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Student Loan Forgiveness Act of 2012 (H.R. 4170)

The Student Loan Debt Crisis

Since 1978 average college tuition for a four-year college education has boosted a shocking 900%. At the same time, funding for college grants continue to be cut down. In situation like this, millions of students are forced to take student loans that are non-dischargeable in bankruptcy in order to pay for their college education. In addition to this, more than a half of recently graduate students find it impossible to find a full-time employment and at least one out of five students presently default on their student loans.

It is expected for total outstanding student loan debt to go over $1 trillion in 2012. This fact marks it as a serious financial crisis which can lead to another crush of global economy in the USA. People buried in their student loan debts cannot afford to buy a car or a house, to start they own business, or even to get married. Millions of individuals are failing to be engaged in economically motivating activities and this can have a devastating effect to the country’s economic growth. Possible way out of this situation may be The Student Loan Forgiveness Act of 2012 (H.R. 4170).

What is The Student Loan Forgiveness Act of 2012 (H.R. 4170)?

On March 8, 2012, Congressman Hansen Clarke of Michigan has introduced the Student Loan Forgiveness Act of 2012, H.R. 4170, in the House of Representatives. This Act is a legislation intended to help those who are under pressure of enormous amounts of their student loan debts. This Act is a hope for millions of Americans who struggle to pay off their loan debts. This is a petition for the House of Representatives to vote on this bill in 2012 and for the president Barack Obama to sign this legislation into law.

The Student Loan Forgiveness Act of 2012 (H.R. 4170) Outline

H.R. 4170, the Student loan Forgiveness Act of 2012 main points include the following:

  • 10/10 Loan Repayment Plan

This plan limits a payment amount at 10 percent of borrower’s discretionary income and provides loan cancellation in 10 years. In other words, H.R. 4170 would create a “10-10 standard” for student loan forgiveness which means that if you have paid 10 percent of your discretionary income toward your loans for previous 10 years your remaining federal student loan debt would be forgiven. Discretionary income is defined as the borrower’s and his/her spouse’s (if applicable) adjusted gross income exceeding 150% of the poverty line applicable to the borrower’s family size as determined under section 673 (2) of the Community Services Block Grant Act (42 U.S.C. 9902(2).

In case you have already been paying off your education loans, you can expect for your repayment period to be shorter than 10 years. The sum of the loan you have already paid off over the ten years would be credited in the direction of meeting the requirement for loan forgiveness.

  • Low Interest Rates

The bill would guarantee low interest rates on federal student loans by limiting them at 3.4%.

  • Refinancing Private Loans

The bill will also help those who took private student loans with high interest rates and whose student loan debts surpass their income by allowing them to convert their private loan debt into federal Direct Loans and obtain a Federal Consolidation Loan which will allow them to enroll their new federal loans into “10/10 program”. The only eligibility requirement is that your average adjusted gross income is equal to or less than your total student loan debt.

  • Public Service Loan Forgiveness

The bill would reward graduates for entering public service professions. Individuals who decide to enter teaching profession, practice medicine or go into public service can be eligible to have their student loans forgiven after five years of service.

  • Forgiveness Amount

Under the Act of 2012 there would be no caps on the maximum amount of forgiveness available for those borrowers who are presently in school or in loan repayment. However, the 2012 Act caps the amount for new borrowers that can be forgiven to $45,520 in principal of the loan and fees plus the interest accrued on the principal and fees.

  • Defaulted Student Loans

Borrowers who have their loans in default would still be eligible to enroll in “10/10 program”.

  • Federal Plus Loans for Parents

Parents who took out a Plus Loan for Parents would also be eligible to enroll in “10/10 program”.

  • Tax Exclusion

The amount of your eligible education loans forgiven will be excluded from taxable income.

Student Loan Forgiveness Eligibility

Repayment and forgiveness under the Student Loan Forgiveness Act 2012 only applies to federal student loans. If you are planning to consolidate your student loans, consolidate into a Federal Consolidation Loan since this would be eligible for the Student Loan Forgiveness Act’s 10/10 plan and Public Service Loan Forgiveness (PSLF).

Although the Student Loan Forgiveness Act 2012 has not yet been passed it already gained a huge popularity. One million people so far dedicated to a SignOn.org petition supporting H.R. 4170, the Student Loan Forgiveness Act 2012.

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Information on Nelnet Student Loans

Nelnet student loans are one of the numerous U.S. private student loans. Nelnet works together with the Department of Education, helping college students to pay to their tuition and other education-related expenses and to achieve their educational goals. Nelnet has favorable and simple terms and application conditions and are among the most popular private student loans because of their low interest rates.

