If you're anything like the typical recent college graduate, you have student loans. And if you have a large amount of student loan debt, like many graduate students do, then student loan forgiveness might be the best option for you. But what's the first step? How do you know if your loans qualify for forgiveness? And what should you do if they don't qualify?
If you're pursuing student loan forgiveness you essentially have 2 options. Work for a government agency or non-profit and have your loans forgiven after 10 years, or work at a for-profit company and have them forgiven after 20 years. There are a few key details you need to pay attention to, if you plan on having your student loans forgiven, and the most important one is making sure you have the right type of loans.
Having the right type of loans is the most important step, because it's the first step. I've seen far too many people waste thousands of dollars on payments that won't qualify for student loan forgiveness, only to realize years later that they've been throwing money away. In the broadest terms, you might have 2 separate types of student loans government loans, and private loans. Your government loans are almost always dispersed through your school's financial aid office after filling out the FAFSA each year. These loans will be serviced through one of the companies below:
- CornerStone
- FedLoan Servicing (PHEAA)
- Granite State – GSMR
- Great Lakes Educational Loan Services, Inc.
- HESC/Edfinancial
- MOHELA
- Navient
- Nelnet
- OSLA Servicing
- ED Held Perkins Loans / ECSI
- Default Resolution Group (also known as Maximus Federal Services, Inc.)
Private Loans
If your loan isn't serviced by one of these organizations above, then it's a private loan. Private loans aren't eligible for forgiveness and generally should be paid back as soon as possible to minimize the total amount paid due to interest.
Federal Loans
Your federal student loans will be serviced by one or more of the above companies, and will be listed on the studentaid.gov website as well. These are the loans that may be eligible for eventual student loan forgiveness, but only if they're direct federal loans. You can tell if your loan is a direct federal loan through the studentaid.gov website. Simply log in to your studentaid.gov account. Hover over your name in the top right and click on Dashboard.
Click on View Details in the middle of the page.
Scroll down to Loan Types, and click the down arrow to expand each loan type.
Eligible Loans
The Direct loans are eligible for student loan forgiveness, so nothing needs to be done to those. All other loans will need to be consolidated right away. Consolidating your indirect federal loans to direct federal loans is the absolute first thing you should do with your student loans, preferably within 6 months after graduating. You do not want to be making payments on these loans that will not count towards student loan forgiveness. Note: If you have Perkins loans, you'll want to look into those separately. If you have other loans that are not Direct loans, here's how you consolidate them.
Consolidating Your Federal Loans
Consolidating your loans into direct federal loans for student loan forgiveness is quite simple. All you need to do is complete the Direct Consolidation Loan Application. Everyone's case is different, so if you have a small amount of indirect loans, and are already several years into your qualified student loan payments, it might be a better financial move to simply pay your indirect loans off. For example, I have over $300,000 in student loan debt, and only $2,500 in indirect federal loans, so I'll simply pay the $2,500 instead of letting that interest accrue for another 16 years of income-driven repayments.
Once in the Direct Consolidation Loan Application, you can select to only consolidate your loans that aren't already direct, by selecting each specific loan you want to consolidate. If you've already been making qualified payments on your loans, you'll only want to consolidate your loans that aren't already direct. The application is completely straightforward. If you're married, your spouse will need to log in to their studentaid.gov account at the end to cosign the new direct loan.
Consolidating your indirect federal student loans is a simple, easy process, that you absolutely need to look into before starting your journey towards student loan forgiveness. There's no sense in waiting and wasting your payments on loans that will never be forgiven. Consolidate through studentaid.gov if you need to, and get all of your loans forgiven as fast as you can.