Student loans are the largest source of debt in America. According to NBC News, student debt is even more prevalent in America than credit card debt or car loans. Student loan forgiveness is a major topic, especially since 1 in 5 Americans have student loan debt.
“Education is not the filling of a pail, but the lighting of a fire.” This is a quote William Butler Yeats supposedly said once upon a time. But what happens when the pail is borrowed, and when the kindle was gathered for your fire, it also burned holes in your pockets? By the time you make it past graduation and into the real world, you find yourself glaring directly into the eyes of the debt monster – and you’re reminded of exactly how much money you owe.
Student loan debt can’t really be considered “good” debt, because no debt is good debt. It’s never “good” to expend more than you can afford to, by borrowing from your future self. Students are turning to the bank for loans to cover all sorts of education-related expenses. This includes tuition fees, room-and-board, cost of books and school supplies, and transportation. Students also often need loans to compensate for not being able to work or earn money while in school.
If you graduate with student debt, you can’t ignore it. It is crucial for your personal health – as well as the health of the economy – to responsibly manage your finances. Doing so helps you remain prepared for any contingencies, plan for your retirement, and have the lifestyle you wish to have. So, one of the most important questions you need to ask yourself is this: In order to responsibly manage your finances, do you need to consider student loan forgiveness?
What is Student Loan Forgiveness?
Student loan forgiveness is a type of assistance program that potentially absolves you of your student debt, or helps you pay it off. Student loan forgiveness comes in several forms. Your options depend on where you live, what your occupation is, and how much income you earn. The criteria you must meet in order to be approved for student loan forgiveness is extremely particular. This makes it very difficult for the majority of people to be absolved of their student debt.
Multiple options are available in America for student loan forgiveness which eliminates student debt only for qualified candidates. These include Teacher Loan Forgiveness, Perkins Loan Cancellation, Total And Permanent Disability Charge, Bankruptcy Discharge, False Certification Discharge, and Public Service Loan Forgiveness.
One of the most popular types of student loan forgiveness programs in the U.S. is the Public Service Loan Forgiveness. This is a federal program that considers student loan forgiveness for borrowers who are employed full-time in an eligible federal, state or local public service job, or an eligible non-profit job.
The U.S. Department of Education released the latest statistics for Public Service Loan Forgiveness. On average, 99.5% of applicants are rejected from this Student Loan Forgiveness Program. The most recent Public Service Loan Forgiveness Statistics explained that as of September 30, 2018, there were nearly 900,000 borrowers. Only 49,669 applications were received. This is in part because of how complicated the application process is. Of those 49,669 applications, only 423 were approved, and only 206 people actually received student loan forgiveness. 32,409 people were denied student loan forgiveness by this particular program.
In Canada, student loan forgiveness programs depend on the province you live in and what your current circumstances are. In British Columbia, for example, recent graduates in select occupations can sometimes have their student loans forgiven by agreeing to work at publicly funded facilities in underserved communities.
It’s more common for Canadian students to get repayment extensions or assistance, rather than getting their student debt cancelled or completely forgiven. A 5-10 year extension on student loan repayment will lower your monthly payment and make your life a little easier. Lengthening the term of your loan, however, will result in you paying more interest on your total debt.
Other forgiveness programs in Canada include forgiveness for those earning a very low income. For example, in some Canadian programs, an individual earning less than $25,000 is not required to repay their student debt until their income exceeds this amount. Essentially, this is a repayment deferral based on income.
To be eligible under the Canada Repayment Assistance Program, you must reside in Canada, be out of school for at least six months, and you cannot already be in default on your student loans.
In Canada, to be eligible for complete student loan forgiveness (a complete cancellation of your student debt) you typically have to wait for a period of 5 – 7 years before applying. You can apply to have your student debt completely discharged in a bankruptcy or proposal as early as five years after your end of study date. You must show that repaying your student loans will cause “undue financial hardship”. This requires lawyers and court dates, and this type of student loan forgiveness is not easy to obtain.
How Difficult is it to Apply for Student Loan Forgiveness?
In general, it’s not designed to be easy to apply for student loan forgiveness. The United States Department of Education, recently published their Federal Student Aid – Fiscal Year 2018 Annual Report. The report discusses the state of the current federal financial aid process, wherein students must navigate a complex and fragmented landscape if they want to be considered for student loan forgiveness.
The confusion regarding the complicated application process often leads to being automatically disapproved due to an incorrectly submitted application. Or, automatically being denied due to submitting an application with missing information.