Nelnet Student Loan Servicer

You can borrow your student loan directly from the Nelnet, but they also provide customer service for other lender’s loans, including student loans issued by the Department of Education. Nelnet provides customer service on your account if: you borrowed money directly from them, if Nelnet services your Direct Federal student loan borrowed from the Department of Education, your lender selected Nelnet to service your loan, sold out your loan to the Department and selected Nelnet to service the loan or in case your lender sold your loan to Nelnet and Nelnet is now the owner and servicer of the loan.

Nelnet Student Loans Eligibility Requirements

To qualify for Nelnet student loans, you must meet the following eligibility requirements:

  • You must be enrolled in an eligible school at least on half-time basis;
  • You have to apply with the creditworthy cosigner;
  • You as a borrower, as well as the cosigner must be at least 18 years old;
  • You must be a U.S. citizen;
  • You should not have any of your student loans into default and no bankruptcies for the previous 7 years.

Nelnet Student Loans Benefits

The main advantages of this private student loan option are favorable borrowing terms and conditions. Furthermore, applying with a co-borrower may increase your chances of getting the loan and help you to save some money. In addition, Nelnet offers the loan consolidation program which allows you to replace multiple student loans with just one and to make one singly payment a month which will decrease your monthly repayments.

How to Apply

To qualify for Nelnet Student loans you will have apply by to filling out the FAFSA (Free Application for Federal Student Aid) application. You will need to file in a new FAFSA after January 1 each year you go to school.

Nelnet Student Loan Stages

During your student loan’s life, from the time you take it out to the time you pay it back, there are generally three stages: in school period, grace period and loan repayment period. Borrowers of the Federal Stafford Loans typically go through these three stages. Borrowers of other student loan options such as parent PLUS loans or GradPLUS loans for graduate and professional students have somewhat different experiences.

However, your school will work directly with Nelnet to make sure your lender knows which stage you are in. Your servicer will be in touch with you and communicate based on your needs at that time. To help you understand the student loan life process, there is an overview of the stages of the student loan life cycle below.

Federal Stafford Loan Stages

In School Period

No payments are required during your period in school, as long as you are enrolled att least half time, which could take two to four years.

Grace Period

After leaving school, you’ll be provided six months grace period. This period is intended to help you get ready to make your student loan repayment, by finding a job or fit the loan payment in your budget in other way.

Repayment Period

Repayment period can take one to twenty years. In general, Stafford and PLUS loans must be paid off within 10 years from the start of loan repayment. Nevertheless, a grace period, periods of postponing your payments due to deferment or forbearance, and  time  when the payments weren’t due (while you were in school)  will not count toward the 10-year repayment term. You may extend the repayment term if you meet the requirements for the Extended Repayment plan, Income-Based Repayment plan, or Income Contingent Repayment plan. On a consolidation loan, the repayment period may extend up to 30 years depending on the initial balance of the loan.

Federal GradPLUS Loans

Federal GradPLUS loans are loans for graduate and professional students. There are no payments required while you are enrolled in school at least half time, but you can make early payments if you like, there is no early payment penalty. Also, you’ll enjoy six months deferment period after you graduate or drop below half-time student status (for GradPLUS loans loan postponement is called a six-month deferment, not grace period). You’ll receive your monthly student loan billing statement about three weeks before your payment is due. When you start making payments, your Nelnet student loan is considered to be in repayment.

Federal PLUS Loans for Parents

Federal PLUS student loans are designated to parents of dependent students to help them with their child’s education costs. PLUS loans are typically disbursed in groups of funds directly to the school, usually in two installments, half during a fall semester and the other half during spring semester.

At the earliest, your first PLUS loan payment would be due 60 days after the school receives the last set of funds. Although Federal PLUS Loans don’t have a grace period, you can postpone payments while you or your student is in school—but note that the loan will continue to accrue interest. Nelnet servicer is going to send your monthly student loan billing statement about three weeks before your loan payment is due. When you start making payments, your loan is considered to be in repayment.

Nelnet Student Loans Forgiveness Options

Teacher Loan Forgiveness Program

Nelnet student loans offer loan cancellation option for teachers for Federal Stafford loan borrowers with the intention to support growth of the teaching profession. You can qualify for this loan forgiveness opportunity if you teach full-time for at least five consecutive academic years in so called low-income schools that serve low-income families. You may qualify for up to $17,000 of student loan with this loan cancellation option.

