Student loan forgiveness programmes have been an eminent feature of undergraduate and graduate studies in the US economy since 1950s, with its horizons been further broadened with the passing of time and growing importance of education. Student loan programme that was initially started in response to Soviet Union’s launch of Sputnik Satellite has now come to dominate the education scenario in the US.
Student loans are different from scholarships and grants and are supposed to be paid off. With time, policy makes have realized that it would benefit the economy as a whole to facilitate the borrowers in full or partial repayment of their student loans. This sometimes takes the form of loan forgiveness for choosing a desired career path or discharge of loan in case of bankruptcy, medical complication or forgery et cetera.
Student Loan Forgiveness Program
Repaying a student loan is generally not as easy a task as is taking one. It becomes even harder to pay off a student loan when an individual chooses to join public sector services or some other low paying job like teaching or nursing to follow one’s passion and field of interest. It is to help such borrowers that there exists a concept of Student loan forgiveness programs. A student loan forgiveness programme is designed to help students pay full or a part of their student loan.
This sounds great but off course requires something in return. Student loan forgiveness programmes typically require the student to pursue a particular occupation or volunteering service in exchange of paying off the loan completely or in part. In the US, student loan forgiveness programs are also aimed at directing individuals towards sectors of national importance where there is lack of qualified personnel. The US Department of Education offers forgiveness on federal student loans and once forgiven, the student is not liable to pay his remaining loan balance.
There are two types of student loan forgiveness programmes; upfront forgiveness that eliminates a part of student debt with each passing year of service and back-end forgiveness that cancels whole of the student loan after a certain number of years of service. Back-end forgiveness programs come with all-or-nothing condition and therefore, might be risky for individuals who are not sure whether they would be able to complete their committed tenure of service or not. Student loan forgiveness programs are also available on private student debt but the provision of the same highly depends on the private lender.
Nursing Student Loan Forgiveness
The Nursing Education Loan repayment program is managed by the U.S. Department of Health and Human Services. The program aims to provide assistance in recruiting and retaining professional nurses by providing substantial help to these nurses in paying off their student loans. Registered nurses in the Nursing Education Loan repayment program can have up to 60 percent of their loan repaid in the first two years of this program and an additional twenty five percent loan repaid in the third year of the program. However, there are certain eligibility requirements for the programme.
Eligibility Requirements for Nursing Student Loan Forgiveness
Here are the key points:
- The borrower needs to be a US citizen, dual citizen or a national.
- The borrower needs to be a registered licensed nurse who has completed his/ her training and is full time employed at an eligible facility in an area facing shortage of nurses.
- NURSE Corps member are required to provide services at one of the eligible clinic, non- profit hospitals or any other facility across U.S. that is designated under the Health Professional Shortage Areas.
- The US Department of Education includes nursing services in its Public Service Loan Forgiveness Program under which, only loans availed under the William D. Ford Federal Direct Loan are eligible. In case of Federal Family Education Loan (FFFL) and the Perkins Loan Program, the loan needs to be consolidated into a Direct Consolidation loan in order to be eligible for the Public service loan forgiveness programme. Employment with a federal, state or local government agency, entity or organisation or a not-for-profit organisation that has been designated as tax exempt by the internal revenue service (IRS) under section 501(c)(3) of the Internal Revenue Code (IRC) qualify for the Public service loan forgiveness programme.
- The application to apply for this program is accepted once every year and the borrowers are advised to read the application document carefully before applying for this forgiveness program. This program requires the obligation to abide by the negotiated contract, failing which the borrower can expect some adverse financial issues.
Benefits of Nursing Student Loan Forgiveness
Nursing Student Loan Forgiveness is highly beneficial to people with high student debt and relatively smaller incomes due to their decision of joining the public sector. The Consumer Financial Bureau also helps the employers in this sector to aware prospective workers that they will be benefited by this program.
The Nursing Student Loan Forgiveness program can forgive a total of eighty five percent of student debt and can act as a big relief for people joining nursing services. Such programs also help borrowers to save some part of their income during repayment due to capping on the monthly payments.
This Nursing Student Loan Forgiveness program aims at directing the flow of professional nurses to serve the underserved people of the society in areas with shortage of such services and therefore helps a huge population of people with good medical facilities. It also helps in strengthening the economy as a whole by getting qualified professional nurses to serve the public sector and make the health sector competitive and efficient.
Limitations of Nursing Student Loan Forgiveness
One serious limitation of federal nursing student loan forgiveness program is that this is available only to people with a federal direct loan and not private student loan, even though borrowers with private student loan might be equally in need of such programs. Private lenders might also offer for such forgiveness programs but that depends a great deal on their terms and conditions. However, consolidation of older private loans which were guaranteed by the federal government into a direct loan would help the borrower become eligible for the program.
Due to severe restrictions imposed on the eligibility requirements for this forgiveness program, many people are left out from its ambit. One caution that experts always warn borrowers about is that even in the presence of such forgiveness programs, one should think of minimizing his/ her loan requirements because such programs require a long term commitment and not everyone is clear enough of what’s life going to be like for the next ten years. People who are caught in an illusion of the benefits of these loan forgiveness programs might end up taking excessive loans and worsening their financial situation.
With the kind of benefits that nursing student loan forgiveness programs offer, they surely seem to benefit a large proportion of population serving the health sector.
However, due to strict conditions imposed on the qualification criterion of the forgiveness program, there are still people who might be in need of such forgiveness but are unable to avail this benefit. In the mid of all the praise that these forgiveness programs attract, there is also some amount of criticism due to huge subsidy expenditure that the federal government incurs by carrying out such programs.
This forgiveness programs comes with a contract and thus, it is important for a prudent borrower to carefully analyse the terms and conditions of the contract before entering into one. Apparently, such programs require a long term commitment on part of the borrower and therefore, one should be sure of his dedication towards the service before applying for the forgiveness program.