The U.S. Department of Education released the latest statistics for the Public Service Loan Forgiveness applications. Last year, over 25% of applicants were denied due to mistakenly leaving out certain pieces of information on their application. That means that over 11,000 applicants were denied due to missing information.
Speaking of confusion, student loan borrowers often fail to understand the financial implications of their student debt, their repayment options, and more pertinent info they should be clear on. Not everyone takes the time to understand the different types of loans, repayment options, consequences of debt, etc. Not everyone thinks to speak to a financial advisor before taking on student debt. Students get themselves into a bad position, and end up wishing there was a way to eliminate their student debt. Unfortunately, it’s rare to be approved for student loan forgiveness.
Is The #CancelMyDebt Movement a Better Plan for Student Loan Forgiveness?
What’s the point of student loan forgiveness programs if deserving, hardworking candidates are constantly being denied? A U.S. Senator recently came up with a better plan, along with a trending #CancelMyDebt hashtag on Twitter. In April of 2019, Elizabeth Warren, U.S. Senator and presidential contender, revealed her plan that would one-up student loan forgiveness programs. She wrote in Medium that she plans to cancel up to $50,000 of student loan debt for over 42 million Americans. According to Warren’s plan, student loan debt would be cancelled for more than 95% of the 45 million Americans with such debt. Her plan also involves wiping out student loan debt entirely, for more than 75% of those with student debt.
Warren explains that this would boost the economy with increased home purchases and more small business start-ups. And, it could significantly increase wealth for Black and Latinx families who face a wealth disparity compared to White families.
In July of 2019, Sen. Elizabeth Warren introduced a bill that would cancel $640 billion of student loan debt. Under Warren’s plan, the government would pay a one-time US$640 billion to cancel student debt for roughly 42 million Americans. Specifically, Americans whose household incomes are less than $100,000.
Any U.S. families with wealth above $50 million would get an annual 2 percent tax. Families with wealth over $1 billion would get an annual 1 percent tax. This could pay for Warren’s plan to wipe out student debt. Warren is the only presidential candidate to present a detailed plan on student loan forgiveness, and seek to entirely solve the student debt crisis.
Warren’s proposal also includes making undergraduate tuition free for two-year and four-year public institutions. This way, just as high school is free, college is free. Wouldn’t that be something?The criteria you must meet in order to be approved for student loan forgiveness is extremely particular. This makes it very difficult for the majority of people to be absolved of their student debt. Click To Tweet
The Issue of Student Loan Debt in North America
Student loan debt is a major issue in both Canada and the United States. According to the Average Student Loan Debt in the U.S. 2019 Statistics from Nitro College, Americans now collectively over $1.53 trillion in student loan debt. The average American’s student loan debt is $37,172, and the average student loan payment is $393/month.
In Canada, as of last year, Canadian students owed a total of over $28 billion in student debt to all levels of government. $19 billion of this debt was owed to the federal government.
As the cost of education and the cost of living both rise, more and more students will be unable to pay back their student debt. The Canadian government predicts this and accounts for this. Each year, they write off student debt they don’t expect to collect. The Canadian government has written off $710 million worth of student debt in the past three years.
Many Canadians think that Canada should devise a plan to find the money to completely eliminate student debt, similar to Sen. Elizabeth Warren’s plan. After all, the CRA estimates that there is at least $14.6 billion per year withheld by wealthy Canadians. Should the government be recovering that money to help eliminate student debt?
77% of Canadian graduates under 40 have regrets about the money they spent while in school, according to a poll released Tuesday by debt firm BDO Canada. 62% of the students surveyed who completed their education with debt, are still paying off their loans.
Forgiving Canadian student loans hasn’t been a top priority. Linyuan Guo-Brennan, an associate professor in the faculty of education at the University of Prince Edward Island, told Global News that a plan to cancel student debt like Sen. Elizabeth Warren’s would probably not be practical in a Canadian context. Guo-Brennan points out that if Canadian student loans were forgiven in Warren’s style, where would that money come from?
Dan Lang, a professor emeritus at the University of Toronto, points out that Canada has a number of education tax credits. If Canada forgave all of the student loans, would those tax credits still exist? And if not, would it be a worthwhile trade-off for Canadians? Perhaps not.
How About Preventing The Problem of Student Debt in the First Place?
Many students choose to take out a student loan because a full course-load is equivalent to a full-time job. They think that means they can’t work or make money while they’re in college. Does this sound familiar? You know that if you have any free time after class, you should be spending that time studying, not working. But what you had a high-income skill with which you could earn money as a freelancer, whenever you’re able to take a short break from studying?
