Monday, September 23, 2013

Forgiveness vs. Discharge

Two terms that are used with student loans are the terms 'forgiveness' and 'discharge'. In either case, you can be released from your obligation (in part or in whole) to repay your student loan if your loan is forgiven or discharged. But what's the difference between the two? It depends on what you do or what happens to you.

For discharging your student loan, it has to be a circumstance that was not your choice. Two common ways of discharging a loan is if you are considered 'total and permanent disability' and 'death'. In these two circumstances, it obviously not be your choice to be totally and permanently disabled or to die. Since you are not able to use your education in the strictest way, you may have your loans discharged. Another way to get your loans discharged may occur if your schools closes before you are able to complete your educational program. The key is 'before you complete your program' though. This is a rare scenario, and neither of the previous two are good situations either.

For forgiving your student loan, it has to be a circumstance in which you made a choice to devote your time to something in exchange for part or all of your student loans. Usually, the forgiving party in this case is the government. For high demand, important jobs such as teaching, public service, or government work, the federal government may actually forgive part or all of your student loans depending on the job and length of service. Some organizations and state governments will do this as well.

Although these are options available, most students won't or aren't able to give back to the community in the specified ways that qualify for student loan forgiveness. And although student loan discharge is available for those who can't physically complete the work their education prepared them for, they are only options in the extreme cases. The most common method of handling student loans is repaying them. With several repayment options available (and some even acting almost like forgiveness programs themselves), it's recommended that you go into repayment with a plan. If you have trouble with any aspect of repayment, talk to your loan servicer for more information.

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