Public Service Loan Forgiveness (PSLF)

If you work in public service, you may be eligible for cancellation of your remaining federal student loan balance after making qualified 120 payments made under the Income-Based Repayment Plan, Income-Contingent Repayment Plan, or the Standard Repayment Plan. Eligible loans for this forgiveness option include Direct Stafford Loans (subsidized and unsubsidized), Direct PLUS Loans (for parents and graduate or professional students), and Direct Consolidation Loans.

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An Introduction to Teacher Loan Forgiveness Program and How to Apply

What is the Teacher Loan Forgiveness Program?

Nowadays, a large number of students in The USA take student loans to pay for their academic education. Student loan repayment usually comes in six months after student finishes school.  However, professionals in some particular occupations can expect to have their student loans forgiven, and teaching profession is one of these. Teacher loan forgiveness program (TLFP) is a supportive loan cancellation program introduced by the US Congress. Given that teaching is considered as a very responsible and demanding profession, the intention of this program is to reward those working as school teachers for their important commitment and to encourage them to stay in teaching profession. Teachers with student loan debts now can save significant amount of money with launching this program. To qualify for a US federal loan forgiveness program, applicants have to work on full-time bases as teachers for five consecutive academic years in schools where teacher earnings may not be high. These schools are called “low-income” schools as they have a lot of students from low-income families. A list of selected schools can be found in the Department of Education’s online Teacher Cancellation Low Income Directory. The Department of education publishes this list of designated school boards every year.

The details of teacher loan forgiveness program vary by state and federal government regulations. For example, some states like Georgia have their own programs for teacher loan debts forgiveness which gives the opportunity to more categories of teachers to get their student loan cancellation. In Georgia foreign language teachers can also benefit from this program, since they are eligible for TLFP in this state.

The teacher loan cancellation program only is valid to the exceptional balance at the time the application was accepted. Preceding payments are not to be refunded. The particular loan provider makes a decision on student loan forgiveness plan, and it is not possible to be automatically approved for debt forgiveness. The maximum forgiveness amount is up to $5,000 (increases to $17,500 for teachers who teach special education or math and science in secondary schools).

Teachers Loan Forgiveness Programs

Stafford Loans Program

Stafford Loans Program is a federal program intended to support people entering teaching profession. Consolidated Stafford Loans are made throughout the Direct Loan or Federal Family Education Loan programs. To qualify, teacher must be a new borrower of the Federal family Educational Program or Direct Loan Borrower on or after 1st of October 1998. In addition, teacher must not have received refund from the AmeriCorp Program under Subtitle D of Title 1 of the National community Service Act of 1990 for the loan she is seeking cancellation for.  Furthermore, he or she must not be in failure to pay on the loan.

How to qualify?

To be eligible for the Stafford Loan Forgiveness Program applicant must:

  • Have worked as a teacher for at least five successive academic years in an elementary or secondary public or nonprofit school that was nominated a “low-income” school by the US Department of Education
  • Must be employed on full-time basis
  • Must have his teaching service began on or after October 30, 2004
  • Have no less than one of the teaching years after the 1997/98 academic year
  • Student loan must be made before the end of the fifth year of qualified teaching
  • Those teaching in elementary schools, must provide evidence they have knowledge of teaching skills in elementary curriculum areas
  • Teachers working in secondary schools must certify that they are teaching a subject applicable to their university major
  • Highly-qualified teachers of secondary school key subject areas: math and science or teachers of special education who work with disabled children may qualify for the forgiveness maximum to $17,500

Perkins Loan Cancellation Program

The Perkins Loan cancellation plan has less strict requirements concerning loans that can be canceled than Stafford Loans program, although normally comprise Perkins Loans made on July 1, 1972, or after. Perkins Loan forgiveness program allows teachers to receive forgiveness benefits increasingly. Fifteen percent of teacher’s Perkins Loan credit gets canceled after first two years of teaching service; twenty percent gets canceled after third and fourth year and thirty percent after the fifth and any following years.

How to qualify?

To meet the criteria for the Perkins Loan Cancellation Program applicant must:

  • Have worked as a teacher for at least five following academic years in an elementary or secondary public or nonprofit school that was designated a “low-income” school by the US
  • Department of Education, where at least 30% of students come from the “low-income” families
  • Have taught  in the specific subject area or has been a special education teacher; in that case there is an exemption of the “low-income” rule
  • Have worked in a private, but strictly non-profit school, servicing “low-income” students
  • Must be considered as a full-time professional by the employing school
  • Have taught in the field of science, math, bilingual education and foreign languages or in a subject designated as a teacher deficiency area by the state education agency.

