What Teachers Should Know About Loan Forgiveness Programs

Last year, students loans made up the highest delinquency rate of any kind of household debt. It is safe to say that many graduates are struggling to pay back their school loans. But if you’re a teacher, you might be in luck! The Teacher Student Loan Forgiveness program may allow you to have some of your student loan debt forgiven—but there are specific rules and strict repayment schedules you will need to follow. Today’s blog post takes a look at loan forgiveness rules for educators in New Jersey.

 

In order to take advantage of the Teacher Student Loan Forgiveness program, you need to have one of these loans: a Subsidized Federal Stafford Loan, an Unsubsidized Federal Stafford Loan, or a Federal Direct Consolidation Loan. It’s also important to note that you cannot qualify for loan forgiveness if you are in default on your loan unless you have previously made arrangements with you loan provider for a repayment plan going forward. Under the Teacher Student Loan Forgiveness program, administrative staff, school counselors, librarians, and other school staff are not considered “teachers” and therefore are not eligible for loan forgiveness.

 

However, even if you meet all of the above criteria, you must have worked as a full-time teacher at a low-income school for five academic years consecutively after the 1997-1998 school year to qualify for the program. (Did you catch all that?) The award amount you will receive depends on the subject you teach, how long you have been teaching, and what level of qualifications you have. The maximum award for science, math, and special education is $17,500, while all other subject educators can receive a maximum of $5,000. You can apply online at ifap.ed.gov.

 

Considering not many teachers will qualify for the Teacher Student Loan Forgiveness program, and those that do may still have a lot of debt left, it is a good idea to look into alternatives for teacher loan forgiveness. Luckily, you can stack loan forgiveness programs, but typically you cannot apply for more than one loan simultaneously. Take the time to look over all of your options to ensure that you are choosing the right loan forgiveness program or programs for you. Here are some of the more common loan forgiveness programs for teachers:

 

Perkins Loan Teacher Cancellation: This forgiveness program is specifically designed for teachers with Perkins loans. While the Perkins Loan Program ended in 2017, if you have outstanding Perkins loans, you could qualify to have 100% of the loan canceled over a period of time. You must teach at either a low-income school or within the following subjects: math, science, foreign languages, special education, or a subject that is experiencing a shortage of qualified teachers in your state. To apply, you will need to contact your alma mater for the specific rules of the Perkins Loan.

Public Service Loan Forgiveness: With only 1% of applicants getting accepted to the program, there is a very specific criteria that must be met for Public Service Loan Forgiveness. While teachers are not limited to specific schools or subjects, there are four major criteria that must be met.

1. Your loans must be federal direct loans.

2. You must have an income-driven repayment plan.

3. You must be employed by a qualifying employer, AND

4. You must have already made at least 120 payments (or 10 years of monthly payments). The online Public Service Loan Forgiveness tool will help you determine if you qualify and allow you to apply if you meet all qualifying criteria.

State and School Forgiveness Programs: Every state has at least one student loan forgiveness program for those who work in public service fields. Colleges and universities also sometimes provide teacher loan forgiveness programs. Reach out to your alma mater’s financial aid or alumni office to find out if they sponsor and loan forgiveness programs.

If you are a teacher struggling to pay back your student loans, these forgiveness programs can help you get ahead of your debt. If you have student loans that do not qualify for these forgiveness programs, Veitengruber Law can help. Our debt resolution team offers individualized advice and comprehensive debt solutions to get you back on the road to financial health.

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Getting Savvy About Your Student Loans

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You did it! You got the degree, graduated college, and are ready to branch out into your career. Graduation is a time to look forward to your bright future after years of hard work. But it’s also worth taking a look back—especially at your student loans. Many college students graduate without really knowing how much they owe, when payments are due, or even who they owe. How long will these loan payments be in your life? Organizing your student loan debt is a big first step towards your bright future after graduation. Here are six steps you can take to get on top of your student loan debt.

1. Who do you owe?

Are your loans federal or private? This is a good time to figure that out. Most college students have some kind of federal student loan debt. Go to studentloans.gov and enter your FAFSA information to see what loans you have and to find the government-hired company that services the loan. This will be the company you contact for all future interactions concerning your loan.

