Education Student Loan

By: EconomyWatch Content   Date: 23 November 2009

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An education student loan helps students to find financing their increasing expenses associated with higher education, particularly that of private colleges and universities. However, a student loan must be undertaken only after other financial assistance options, such as grants and scholarships, have been exhausted or adjudged infeasible.

When it becomes inevitable to apply for a loan, a student must primarily strive to acquire a federal education student loan. Such loans have a substantially lower interest rate than that of conventional banks and lending institutions. It also offers benefits like loan forgiveness option.

Education Student Loan Forgiveness

Generally, when a student gets employed in a profession that contributes to the development of the community, the federal government cancels all or a portion of an educational student loan. This practice is known as loan forgiveness. A student loan holder qualifies for student loan forgiveness when s/he:

·        Performs volunteer work;

·        Participates in military service;

·        Educates is disadvantaged areas; or

·        Practices or teaches medicine in certain specified communities.

Education Student Loan Forgiveness: Exceptional Circumstances

A student loan holder may also qualify for loan forgiveness when s/he is faced with:

Disability: If an individual becomes completely disabled since attending college, s/he qualifies for loan forgiveness by the federal government. However, to be eligible for it, the individual must not have any chances of recovery or become gainfully employed.

Fraud: If the college or institution attended by the student fails to provide adequate training or falls short of meeting commitments to students, such as job placement services, a student becomes eligible for complete student loan forgiveness.

 

Taxability of Education Student Loan Forgiveness

The taxability of student loan forgiveness programs vary from time to time and region to region. Generally, if a student works for a specific number of years in the special professions (stated above), the student loan forgiveness gets excluded from tax, provided the individual’s income depends completely on that profession.

Furthermore, the following are taxable:

  • loan discharges in case of false certification

  • closed school or educational institute

  • unpaid refunds

  • disability

  • death

Finally, one must keep in mind that although acquiring private education student loan is comparatively easier, they come with higher interest rates. Also, such loans do not have the provision for loan forgiveness.


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