questions aren’t being answered stop and take a breather to do a gut check. All of your concerns should be addressed with ample information so that you feel confident about the process and decision. If that’s not what you’re experiencing, you should back away.  

Use your village.

There are lots of reputable companies out there, and it’s pretty easy to find them by reading unbiased reviews. Do your research and continue learning more about how their process will help you. Use resources available to you to vet companies before you reach out. If you utilize the resources available to you, you’ll be less likely to encounter an unreputable company on the prowl.

You should never be badgered or threatened.

No reputable company is going to make threats against you or repeatedly harass you to sign up. As a consumer, you have certain protections and any company that violates these should be investigated. If you’re facing this treatment from any lender, would like to see more information on various types of financial products and your rights, visit the FDIC website.    

Check Out Our Guide to Student Loan Refinancing

  NOTICE: Third Party Web Sites Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.
Women looking at jobs on computer with dog.
2019-02-26
Reduce Student Loans for College with These Jobs for Students

It’s not practical to go to college and not have a job. With a number of non-traditional students commuting or even raising a family during school years, being employed is a must. Plus, even having a part-time job not related to your desired field can still prove that you have the skills it takes to manage your time, work as part of a team, and be reliable. Never underestimate the importance of these types of skills on your resume!   With most students taking out student loans or aid, finding a college job can mean that you can reduce your student loans for college and pay some tuition or expenses with your current income. That said, there are some jobs for college students that are better than others. Here’s our take on what are the top jobs for college students and why.  

Nanny

Nannying is a serious skill that not everyone has. If you’re great with kids and can find a gig to match your availability, being a nanny means you’ll get paid well to spend your time helping a family raise cool kids into stellar adults. No longer the $3/hour that you got paid to watch neighborhood kids back in the day, the average nanny rate is $12–$13/hour. You could even get paid more if you have additional skills like foreign languages or child development knowledge. Nanny jobs can be a really great asset to students studying to be teachers. Nannying could be a great introduction to what you’ll be studying in school.  

Office Admin

Working in an office is usually not very glamorous, but there’s a reason why so many college students look for basic administrative work. Office environments can be nuanced and require you to learn certain types of etiquette on top of professional dress and demeanor. By working part-time in an office around your school schedule, you’ll learn things like phone skills, how to operate standard office equipment, basic computer skills (that you might already have, but it’s still nice to reinforce), and you’ll make connections with other professionals who can give you a reference later. Depending on the type of office you’re working in you may have the ability to gain some additional career skills. If your regular tasks are completed it’s likely you’ll get to learn some additional skills that could come in extra useful in the long-run.  

Hospitality or Community Outreach

Anything in outreach or hospitality that exposes you to lots of people in your community is a great opportunity for a college student. Being the happy face of an organization means that you will build great people skills like patience and customer service. In addition, it’ll give you a chance to get to know other people or places you encounter. Did we mention networking? Do you best to network with as many people as possible. You never know when the relationships you’ve made will come in useful across your career and study journey.    

Health Unit Clerk

Helping out in a medical facility or institution is a top job for college students because you can usually land a good rate of pay during hours that fall outside when your classes are. Whether it’s nights, weekends, or after-hours, being an orderly requires you to use empathy and care for people who need help caring for themselves. It’s not for everyone, but if you’re passionate about helping people and want the simplicity of wearing scrubs every day while making about $12/hour, this might be your best bet. Of course, being a health unit clerk is a great first step for anyone looking to further their career in social work or a medical field.  

Bank Teller

Some people actually joke that you should not become a bank teller in college because working at a bank can become so comfortable that you won’t want to leave! With opportunities for advancement, solid pay (about $12/hour), regular hours, and plenty of holidays off, being a bank teller is a pretty good job for a college student. You need to be detailed and good at math along with having the people skills of someone in reception or customer service.  

Tutor

Tutoring is probably one of the best ways to earn money while in school if you have enough experience in one area of study and can help lower level students navigate their coursework. Tutoring is highly flexible and not limited to business hours, plus you can usually do it at school or at a library or home, and it has a higher hourly rate than many other jobs. Tutors can easily make $20–$40/hour depending on the area of study, helping you make extra cash in less time and strengthening your own study skills while you’re at it.   If you’re looking for ways to reduce your student loans for college, consider one of these top jobs for students so you can pay some of your expenses with your income!  

Check Out These Resume Tips from Hiring Managers

  NOTICE: Third Party Web Sites Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.