If you have private student loans this can be a little more difficult to track, especially if you weren’t exactly the world’s most organized filer when you were 17 years old. Your loan(s) also could have been sold to a completely different company than you initially used. In these instances, your college admissions office should be able to lend a helping hand. Your alma mater should have a copy of any loan agreements with your records that can tell you who your loan servicer is. Your credit report can also help you determine information about any private loans.

2. How much do you owe?

This is really a two-fold question: What is the amount you initially borrowed and what is the current amount of principal you owe? If you have been making some payments towards your loan, it is important to find out if these payments went towards the principal of your loan or if they went towards interest. Federal student loan balances are frequently not up to date, so contact the lender directly for the true amount of your loan. Private student loans should be up to date with your most recent statement, but it never hurts to make direct contact if you have any questions about what you owe and what you’ve already paid.

3. What is the interest rate?

Knowing which loans have higher interest rates can help you determine which loans should take priority as you begin repaying your debt. All federal loan interest rates after 2006 are fixed, meaning the rate remains the same over the duration of the loan. Private student loans as well as federal loans taken out prior to 2006 may have variable interest rates. Find out how often the rate changes and if there is a cap on how high the rate can go. If you have an unreasonably high interest rate, it is likely due to a poor credit score when you applied for the loan. Ask us how to refinance your student loan!

4. What are my payment options?

Your lender should be able to tell you the estimated payoff dates of your loans which can help you establish a payment plan that works for you.

  • Federal loan monthly payments will automatically calculate based on a standard 10-year repayment plan. If you cannot afford these payments, there are many income-driven repayment plans that can allow you to make smaller payments more in line with your budget. It’s important to understand any special conditions of these plans and how smaller payments may impact your loan balance.
  • Private loans are much less flexible when it comes to payment options. Review your loan agreement. Most private loans will spread out payment equally month by month for the duration of the loan. If you are struggling to pay back your private student loans, reach out to your lender to discuss payment alternatives. They would much rather you be making smaller payments than none at all.

Student loans will be part of your financial reality until you pay them off. It can be daunting to think about paying back this debt while you’re still establishing yourself professionally, finding a place to live, and making your mark on the world. Don’t panic! Answering the above questions can help you create a plan of action to pay off your debt and get back to planning for your bright financial future. If ever in doubt, reach out to Veitengruber Law. We can help you make sense of your loan repayment options.

The Best Tips for Paying off Student Loans Quickly

At the time you applied for and were granted a federal student loan, there’s very little chance that you were thinking about how long it would take you to pay it back. We’re all a bit naive and wet behind the ears when just starting our college studies. Buoyed by the prospect of a “well paying job” after your time at university, you, like many others, most likely figured that paying back your student loan debt would be a piece of cake.

As we all know, student loans are a whole lot less fun after college ends. No one likes the harsh reality of knowing that a large portion of your (newly acquired) paychecks will go toward paying back your student loans. Real life take home pay is usually a lot less than you thought it would be, and subtracting even more money from your net income can feel almost physically painful.

On top of how depressing it can be to fully realize just how much you owe, it can feel like you’ll be paying for your student loans forever. However, there are things you can do to make sure that feeling doesn’t become your reality.

Stop deferment as soon as possible

As a general rule, most student loans, both federal and private, will continue to accrue interest while in deferment. This means the longer you put them off, the more you’re going to owe.

Avoid income-based repayment plans

Also known as ‘pay as you earn’ or ‘income contingent’ plans, these repayment methods are geared toward college graduates who can demonstrate at least a partial financial hardship. In theory, limiting how much borrowers have to repay each month based on how much money they’re earning might sound like a good idea. The problem with dramatically lowering your monthly loan payments again lies in the staggering amount of interest that will be tacked onto the total amount due.

Be aware of income taxes if considering loan forgiveness programs

There are currently a number of federal and New Jersey loan forgiveness programs available for borrowers who have made a set number of payments over a given time period (usually 10, 20 or 25 years). While just knowing that the remainder of your loan will eventually be forgiven can be a light at the end of a tunnel, you may have to pay income tax on the amount that is forgiven.

If you’ve deferred your loan several times and then paid the lowest payments possible via income-based repayment, the interest will have been compounding for a long time. That interest will be added to the remaining balance, which may be a significant sum by the time you qualify for forgiveness. While you will be able to celebrate the debt forgiveness, you’ll still need to foot the hefty NJ income tax bill.