Students working just a few hours per week as a freelancer with a high-income skill could make lots of money. More money than they think. With a high-income skill such as copywriting, students can earn almost as much money as they would earn at a regular full-time job. This would require less need for student loans.
Students Don’t Just Receive Loans From Banks, They Also Receive Stress and Insomnia
Stress and insomnia often come with your student loan. It’s not exactly peaceful knowing how much money you owe. Having debt certainly affects one’s mental health, and can make it difficult to sleep at night. Did you know that the average student loan outstanding for a student in America is in the range of $20,000 on the lower end and $38,000 on the higher end?
A 2017 survey by Student Loan Hero of over 1000 student loan borrowers, found that nearly 65% of them had sleep issues because of their loan. Yes, 65% of participants reported that they suffered from sleepless nights due to debt. This makes sense, doesn’t it? Wouldn’t it be easier to sleep at night, if you didn’t owe anything to anyone?
On the one hand, some students consider having a “good” debt in the form of a student loan, necessary to pave their way towards a better future. On the other hand, however, having large amounts of debt to finance that pathway to a better future affects the quality of the ‘better’ future they envisioned.
How Long Will it Take to Pay Off a Student Loan?
How long it takes to pay off a student loan greatly depends on your income, and your budgeting skills. For people who earn average incomes and only budget for 8 – 10% of their monthly income to be contributed to student loan repayment, it can take over 15 years to repay student debt.
Take the time to look at different models of repayment aside from the standard repayment plan. For example, you may consider an Extended Repayment Plan, Pay As You Earn Repayment Plan (PAYE), Income-Based Repayment Plan (IBR), Income-Contingent Repayment Plan (ICR), or Income-Sensitive Repayment Plan. And of course, there’s also the possibility of loan deferment or student loan forgiveness, where your student debt is absolved.Any earnings you make on the side, as a freelancer, can go into a separate bank account that is only used for student loan repayment. Click To Tweet
The average student will be denied for student loan forgiveness. That means it’s on you to pay off your student debt. If you find a way to earn more money, and you can therefore contribute more money every month to your student loan repayment, it can take much less time than 15 years.
When you pay more every month, you will clear that student debt quickly. So, if you want your debt gone yesterday, a side-hustle such as freelancing can be a great source of supplementary income that you could put to use to only pay off the debt. If you have your regular income from a full-time job, and side hustle income, you’re in a great position to pay off student debt faster. Separating your regular earnings from side hustle earnings specifically earned for loan repayment, can make you feel much better about your financial management routine. Any earnings you make on the side, as a freelancer, can go into a separate bank account that is only used for student loan repayment.
With advancing technologies in freelancer platforms such as Upwork or TopTal, it’s become easier than ever to obtain freelance work. The catch? You need the right skills to earn top-dollar as a freelancer with a side-hustle motivation. You’ll need to develop an in-demand skill such as copywriting before you can make real money as a freelancer. Be aware of what the top jobs of the future are, and learn modern skills that align with those modern jobs. Enroll in my 7-week High-Income Copywriter Certification Program to earn more money faster, and pay off that student debt faster.
Desperate to Earn Money Fast, and Get Rid of Your Student Debt Fast?
Many students who are in debt, and have very little free time available to work and earn money, often ask Google questions such as How can I make good money only working a few hours per week? They want to know how they can make the most money working the fewest hours, because between their course-load and the hours spent studying, they don’t have much time.
If you learn a high-income skill such as copywriting or high-ticket closing, you can earn a real living on the side, even while you’re a student. This will help you get a jump start on paying off your student debt. Why not start paying it off while you’re still a student? Simply learn a high-income skill, and freelance on the side for high-paying clients who seek that skill. Use what you earn to start a savings account meant for student loan repayment.There’s no reason why a busy student can’t dedicate at least a few hours per week to a freelance job, and make some money while they’re a student. Chances are, the reason they don’t freelance, is because they don’t have a high demand… Click To Tweet
Should You Spend Money on Upgrading Your Skills if you have Student Debt?
If you’re in debt, should you really be spending money to learn a high-income skill? The answer is yes. I don’t know you, and I don’t know why you have student loans. I don’t know what you went to school for. What I do know, is that it’ll likely take time to find a suitable, full-time job that aligns with your chosen career path. I also know that you might have to start out as an unpaid intern, depending on what you went to school for. That’s why you might need to spend a little money on a specialized skills training program designed with freelancers in mind. My skills programs are typically only 7 weeks long, and they focus on teaching high-income skills that can get you freelance jobs right away.
As a new graduate, you may need to do some freelancing while you figure out your next steps. If you are going to try freelancing, you might as well learn a high-income skill so that you can be a high-paid freelancer.
