Why The Governments Student Loan Forgiveness Program Is A Joke

If you have student loans then you may have heard about these government loan forgiveness programs that promise to wipe out your student loans after a set amount of years.  Sounds great right?! There is the standard loan forgiveness program and then there are more specific programs like the teacher loan forgiveness or public service forgiveness program.  Each has it’s own requirements like number of minimum payments and terms and yada yada.  

A lot of people are now faced with staggering amounts of student loan debt and these programs are to help alleviate the student loan crisis that a lot of people spend their entire lives trying to pay off.  Financial guru Dave Ramsey refers to student loan debt as a pet because it sticks around for so long.  

About half of all students take out some form of student loans in their lifetime. According to Investopedia.com the average student loan balance per borrower in America is $35,359. And in 2019 the total outstanding amount of student loan debt reached 1.4 trillion dollars!!! That’s a lot of money!!

Along comes the government with promises to these great programs to wipe out some or all of that debt if you meet certain requirements though.  A lot of people hear about these programs and think that their loans can just be forgiven if they make the minimum payment. I know I was tickled to death when I heard that my husbands loans could fall into this category of being forgiven!

But before you go relying on the government to wipe your slate clean you need do your due diligence and research because there’s a lot of information you may not know going into it which can disqualify you.

My husband and I got crazy intense a few years ago and paid off all our debt , over $76,000 to be exact (with the exception of our mortgage which we are currently working on).  This amount included setting aside about $28,000 in student loan debt that my husband had racked up in his college years.  Instead of paying off the student loans once we had saved up that money we put it in a savings account because we were banking on the fact that the government would pay them off and just set that money aside for a “just in case” situation.  

We had been told about the public service loan forgiveness program and since my husband was a teacher we were told he would qualify to have those loans forgiven after 120 consecutive payments. We had already been paying the minimum required payment for many years so we figured we were just a few years shy of having them forgiven.  What an awesome deal if that was the case! But it wasn’t… here’s what happened…

Last year we wanted to make sure these loans would be forgiven because we had ended up using some of that money we set aside for them “just in case” to buy my husband a truck because his old one went kaput.  So before we were going to go any further with aggressively paying off our mortgage we decided to look into this program a little more just to make sure everything was copasetic.  After a few calls and researching more into the program we realized that we had to transfer his student loans from his loan provider to Fed Loan Servicing which is who handles all of the government repayment programs.  We also learned at that time that the monthly payments we had been making for years didn’t even qualify as one of the type of repayment options they had.  

So this meant applying for Fed Loan to take over his loans which was a lengthy process but we finally got it pushed through.  Once Fed Loan approved them and had ownership of the loans then we had to apply with them for the loan forgiveness program. This proved to be a dead end for us because by the time they worked up their calculations and altered our current monthly payment to fit their criteria we would end up having paid the loans in full before the forgiveness even kicked in.  So we essentially were approved (yay!), but because of their guidelines they would not step in and forgive the rest until 120 payments additional payments had been made which we would have already paid them off by then (boo!).

So we thought what would be the point of going any further with the forgiveness program.  Now if we had like $100,000 or more in student loans then this might knock some of it off but we were sitting at $28,000. Sure we could get approved by this point but it would serve us no good.  So we did what any person who hates debt would do.  We went absolutely crazy balls to the wall and paid them off as fast as we could!  We had done it once before, we could do it again. We stopped contributing to most of our retirement accounts, 529 college accounts, all of our other investments, and cut back spending.  We aggressively paid off those student loans to get them out of our lives for good within months.  It wasn’t what we had planned but we adjusted and did it.  All of that money was slotted to go towards our extra mortgage payments but we just wanted to get rid of that looming debt that was “supposed” to be forgiven. 

The reason I share this is because there are lots of people out there just like us who hear about these programs and depend on them to pay off their loans but with all the hoops and requirements you have to meet, very few people actually are able to take advantage of these programs so it’s good to be informed and have a plan in place in the event they do not. Less than 1% of all people who apply for public service loan forgiveness actually get it. Where I come from a 1% chance is not a good bet. That means 99% of people get denied!!! We happened to be one of the 1 percenters who got approved but it didn’t even make sense to go forward since we were going to pay them off regardless before the government stepped in.

Another reason you do not want to rely on these sort of programs is that the government can just decide to get rid of or change these programs one day, then poof, gone. My advice is number 1: don’t get into student debt unless you ABSOLUTELY have to, and 2nd: pay it off as quickly and aggressively as you can! Get it out of your life because damn it just feels good to not have any student loans!

So what do you think? Share your thoughts here!

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