Refinance and consolidate your student loans

One of the best steps to take when trying to get a handle on your student loan debt is to lower your interest rate. You should first consolidate (combine) any loans that are eligible for refinancing. If your original student loan interest rates were high, you’ll save a lot of money over the course of your repayment plan by refinancing to get a lower rate. This can also shorten the length of time required for you to pay back your loans and, in turn, lower the amount of income taxes you’ll owe on any remaining balance if you qualify for forgiveness.

Earmark your yearly tax refund for student loan repayment

Each time you receive extra money, whether from your tax refund, a lawsuit settlement, an inheritance, etc., resist the urge to spend it frivolously and instead apply as much of the total windfall to your student loan balance. You can do the same every time you receive a raise at work, too. Set aside the extra income and pay that much above and beyond your monthly minimum loan payment.

Look for employment opportunities that offer loan forgiveness

The Public Service Loan Forgiveness Program forgives student loan debt in teaching and certain public and nonprofit jobs. You’ll have to meet a whole host of requirements in order to have your loans forgiven through your job, but it is something extremely well worth looking into.

In addition to the above strategies to get out of student loan debt quickly, you should consistently re-work your budget so that you can trim as much excess spending as possible. This will allow you to put more of your income toward repaying your debts faster. Your budget will only be stilted temporarily – so remind yourself that the end justifies the means.

 

Image: “Calculator and Money” by Reyner Media – licensed under CC by 2.0

Wage Garnishment: FAQ

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What is wage garnishment?

If you owe money to a person or company that you have failed to repay or even begin to repay, the creditor (entity to whom you are indebted) can obtain a court order against you. This court document will order your current employer to take a specific amount of money out of each of your paychecks. This money will go directly to the creditor to whom you owe money.

How much of my paycheck can be garnished?

There are federal laws in place that limit the amount of money that can be garnished from anyone’s paycheck so that the debtor can still manage their monthly expenses. Generally, no more than 25% of your income (after deductions) can be garnished by any combination of creditors who may be seeking money from you.

Can I lose my job because of a wage garnishment?

If you have only one garnishment against your wages, your employer does not have the right to terminate your employment, nor can they punish you or treat you any differently because of a wage garnishment.

Multiple wage garnishments filed against you will give your employer some rights to take action. For example, suppose your employer discovers that you are neck-deep in unpaid debt and your job duties include dealing with company finances. Your severely disordered finances at home send up a red flag, and many times employers do have rights against you when the garnishments keep rolling in.

What can I do to eliminate a wage garnishment?

If you feel that a wage garnishment has been filed against you erroneously, you can protest the garnishment at a court hearing. You may also have rights if you cannot manage your bills with the wage garnishments set as they are.

Additionally, you can immediately eliminate any and all wage garnishments by simply paying off the debts in full. If you are starting a new job and don’t want your new employer to know that you owe money to a creditor, your best bet is to try to work with your debt negotiation lawyer to lower the amount you owe so that you can pay it all off in one fell swoop.

Can I eliminate all wage garnishments?

While you can “cancel out” a wage garnishment for say, credit card debt, defaulted loans or medical debt, some garnishments are harder (and sometimes impossible) to remove. For legal reasons, if you owe child support, your NJ county court will automatically set a wage garnishment action in place once your Final Judgement of Divorce has been entered. This guarantees that your children will always be cared for appropriately with no missed payments.

The same is true if you owe money to the federal or state government in the form of back taxes, or if you have delinquent student loans. In fact, wage garnishments for child support, taxes and student loans can even be initiated without a court order.

If you are facing a wage garnishment in New Jersey that you feel is inaccurate or that is preventing you from meeting your other basic financial obligations, work with your NJ debt relief attorney to either modify the wage garnishment order(s) or eliminate them if they are unlawful.

 

Image credit: Tax Credits

Home Ownership & Student Loan Debt: How They’re Connected

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Applying for a mortgage loan is akin to putting all of your financial cards on the table. Because the amount being borrowed is so high (in most cases), lenders will scrutinize all of your money decisions with a fine tooth comb. With that being said, it is best to wait to apply for a mortgage loan until such a time when your other financial obligations are low and your credit score is good.

However, everyone knows that life doesn’t always go as planned, and many millions of Americans are finding themselves paying off student loan debt years, sometimes decades after they have finished college. Many of these people may have in fact defaulted on their student loans, which can result in a legal judgment from the court.