Get Budgeting Help From Mobile Apps
If you’re struggling with staying organized in repaying your student debt? Do you need help budgeting for the added expense of your monthly loan repayment? If so, why not get help from a mobile app?
Virtual assistant apps such as Meet Cleo make managing your finances easier and more fun. Cleo introduces you to personalized updates, graphs and data-driven insights that help you answer questions such as Can I afford to go out for dinner this weekend? all through a simple chat feature. Cleo already has over 2 million users globally. The app even uses humour to provide you with instant feedback about your spending habits. For example, if you often overspend on Ubers rather than taking a short walk, you’ll get called out. Cleo will say something along the lines of, “You spent $90 on Ubers this month which will delay your loan repayment by seven days.”
Many banks these days offer apps and virtual assistance to help you navigate your spending, and pay off your debt. For example, NOMI by the Royal Bank of Canada (RBC) gives you a visual summary of your banking activity. By looking at figures such as ‘average in’ and ‘average out’ amounts, you can see where you’re at. You can tell if you’re a net gainer or a net loser at the end of every month. Then you can check where you need to make some adjustments in your spending.
If You Have Student Debt, What Should You Do After Graduation?
Graduates leaving college or university and entering the real world often feel extremely stressed about their student debt. It doesn’t help when you’re freshly graduated and you have to work as an unpaid intern, or at a minimum-wage job. Graduates aren’t always able to find a stable, full-time, well-paid job with enough income to support both their student loan repayment program, and their living expenses.
After graduation, get a mentor to learn the skills you’ll need to succeed. A mentor can teach you things like interview tips, how to stand out in a group interview, and how to deliver a sales pitch. Another thing you can do after graduation, is keep learning. Learn a modern skill that will allow you to have a side hustle. Learning certain skills allows you to have a freelancing option, in case your post-graduate career plans don’t go as planned. This way, you’ll never be without work, because you’ll always have your freelancer skill to fall back on. In other words, if your career plans don’t pan out, you will have the gig economy to fall back on.
If You Have Multiple Debts, Which Debt Should Be Cleared First?
Perhaps you have multiple debts in addition to your student debt, and you aren’t sure which to prioritize. Whether it be your credit card debt, mortgage payments, or a car loan.
One method is to prioritize repaying the bad debts accruing the highest interest first, and follow in descending order. If you have an outstanding student loan with low interest, and a credit card bill nearing its limit, what then? It is wiser to clear the credit card bill first, because the interest is much higher.
However, if you have a smaller debt which you know can be cleared in only a few months time, you could prioritize this debt so that you end up with a morale-boost of one full debt off your plate. Another factor to consider is the tax breaks that may be applicable on mortgages or student loan repayments. Those tax breaks are another perk of keeping those loans unpaid and focusing on clearing credit card debt.
What Happens Once You’ve Paid Off Your Debt?
So, what happens once you’ve finally paid off your debt? The goal is financial freedom. Having financial freedom will give you more choices and more opportunities. You’ll have a renewed focus on creating wealth, chasing new opportunities, and setting new goals for yourself that don’t involve paying off a debt.
Student loans are the largest source of debt in America, and 1 in 5 Americans have student loan debt. No debt is good debt, so it’s a myth that student debt is a “good” debt. All debt will negatively impact your mental health and your financial management.
Americans collectively over $1.5 trillion in student loan debt. The average American’s student loan debt is $37,172, and the average student loan payment is $393/month.
For most people earning an average income, it takes an average of 10 – 20 years to pay off a student loan.
Student loan forgiveness is a type of assistance program that potentially cancels your student debt, or helps you pay it off. Student loan forgiveness comes in several forms. The criteria you must meet in order to be approved for student loan forgiveness is extremely particular. This makes it very difficult for the majority of people to be absolved of their student debt. For most people, it’s very difficult to get approved for student loan forgiveness.
Because it’s so difficult to get student loan forgiveness, you must take matters into your own hands. Since you probably can’t get student loan forgiveness, you should learn a high-income skill. Use that skill to start freelancing on the side, to make more money. This way, you’ll pay off your debt faster, and you’ll get to start living the life you want to live sooner.
Develop The High Income Skill Of Copywriting
The more money you make, the faster you’ll pay off your student debt. Since you probably aren’t a candidate for student loan forgiveness, it’s on you. It’s on you to learn the skills that make you the most money. It’s on you to figure out how to pay off your debt faster. Enroll in my 7-week High-Income Copywriter Certification Program to earn more money faster, and become debt-free.