Lana Oconnell
Student loans can be a burden, but there are ways to get help with repayment or even loan forgiveness. Some companies offer student loan repayment assistance as an employee benefit, which can include recurring payments to lenders or contributions to retirement savings. Additionally, the US Department of Education and Department of Defense provide benefits for military service members with federal student loans, including interest rate caps and loan repayment programs. Loan forgiveness may also be an option through federal student loan programs, such as IDR plans, or by teaching full time in certain schools. It's important to be cautious of scams and seek qualified help when needed, as reliable lenders will work with borrowers to find a solution.
| Characteristics | Values |
|---|---|
| Government help | The U.S. Department of Education and Department of Defense offer benefits for military service members with federal student loans, including interest rate caps and repayment programs. |
| Military service | Your military service can count toward PSLF (Public Service Loan Forgiveness). |
| AmeriCorps service | Participants who complete a term of national service in an approved AmeriCorps program are eligible for the Segal AmeriCorps Education Award, which can be used to repay qualified student loans. AmeriCorps service also counts toward PSLF. |
| IDR plans | The government offers IDR (income-driven repayment) plans that base your monthly payment on income and family size. After a certain number of payments over 20-25 years, the remaining balance may be forgiven. |
| PSLF requirements | To benefit from PSLF, you must repay your federal student loans under an IDR plan or a standard 10-year plan. You need to make 120 qualifying monthly payments. |
| Loan forgiveness | The government offers loan forgiveness programs for those working full-time for government or not-for-profit organizations. Additionally, teachers may be eligible for forgiveness if they teach full-time for five consecutive years in certain schools or agencies serving low-income students. |
| School-related discharge | If your school closes while you're enrolled or soon after you withdraw, you may be eligible for a discharge of your federal student loan if you meet certain requirements. |
| Employer assistance | Some companies offer student loan repayment assistance as a benefit to attract and retain employees. This can take the form of recurring payments to lenders or contributions toward retirement savings. |
| Tax benefits | Employers can offer tax-free benefits of up to $5,250 toward student loan assistance through 2025, thanks to the Consolidated Appropriations Act. |
| Company examples | Financial services company Ally offers a student loan repayment program with a $100 monthly contribution and a $10,000 lifetime maximum. Abbott employees making student loan payments of at least 2% of their salary receive a 5% contribution to their 401(k). |
| Credit counseling | Credit counseling nonprofits can help create a plan to get out of debt. These services are free and different from credit repair companies. |
| Interest accrual | Interest on student loans accrues daily, typically starting when the loans are disbursed. The government pays interest during deferment periods for subsidized federal loans. For unsubsidized federal loans, borrowers are responsible for interest accrued during forbearance. |
| Default consequences | Defaulting on a student loan can lead to negative credit score impact, lawsuits, loss of eligibility for federal student aid, and garnishment of tax returns, wages, and Social Security payments. |
| Scam awareness | Be cautious of scams offering loan forgiveness. Never share loan or bank information, and be aware that free help is available through official channels. |
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What You'll Learn
Loan forgiveness programs
There are a variety of loan forgiveness programs available in the US, which can help to reduce or erase your student loan debt. These programs are typically targeted at borrowers with lower incomes, large amounts of debt, or public service jobs. Here are some of the key loan forgiveness programs:
Public Service Loan Forgiveness (PSLF)
This program is available to government and qualifying nonprofit employees with federal student loans. Eligible borrowers can have their remaining loan balance forgiven after making 120 qualifying loan payments on an IDR (income-driven repayment) plan and 10 years of full-time public service work. Teachers employed full-time in low-income public schools may also be eligible for Teacher Loan Forgiveness under PSLF after working for five consecutive years, with up to $17,500 in federal direct or Stafford loans forgiven.
Income-Driven Repayment (IDR) Plans
The federal government offers several IDR plans, which base your monthly payment on your income and family size. These plans typically allow you to cap your loan payments at a percentage of your monthly discretionary income. After making payments for 20 or 25 years, depending on the plan, your remaining loan balance may be eligible for forgiveness.
