Applying For Loan Forgiveness?
There are some cases wherein the federal government might decide to forgive some or even all your debts based on your current situation or the type of selfless service that you extended to your community or country.
If a person has given a number of months in the Peace Corps or had served some years in a military campaign, that person can apply for loan forgiveness. You should know that there are 3 main types of loan forgiveness that extends certain sets of privileges.
What is loan forgiveness?
It is an encompassing term that covers various approaches to the alteration of conditions of debt repayment. Loan forgiveness is made up of various programs that are given by the federal government or any private lending company to deserving loaners.
Take note that not everyone qualifies for loan forgiveness and not everyone will be given it.
Loan deferment – it is a type of loan forgiveness wherein there will be a suspension on the usual monthly payments for a period of time. If you cannot make regular payments because of an illness or a tragedy in the family, or unemployment, then your loan repayment can be deferred.
But there will be a limited grace period. Once you come into an agreement with the lender, you will agree to repay the debt once the grace period expires. Take note there are no accumulating interest rates in federal loans. That is why it is important for you to read the terms of deferment in order to be ready for any surprises.
Loan Forbearance – this is similar to deferment except that the interest rates will continue to build up after the period of time. This should be considered as the last resort when it comes to repaying debt. This is given to people that do not qualify for a deferment.
For instance, a person that is employed or still studying can opt not to pay his or her loan regularly for a period of time. But there will be a trade-off and that is the accruing of interest.
Loan forgiveness is a part of the federal reward system for people that engage in public or social services. Take note that not all loans can be completely forgiven. It is rare to see a clean slate but every little thing removed from the debt is really helpful. There are some people that have reduced their debts every month because of loan forgiveness.
But first of all, you need to show that you are a good borrower before you will be given loan forgiveness. For instance, if you have not paid your loan for more than a year now, there is a chance that you cannot apply for loan forgiveness.
One of the best ways to reduce your debt is the civil volunteer programs. If you don’t have plans after college, then you can try the Peace Corps, VISTA, or AmeriCorps. Most of the time volunteers will be given a good amount of money for the reduction of their debts. Some of them are even given allowances.