Understandably, lenders are very wary of giving a loan to someone who has already defaulted on a loan in the past. They’d rather not take the risk of losing big-time money, and may pass you over for the next borrower ‘standing in line.’

So, what is a person to do if they are working hard to make good on an old student loan judgment? Must they wait until their loan is 100% paid off to pursue their dream of owning a home?

The real answer to this question is “maybe.” While that answer may not seem very encouraging, it’s better than an outright “no.” Lenders are going to look at more than just an outstanding student loan judgment (even if you are currently making steady payments on that loan via wage garnishment).

Another big factor that mortgage lenders are going to take into account is your overall credit score and your credit report. If you haven’t taken a look at your credit report recently, take advantage of the free report available to you at annualcreditreport.com. If you want to know your actual score, you will simply have to pay an extra $10.

If your score is at least fair, (above 630), that is proof that your student loan has not put a permanent albatross on your credit score, and moving ahead with applying for a mortgage loan is definitely within the scope of reasonable actions for you at this time.

If, on the other hand, your credit score is less than 630, you probably won’t get approved for a mortgage loan immediately, but you do have several options to help yourself move toward that goal.

First, make contact with your student loan lender(s). By reaching out to them personally, you’ll likely have a better chance of getting out of student loan debt much faster than you will on your current payment schedule. Many lenders have a rehabilitation program that helps debtors get back on track. If your lender is not amenable to speaking with you or negotiating with you, contact a New Jersey attorney who has experience dealing with both student loan debt and real estate. The right NJ attorney can negotiate your outstanding debts down to a much more manageable level – so much so that the fees associated with hiring an attorney will seem like a drop in the bucket.

Another thing you can do is apply for three secured credit cards and begin using them as soon as you receive them in the mail. Pay off the balances consistently every month for the next six months. This action alone will boost your credit score and help put you in position to get that mortgage loan, and get into the home of your dreams.

To get additional information and help negotiating your student loan debt, contact our office now for a free consultation. (732) 852-7295

Image credit: Chie

Retirement and Student Loan Debt: How They’re Connected

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To most of us, the word retirement brings to mind images of a renewed enjoyment of life – a time when we will finally be able to put work aside and possibly even find time to stop and smell the roses. Then again, the phrase ‘student loan debt’ isn’t one we usually associate with our golden years.

Unfortunately, these days, more and more older Americans are entering the retirement age bracket, but are unable to look forward to retiring with joy. Sadly, many older Americans are still affected by student loans they took out in their younger years, but were simply unable (for a variety of reasons) to pay off.

In fact, there are approximately two million Americans aged 60+ who are still struggling under the weight of unpaid school loans. According to the Federal Reserve Bank Of New York, this number has tripled since 2005.

Some older Americans are saddled with student loans that they themselves took out years ago in order to put themselves through college, while others took on the responsibility of cosigning a student loan for a family member (usually children).

Regardless of the reason for student loan debt among older Americans, attempting to repay an amount that is perpetually compounding due to high interest rates is exceedingly difficult for this particular group. Due to the fixed income that comes along with retirement, many retirees are finding it virtually impossible to stay up to date on their student loan debt.

What this means for retired debtors is that they will likely experience wage garnishment from their Social Security income. For an already struggling group, this can spell financial disaster.

Although retired student loan debtors truthfully do only represent a very small portion of all student loan debtors, the seriousness of their particular situation is quite dire.

In fact, wage garnishment being taken out of Social Security payments will likely push these older Americans into poverty. Working hard your entire life, only to spend your golden years without two pennies to rub together just doesn’t sit right with this New Jersey law office.

Can you relate to Carrie Mallik*? Age 62, Carrie is experiencing some declining health and a home loan that she can’t afford. On top of that, she owes over $100,000 on a $15,000 student loan from her youth, due to the astronomical interest rate when she borrowed the money. Unable to afford both her mortgage payment and her student loan debt, she is quickly finding herself in a hopeless situation. If you can relate to Carrie, it’s important that you know that there is hope for you.

Because of new legislation, people who took out student loans prior to July 2013 will now be able to refinance their student loans at significantly lower interest rates.

Finding a NJ attorney like George Veitengruber, who is experienced in and passionate about credit counseling and debt restructuring, is key to your success in this situation.

Veitengruber Law can help you secure your retirement and allow you to enjoy your golden years as planned. Call now (732) 852-7295.

Image credit: The Arches

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