Military Service Benefits
The U.S. Department of Education and Department of Defense offer special benefits for military service members with federal student loans. These include interest rate caps under the Servicemembers Civil Relief Act and Department of Defense student loan repayment programs. Military service can also count toward PSLF.
AmeriCorps Service
Participants who complete a term of national service in an approved AmeriCorps program (AmeriCorps VISTA, AmeriCorps NCCC, or AmeriCorps State and National) are eligible to receive the Segal AmeriCorps Education Award, which can be used to repay qualified student loans. AmeriCorps service can also count toward PSLF.
It is important to note that there are potential tax implications for some loan forgiveness programs, and forgiveness is typically not an option for defaulted loans. Be cautious of scams and always review the details of a program before applying.
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Student loan repayment assistance employers
Student loan debt is a significant burden for many Americans, with the average federal student loan debt balance hovering around $38,000. This financial stress can lead employees to seek relief through new jobs or even multiple employment. However, some employers are now offering student loan repayment assistance as a benefit to attract and retain talent.
Under federal law, employers with educational assistance programs can use them to help pay off their employees' student loan obligations. This benefit is tax-free until December 31, 2025, thanks to the Consolidated Appropriations Act, which was signed into law in 2020 as part of pandemic relief efforts. Employers can offer up to $5,250 in student loan repayment benefits without incurring tax costs.
The SECURE Act 2.0, implemented in 2024, also allows employers to treat employees' qualified payments toward student loan debt as if they were 401(k) contributions for matching purposes. This means employees can receive employer retirement matches while paying off their student loans.
Some companies have already begun offering student loan repayment support. By October 2023, 34% of employers offered student loan benefits, up from 17% in 2021. This trend is likely to continue as employers seek to attract and retain top talent in a competitive job market.
Additionally, the U.S. Department of Education and Department of Defense offer special benefits for military service members with federal student loans, including interest rate caps and loan repayment programs. These programs provide much-needed financial relief and contribute to the overall well-being of service members.
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Understanding student loan traits
Understanding the traits of student loans is crucial before opting for one. Here are some key features to consider:
Interest Rates
Student loans, whether federal or private, charge interest on the amount borrowed. Federal student loans typically offer lower, fixed interest rates that remain constant throughout the loan period. On the other hand, private student loans may offer fixed or variable interest rates. Variable rates can change over time, so it's important to understand how these rates work and their potential impact on your loan.
Eligibility
Federal student loans are need-based and do not require a credit check. To apply, individuals fill out the Free Application for Federal Student Aid (FAFSA). In contrast, private student loans depend on credit scores, and a co-signer may be necessary if your credit history is not strong.
Repayment Plans
Federal student loans offer income-driven repayment plans, where the repayment amount is based on the borrower's income after graduation. Additionally, federal loan borrowers can change their repayment plan even after taking out the loan. Private student loans are typically repaid directly to the school's financial aid office, while personal loans are deposited into the borrower's bank account. It's important to understand the repayment terms and make a plan for repayment to stay organised and responsible.
Grace Period
A grace period is a feature of some student loans that provides a temporary reprieve from repayment obligations. This period typically begins after the loan is disbursed and can vary in length. During this time, no payments are required from the borrower, giving them some financial breathing room as they transition into repayment.
Loan Forgiveness
In certain circumstances, student loan forgiveness may be available. For instance, the U.S. Department of Education and Department of Defense offer benefits for military service members with federal student loans, including interest rate caps and repayment programs. Additionally, individuals who complete a term of national service in approved AmeriCorps programs may be eligible for the Segal AmeriCorps Education Award, which can be used to repay qualified student loans.
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Scams and loan forgiveness
Student loan scams are prevalent, and it's important to be vigilant to avoid them. Scammers prey on people's anxieties about debt, offering fraudulent solutions to defer, lower, consolidate, or eliminate debt. These scams can cost thousands and push victims further into debt.
The most common student loan scams are offers for loan relief and consolidation. If a company charges a fee to consolidate federal student loans, it is a scam. Federal student loan consolidation is free and can be done by the borrower at StudentLoans.gov. Similarly, be cautious of any company that promises to eliminate or reduce student loan debt. Student loan debt generally cannot be eliminated or forgiven, except in specific circumstances such as death, permanent disability, identity theft, federal loan forgiveness plans, and income-based repayment plans. These plans are only available through the Department of Education, and you do not need to pay a third party to set them up.
Scams can come in the form of phone calls, emails, or text messages. Be wary of messages promising student loan forgiveness, especially if they feature unusual capitalization, improper grammar, or incomplete sentences. Official communications will not have these errors. Additionally, be cautious of messages with official-looking names, seals, and logos, as these do not guarantee legitimacy. Always double-check the sender's email address and only respond to trusted addresses. For example, legitimate emails from Federal Student Aid will only come from specific addresses, and text messages will only come from 227722 or 51592. If you are unsure, you can check with your local Better Business Bureau to see if a company has any complaints.
To avoid scams, it's crucial to know that you don't need to pay anyone to help you navigate loan repayment or loan forgiveness. Your loan servicer can help you for free. Additionally, federal loan forgiveness programs are always free. If you need help with your federal student loans, only contact a U.S. Department of Education-affiliated company. You can review the list of contracted federal student loan servicers to ensure you are dealing with a trusted partner. If you think you've encountered a scam, contact your loan servicer to revoke any unwanted authorization agreements, and consider filing a complaint with the Federal Trade Commission or the Consumer Financial Protection Bureau.
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Loan repayment tips
There are various options available to help with student loan repayment. Firstly, it is important to understand the unique traits of student loans. Interest accrues daily on most student loans, starting from the day the loan is disbursed. If you have a subsidised federal loan, the government will pay your interest while you are still enrolled in school or during your post-school grace period. The government also pays interest during deferment due to re-enrolment, economic hardship, unemployment, cancer treatment, or military deployment. During forbearance, you will be responsible for accrued interest. Understanding these traits can help you make informed financial decisions.
Secondly, be aware of potential scams. You may receive messages advertising loan forgiveness, but always verify these against official federal programs. Never share your financial information with unknown parties, and be cautious of companies selling support services for something you can do for free. Instead, seek free advice from credit counselling nonprofits or search for "free student loan advice".
Additionally, consider employment with companies that offer student loan repayment assistance. Some employers provide such benefits to attract and retain employees. These benefits can include recurring payments to lenders or contributions towards retirement savings.
Furthermore, explore government assistance programs. The U.S. Department of Education and Department of Defense offer benefits for military service members with federal student loans, including interest rate caps and repayment programs. The Public Service Loan Forgiveness (PSLF) program also provides loan forgiveness for those working full-time in government or not-for-profit organisations.
Finally, if you are struggling to make payments, contact your loan servicer immediately. They may be able to provide options to help you avoid defaulting on your loan, which can have negative consequences for your credit score and eligibility for federal aid. Reliable lenders will work with you to find a solution.
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Frequently asked questions
The U.S. Department of Education and Department of Defense offer special benefits for military service members with federal student loans, including interest rate caps and loan repayment programs. You may also qualify for loan forgiveness if you work full-time for a government or not-for-profit organization. Additionally, the government offers income-driven repayment plans that can lead to loan forgiveness after a certain number of payments.
Yes, some companies offer student loan repayment assistance as an employee benefit. These companies span a wide range of industries and include financial services companies like Ally, as well as healthcare technology companies like Abbott.
If you're having trouble making your student loan payments, it's important to contact your loan servicer immediately to discuss your options. Reliable lenders will work with you to find a solution, such as an income-driven repayment plan or a loan forbearance.
Yes, you can explore credit counseling nonprofits that offer free student loan advice and can help you create a plan to manage your debt. Additionally, if you teach full-time for five consecutive academic years in certain eligible schools, you may qualify for loan forgiveness of up to $17,500.
