Understanding Student Loan Forgiveness Programs

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Seth Czarnecki May 28, 2015

Various programs allow students to eliminate or pause their federal or private student loan payments. Find out who's eligible to get help reducing their debt.

Entrepreneurs fostering new ventures outside of well-developed entrepreneurial ecosystems like Silicon Valley face significant challenges. These markets are unlike Silicon Valley, and they will likely remain so. That doesn't mean they can't nurture and sustain new businesses. In transitioning markets that lack abundant private sector financing, creative approaches from government officials, donors, and business leaders can fill the void to support entrepreneurial activity. Northeast Ohio (where Cleveland and Case Western Reserve University are located) has become a laboratory for such innovative solutions. During our time together in this course, we will explore some of these creative approaches to promoting regional entrepreneurship. Northeast Ohio has seen a massive infusion of government and donor resources for over ten years. In that time, Northeast Ohio has promoted regional development (including job creation and follow-on funding) through alternative methods of financing startups. It has not been easy. The region has made progress, but it remains to be seen whether it has struck upon an enduring formula. A dynamic entrepreneurial ecosystem takes many years, even decades, to develop. Government policymakers and donors typically seek quicker returns on their support programs, which makes long-term support for entrepreneurship challenging. This course includes case studies and first-person testimonials from entrepreneurs who have launched products and services ranging from medical devices to LED lights to whiskey. You will learn how these entrepreneurs discovered and procured resources from various programs and intermediary organizations. You will hear from business people still in the process of developing their companies as well as those whose ventures have flourished. Our focus will extend beyond Cleveland to selected markets around the world, including Greece, Vietnam, Tunisia, Argentina, Rwanda and China. You will learn about international incentives and other supports available to developing startups and small businesses across the globe. This course examines how different communities around the world approach implementing strategies and methods to support businesses. I will ask you to reflect on how to apply the principles we learn to growing entrepreneurship where you live. The social interactive features of the online platform will enable students from around the world to share ideas and learn from one another. Most MOOCs rebroadcast professors’ lectures; this course is different. Don’t expect to see me standing in front of the camera, talking and lecturing every module. Instead, the lectures will be relatively short in length. They have more of the feel of an engaging documentary than a static classroom setting. ## __What type of person takes the *Beyond Silicon Valley* course?__ - Active and aspiring businesspeople in communities looking to initiate new startup ecosystems or bolster existing ones - Current and prospective entrepreneurs who want to learn about funding sources, risk management, and the lifecycle of startups - Professionals who work in government agencies, nongovernmental organizations, philanthropic institutions, and various private funds that fund startups - Anyone curious about how to create and grow startup ecosystems outside the major tech hubs - The principles Beyond Silicon Valley teaches have been drawn from and applied to startups worldwide, from small villages to megalopolises. You'll study success stories spanning the globe from Vietnam to Kosovo to Botswana. ## __What will you learn in *Beyond Silicon Valley*?__ - How and where startups can find funding to get their businesses off the ground - What role government can play in encouraging startups and a healthy startup ecosystem - How anchor institutions such as universities and healthcare systems participate in startup ecosystems - How nongovernmental organizations support startups - How to raise funds from venture capitalists, angel investors, and accelerators - How to navigate challenging periods in the startup lifecycle - The importance of mentoring in successful startups

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According to U.S. News & World Report data, the average amount of student debt in the United States in 2013 was $27,670.

With numbers as high as this — and with the cost of higher education climbing — many graduates are looking to reduce the burden of their student debt. Luckily, there are some avenues that allow them to do so.

What Is Debt Forgiveness?

Debt forgiveness programs are initiatives offered by the government and by nonprofits to help graduates reduce their debt. According to the U.S. Department of Education, if a loan is forgiven, then a student is no longer expected to repay all or part of the principal or interest of the debt. Debt forgiveness is sometimes called cancellation or discharge.

Some programs won’t forgive, or eliminate, a loan; however, they may allow students to defer their loans, or to go into what’s known as forbearance. The U.S. Department of Education defines deferment as postponement of a loan payment without interest accruing, and forbearance as postponement or reduction of a loan’s principal while interest continues accruing.

Who Is Eligible for Forgiveness, and Where Is Forgiveness Offered?

Working for the public sector or volunteering for a government-backed nonprofit provides a student’s best chance of having her debt reduced. The the Public Service Loan Forgiveness (PSLF) program, Teacher Loan Forgiveness Program, and, for students who work for the federal government, the Student Loan Repayment Program all enable graduates to quell some of their debt. The government also rewards volunteers in AmeriCorps, Volunteers in Service to America (VISTA), and the Peace Corps with education stipends and the potential to have Student Loan Repayment Program (SLRP) loans forgiven.

Students pursuing a career in law or in medicine also have opportunities to cut their debt. The American Bar Association (ABA), the U.S. National Institutes of Health (NIH), the U.S. Department of Health and Human Services, the American Association of Medical Colleges (AAMC), and the U.S. Department of Agriculture all have loan repayment programs with their own terms and conditions.

What About Private Loans?

Currently, there are no loan forgiveness programs for private loans. That said, there are avenues by which private loan payments can be reduced. The Income-Based Repayment (IBR) Plan, the Pay As You Earn (PAYE) Repayment Plan, and the Income-Contingent Repayment (ICR) Plan all offer opportunities for graduates to pay back their loans in increments based on your discretionary income, as well as the type and date of the loans taken. The downside to this type of repayment plan is that you may end up paying more in interest over time, since the repayment period ends up being prolonged.

Interested in one of these programs? Use the Department of Education's online calculator to figure out how much you would pay.

How Do I Qualify, and How do I Apply?

Every loan forgiveness program has its own terms, limitations, and application process — and these can sometimes be tricky. For instance, eligibility for the Teacher Loan Forgiveness Program is limited to teachers who are new borrowers (i.e., those who did not have a previous outstanding balance) and who have had a full-time position at a low-income school for at least five consecutive years. The U.S. Department of Education releases a list of low-income schools each year. Even if a student meets these requirements, the loans must be Direct Subsidized and Unsubsidized Loans, Subsidized and Unsubsidized Federal Stafford Loans, or Perkins Loans. PLUS loans are ineligible for forgiveness.

The application process, too, varies depending on the forgiveness program — and this can also be time-consuming. For instance, graduates who are interested in the Public Service Loan Forgiveness (PSLF) Program need to follow a seven-step process to keep track of their eligibility. Graduates on the path to becoming veterinarians who are seeking loan forgiveness through the Veterinary Medicine Loan Repayment Program need to fill out eight forms to apply.

Where Can I Find More Information?

While there are many avenues for reducing student debt, the process can be daunting and overwhelming. Check out the individual websites of each program, and carefully read the terms to see if you qualify. For more information, visit the following websites: