Reasons to Pardon Very Old Student Loans

by Hall Harris , Demand Media

American Student Assistance reports that 60 percent of university and college students borrow money to cover education costs. Since student debt can hurt your ability to get other credit lines, which in turn can slow the economy, there are provisions for pardoning or reducing the burden of old student loans. They include income-based repayment and support for public service workers and the disabled.

Public Service

The federal government pardons some public service workers’ student loans as a way of encouraging participation in the sector. The Public Service Loan Forgiveness Program, for example, is open to all public workers including police and fire department personnel, public defenders and non-profit sector employees. It allows those with high balances relative to their income to have the rest of the loan cancelled after 10 years of service. The Teacher Forgiveness Program pardons teachers’ student loans after five consecutive years of working full time in low-income elementary or secondary schools. The military also has student loan forgiveness programs depending on rank.

Purchasing Power

According to Congressman Hansen Clarke (D-Mich.), excessive student loan is impeding economic growth. Many individuals with excessive repayment burdens are unable to start businesses, invest or buy homes. The Student Loan Forgiveness Act was introduced to remedy the problem. Under the Act, student loans are forgiven after 10 years of continuous repayment at a rate of 10 percent of an individual’s discretionary income.

Payment Cap

Individuals who have been paying without default qualify for student loan forgiveness after 20 years through participation in the federal government's Income-Based Repayment Plan. The program allows individuals to save because it caps student loan repayments at 10 percent of annual discretionary income, which is the amount left over after taxes and basic expenses. The debt is waived after 20 years whether or not the entire loan balance has been cleared. However, this option is not open to defaulters.

Disability Provisions

Total and permanent disability also justify forgiveness of old student loans. Individuals who submit certification from a physician that they are totally and permanently disabled and are unable to engage in any substantial gainful activity, veterans and recipients of Social Security Disability Insurance qualify for the pardon. Submitting supporting documentation to the U.S. Department of Education allows them to be relieved from repaying their student loans. Death of the borrower student or the parent who borrowed on his behalf -- and in some instances, bankruptcy -- also serve to waive the student loan.

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About the Author

Hall Harris’ professional business writing career dates back to 2001. He is an MBA and Bachelor of Commerce graduate from Kingston University and the University of Liverpool, respectively. Hall’s articles have featured in the “Nottingham Evening Post” and “The International Business Times”.

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