The first wave of students eligible for debt forgiveness in professions such as teaching and nursing under the 2007 Public Service Loan forgiveness plan may be in for an uphill battle to have their loans paid off. Out of the more than 73,000 borrowers that have applied for Public Service Loan forgiveness as of March 31, only 864 have had their loans erased.
The forgiveness program was supposed to help those working for a government entity or nonprofits seek relief in what are typically lower paying jobs. The conditions required borrowers to take certain type of loans, enroll on specific repayment plans, and make on time payments for 10 years in exchange for loan forgiveness.
However, poorly written legislation, mismanagement by servicers of the loans, and neglect by Administrations over the years, have left the program in disarray despite many borrowers following all the steps to have their loans forgiven.
Now as borrowers are attempting to cash in on the promise of debt relief, rejections are coming back for borrowers saying they have the ‘wrong type of loan’, do not make enough payments which may or may not be true, and for others saying they are missing information on their carefully filled out applications – a typical government-run fiasco leaving many public service employees in a lurch.
Many are hitting a brick wall through no fault of their own:
- some were lead by service companies handling loans to enter into ineligible repayment plans despite knowing they were interested in public service loan forgiveness
- some made payments that were too small by mere cents, disqualifying them from the minimum payment requirement
- a number of borrowers had their loans transferred to other lenders involuntarily resulting in a hiccup in applying their payments
- some were told their employers qualified for loan forgiveness only to find out later they were not
- others were offered federally guaranteed private loans by their schools under the program only to find out that their loans had to be made directly from the federal government
Public employees continue to jump through the labyrinth of hoops to have their student loans forgiven. Even those struggling with a difficult financial situation are encouraged to keep up with student loans as they are seldom forgivable under bankruptcy. That said, it is typically not the only payment that many struggle with but an overall debt issue that can include excessive credit card debt, medical bills or other loans that may be dischargeable under Chapter 7 bankruptcy protection providing needed funds to pay student loans, house and car payments.
If you are in a difficult financial situation, it is worthwhile to discuss your circumstances with an experienced Illinois bankruptcy attorney who can help you decide if bankruptcy protection is a good strategy for you and your family. Contact Peoria bankruptcy attorney Charles E. Covey at 309-674-8125 for information that can give you a better sense of where you stand financially when it comes to debt relief and getting a fresh start.