How to apply

  • You can apply for Teacher loans forgiveness program after you have taught for five consecutive years in “low-income” school
  • You can submit the application by filing out online Teacher Loan Forgiveness Application Form (2012). Applications and regulations are available on the Department of Education website under Student Financial Aid.
  • You must get your teaching certification from the school’s administrator (usually principal or vice principal) in order to qualify for teacher loan cancellation
  • After your loan forgiveness application is completed, send it to your loan servicer (if you have a direct loan) or to the Department of Education (if you have a federal loan) for the further processing.
  • If your service provider finds that you are eligible for TLFP, you will be mailed a confirmation for the forgiveness balance.

Applying procedure in five steps

  1. Visit the studentaid.ed.gov and choose “Repayment Information”, than select “Cancellation and Deferment Options for Teachers”. In case you have received application from your lender, go to step 3.
  2. Determine if you meet the eligibility criteria
  3. Print a copy of Teacher Loan Forgiveness Application and complete the necessary information in sections 1 and 2. Sign your name in the field where it asks for the borrower’s signature
  4. Have your Chief Administrative Officer fill out the information in section 3
  5. Mail the application to the address given in section 9. In case the address is missing, contact your loan provider.

Benefits and drawbacks of Teacher Loans Forgiveness Program

The main advantage of teacher loan cancellation is that it saves low-income school working teachers a considerable amount of money, especially for teachers who borrowed a minimum amount of student loan. This is beneficial for “low-income” schools also giving the fact that they usually have difficulty hiring highly qualified teachers. On the other side, one of the main disadvantages of this program is time. Namely, teachers are obligated to complete five uninterrupted year teaching period to qualify, which means that they must extend their endurance in order to meet the criteria. In addition, most of these designated schools are often located in deprived and dangerous parts of the city.

To sum up

Teacher Loans Forgiveness Program is US government project intended to reward teachers who have preferred to work in high-demanding teaching areas. The major purpose of this program is to reward those working as school teachers for their commitment to profession.

To qualify for either Stafford or Perkins Loan cancellation programs, the main requirement for applicants is to have five comprehensive academic qualified teaching years. Stafford Loan cancellation program requires teachers to complete consecutive five years of teaching, while with Perkins Loan forgiveness teachers receive forgiveness benefits increasingly. The limit of possible forgiveness is $5,000, but teaching science and math at secondary school or teaching special education which includes work with children with disabilities increases applicant’s prearranged forgiveness maximum to $17,500.

Only full time teacher can qualify for either, Stafford or Perkins Loan cancellation programs. To qualify for teacher loans forgiveness program, teachers must get certification of their teaching from the school administrator.

Many US states, such as Georgia have their own teacher loans cancellation programs. Such programs regularly work adding together to federal loan forgiveness programs. Moreover, they create opportunity to more teachers to get their student loan cancelled.

Apply for your teacher loan forgiveness today

There are many “low-income” school boards across The USA today who are in need for qualified teachers to provide quality education to their students. If you meet the criteria and you have passion for teaching in one of these schools, apply for the teacher loan forgiveness program and have your student loans forgiven. Once your loan forgiveness is accepted, your student loans are fundamentally erased, together with any interest sustained.

We strongly recommend potential applicants to check their state’s Education Department to get information if the state provides such loan forgiveness program.

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The New Obama Student Loan Forgiveness Program

Obama’s student loan debt forgiveness plan

The promises that a quality college education will guarantee a great paying job are lost with a downturn of the U.S. economy. The unemployment rate has remained above 9% for the last two years as employers are practicing a hiring freeze or reducing their payrolls. In the last several years, college students have spent thousands of dollars in college tuition to get a quality education and a degree that promises to pay these loans back. Now these graduates cannot find the jobs they need to fulfill their obligations.

Graduates having trouble paying their student loans have many options. Some of these options include deferments and forbearances, where payments can be postponed for any number of reasons until graduates can find a job and begin earning income.

Another option has also been recently made available. The Obama student loan forgiveness program can help help those student that have too much student loan debt. Under this plan students that are making satisfactory payments for twenty years can have their remaining loan balance forgiven, regardless of how much it is. What’s even better news is that people that work in public service, such as teachers, can have their remaining loans forgiven after 10 years, which is good news for public service workers in Georgia.

