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Pros & Cons of Student Loan Forgiveness

Many people operate under the premise that it’s better to ask forgiveness than permission. When it comes to student loans this can work both ways. There are a number of advantages to loan forgiveness programs, but all of them come with strings attached. And, some of those strings are capable of rendering themselves impervious to your efforts to cut them.

Here are the pros and cons of student loan forgiveness.

Loan Forgiveness Pros

Almost Free Money

At this point you’re probably aware of the primary benefit of student loan forgiveness programs. Work a certain number of years, in a certain profession — staying current all the while on your loan payments — and the balance will be forgiven.

Tax Exemption — In Some Cases

Even better, under the terms of most loan forgiveness programs, you’ll be spared the tax burden of your forgiven amounts. In other words, the IRS will also turn a blind eye to the fact that forgiven loans are typically looked upon as income.

 A Degree of Flexibility in Employment

There are also a wide variety of professions you can enter to work off part of your loan. Working at an academic institution is often considered the same as being a teacher. In other words, simply being employed by an organization engaging in something considered beneficial to the public good is often enough — whether you are a direct provider of that service or not.

Loan Forgiveness Cons

Long Term Commitment

You’re going to have to make a very significant commitment to the organization or profession you enter. In most cases, you’ll be looking at up to 10 years of service and on-time payments each month. This means, you’ll make 120 payments on your loan before the balance is set aside. A whole lot of things can happen in 10 years. Before you decide to commit yourself to that prospect, it’s a good idea to do the math to see if in fact it might be less expensive to just pay off your loan.

Limited Career Prospects

You’ll also be backing yourself into a corner career-wise. If you’re lucky enough to figure out what you want to do for the rest of your life before you go to college — and make sure your major course of study will support it — you’ll be in great shape. However, if you get out of school, start working and discover you hate the field, you’ll be looking at up to 10 years in purgatory if you want the program to pay off your loan.

Denial Is a Possibility

You could go through the entire program only to have your forgiveness denied. A lot of people have thought they were properly enrolled, only to be refused forgiveness on a technicality when their terms of service were complete. This can be particularly disheartening when you realize you’ve given up a decade of your life, only to be turned down when it was time for the forgiveness to kick in.

Similarly to how debt settlement enrollees have stated in Freedom Debt Relief reviews, missed payments can get you disqualified from a financial program. Be ready to commit to any financial resolution program for the long haul if you want it to work — whether it’s relief from credit card debt or student loan forgiveness.

The Bottom Line?

With all of these considerations, pondering the pros and cons of student loan forgiveness is an important thing to do before you commit to entering one. Yes, the prospects of working in a field you love and having it count toward the eradication of your student debt is a wondrous thing. However, the downsides are quite steep and can be rather devastating. The smartest thing you can do is take some time to consider all of the implications before you make such a momentous decision.

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