In some instances, the federal government may decide to 'forgive' some or all of your debts, based on your current conditions or what type of selfless service you have extended to your community or country.
When a person has volunteered for a few months in the Peace Corps or had served for a few years in a military campaign abroad, that person may apply for loan forgiveness. There are three main types of loan forgiveness, each extending specific sets of privileges.
General Definition
this is an encompassing term that covers different approaches to the alteration of the conditions of debt repayment. Loan forgiveness is composed of different programs offered by the federal government or private lending institutions to deserving borrowers.
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Not everyone is qualified for it and not everyone is given it
Loan Deferment
Loan deferment is a type of loan forgiveness where the regular monthly payments are suspended for a time period. If you're unable to make regular payments because of a tragedy in a family or illness, or sudden unemployment, the repayment of your loans can be deferred.
However, the grace period is not unlimited. After entering into an agreement with your lender, you would agree to repay the debt when the grace period finally expires. Federal loans do not have accumulating interest rates. Make sure you read the terms of the deferment to guard yourself from surprises.
Loan Forbearance
Forbearance is similar to deferment except that interest rates will still build up after a period of time. Forbearance should be considered the last line of retreat when repaying debt. Forbearance is given to those who do not qualify for deferment.
For example, a person who is still employed or is not engaged in further studies may opt not to regularly pay for his or her debts for a period. However, there is a trade-off: the accruing of interest.
As A Reward System
In a way, loan forgiveness is part of the federal reward system for individuals who selflessly engage in social, public service. To be a health care provider in a depressed area in Zaire may help you get loan forgiveness. Not trading a public school teaching career to a higher-paying job in the large cities may also qualify a person.
Not all loans are forgiven completely. A clean slate is rare; however, every bit removed from the debt helps. Some 'forgiven' individuals have their debts reduced every month.
However, take note that you have to show that you're a good borrower first, before forgiveness is given. For example, if you've not paid your debt for over a year now, it's probable that you would be rejected for loan forgiveness.
Qualified Programs
Civil volunteer programs are one of the best ways to reduce your debt. If you don't have anything to do immediately after college, you might want to try the Peace Corps, the AmeriCorps or VISTA. Often, volunteers receive handsome sums of money for the reduction of debts. Some even receive allowances to be used elsewhere.
If you dislike civil volunteer programs, then you may join the military for a time period as well. Those who qualify and are trained in the Army National Guard would receive more than nine thousand dollars.
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