The Obama student loan forgiveness program covers student loans like FFEL, Stafford loans, Direct loans and the Perkins loans. It is not covered for private student loans. Georgia residents should fill out the application for the Obama student loan forgiveness program sooner rather than later. The ten year repayment period begins as soon as the application is completed and signed. Those people who are already in public service cannot count their previous years of service.

Another option many graduates can take advantage of is the income sensitive repayment plan. This repayment plan limits your monthly student loan payments to 10% of your total income after taxes and other basic expenses are taken into consideration. This is the one solution for many college graduates that are facing limited income after graduation. In some cases, if income is low enough, the monthly student loan payment can be zero, but it can still count towards the 120 qualifying payments.

While many Americans will attempt to put their student loans into deferment or forbearance, it’s worth doing a little bit of research to find out if you qualify for the newly passed student loan forgiveness program. In fact, you may discover any number of programs that could apply to your situation should you not qualify for the new Obama plan. The last thing anyone should do is allow their loans go into default as this would disqualify any type of repayment plan. Making payments on any plan also gives a person the chance to save or rebuild their credit score too.

Many Americans have student loan debt and are making payments over many years. The student loan debt forgiveness plan can help by limiting the duration of the loan payments for 20 years or even cut it in half for public service workers. Even better is that many students can take advantage of the income sensitive repayment plan and have their monthly payments reduced even further.

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Federal Perkins Loans for Undergraduate and Graduate Students

Federal Perkins Loans are a type of federal financial aid offered by the U.S. department of Education, intended to help students in financial need enrolled in one of 1,700 accredited U.S. postsecondary educational institutions to pay for their college or university expenses. The lender is college or university, rather than financial institution or Federal government. Government provides funds to each participating postsecondary institution and the institution then distributes funds to students in high financial need.

Under Federal Perkins Loan plan, undergraduate students can borrow up to $4,000 per year with a full amount of $20,000 borrowed during student’s undergraduate years at college. Graduate students or students in professional studies, may borrow up to $6,000 annually with a total sum of $40,000 of student loan. The definite amount you will receive is based on your financial need and amount of funds your college or university has available for providing students with this type of aid.

Eligibility Requirements

To be eligible for Federal Perkins Student Loan student must meet certain criteria:  he or she must be enrolled at least on half-time basis in postsecondary educational institution that participates in Federal Family Education Loan Program. Furthermore, she/he must demonstrate high financial need. Additionally, to be eligible for Perkins Student Loans student loan candidate must be a U.S. citizen or national, a U.S. permanent resident or eligible non-resident.

Perkins Student Loan Benefits and Downsides

In the contrary to other student loan options, under the Perkins Loan program students have advantage of nine months grace period, which means that your repayment of the loan will begin nine months after you finish college or university or fall under half-time college status. Further benefits of this plan are ten years repayment period and no penalty charged  if you choose to pay off the loan in shorter period.

Perkins Loans borrowers qualify for Federal Loan Cancellation or loan forgiveness program under condition that they work in authorized “low-income” schools or as teachers in designated high demand teaching areas like science, math and bilingual education. Peace Corps Volunteers also qualify for the loan cancellation.

On the other side, eligibility requirements are stricter than under, for example, some private loan plans and you will have to pay the higher monthly amounts because of the relatively short repayment period.

Perkins Loan Interest Rates

Perkins Loans are issued with a fixed interest rate of 5% during the ten-year repayment period. This loan plan has nine month grace period which allows you to find a job after graduating in order to repay your loan easily. You will also have to repay your Perkins loan in case you fall below half-time status at school or withdraw from the college or university.

How to Apply

In order to apply for this type of financial aid, you must first file a Free Application for Federal Student Aid (FAFSA), which can be completed online, at http://www.fafsa.ed.gov. You also must complete a Federal Perkins Loan Master Promissory Note (MPN) in order to receive this student loan. The MPN classifies the all the conditions connected to terms of borrowing and repayment of the loan.

You are also required to complete Perkins Loan Entrance Counseling before loan funds are paid. The reason of this counseling is to ensure you completely understand your rights and obligations connected to a student loan borrowing. Additionally, you must complete exit counseling after you graduate, withdraw or enroll in less than 6 units.

You are going to receive the loan funds from your school divided into two installments. There are two disbursement options: money can be placed in your student account for you or you can receive a check. The loan is usually divided into two payments, unless the loan is for a very small amount. As a Perkins Loan borrower, you don’t have to pay origination or insurance fees.

Federal Perkins Student Loan is one of the available financial aids for students today. Before applying for the student loan you should consider all the other existing borrowing options as well.

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