6 Reasons Student Loan Forgiveness Might Not Be Worth It

6 Reasons Student Loan Forgiveness Might Not Be Worth It Student loan forgiveness is often considered a smart way out for borrowers struggling with debt. But is it really the great solution people think it is?As with many student loan-related questions, the answer is a little complicated.Lets take a closer look at some of the gotchas of federal student loan forgiveness programs to find out if student forgiveness is the right solution for you.6 potential downsides to student loan forgivenessGetting your student loan balance forgiven is the dream, but unfortunately, the road to forgiveness isnt without its twists and turns. Before pinning your hopes on getting your debt discharged, consider unterstellung six potential downsides to student loan forgiveness programs.1. You might have to wait a long time to receive forgivenessThe federal government offers a few loan forgiveness options, includingTeacher Loan Forgiveness,Public Service Loan Forgiveness (PSLF) and forgiveness fromincome-dri ven repayment plans.But all these plans require years of tafelgeschirr or repayment before canceling your debt. The Teacher Loan Forgiveness program has the shortest service requirement at five years, but it only offers either up to $5,000 or $17,500 toward your debt, depending on the subject you teach.PSLF promises to forgive all your debt, but only after youve worked for an entire decade in a qualifying nonprofit, government agency, or other qualifying organization. Unless this kind of work lines up with your career goals, dedicating 10 years of your life might not be worth the loan forgiveness youd get.The government will also forgive your balance if you still owe money at the end of your term on an income-driven repayment plan, such as income-based repayment or Pay As You Earn. But on these plans, your term will be 20 or 25 years, so you wont see loan forgiveness for a very long time.Instead of pinning your hopes on student loan forgiveness after 20 years (or more), you might be better off paying back your student loans faster. Otherwise, you could have debt hanging over your head most of your life while youre trying to reach other financial milestones.2. Your balance could grow while you waitIf youre counting on loan forgiveness from income-driven repayment, youll have to put your loans on one of the four income-driven plans. And if youre looking at PSLF, youll need to be enrolled in income-driven repayment or extended repayment.Why? Well, if you kept them on the standard 10-year plan, youd have no balance left to forgive after 10 years of paying off your debt.Because they extend your terms to 20 or 25 years, these long-term repayment plans typically lower your monthly payments. This can be helpful if youre struggling to pay your bills every month.But the downside is that you end up in debt for longer, and your loans will accumulate interest that whole time. Over the years, youll end up paying a lot more interest than you would have if youd stayed with a shorter term.For example, lets say you owe $30,000 at a 5.05% interest rate. Over 10 years, youd pay $8,272 in interest. But over 20 years, youd pay $17,716, and over 25 years, youd pay $22,876, nearly as much as you borrowed in the first place.Adding years to your debt also adds interest, which could cost you a lot of money before you see loan forgiveness.3. Your career or financial circumstances could changeIn most cases, federal student loans automatically go on the standard 10-year plan. To get on income-driven repayment, youll have to apply every year. That way, Federal Student Aid can make sure your income qualifies you to stay on this plan.But if your income increases, you could become ineligible for income-driven repayment. In this situation, youd have to go back to regular repayment, and your years on the income-driven plan would have been for nothing.You could groe nachfrage into a similar problem if you were working toward PSLF but leave your public service career before 10 years are up. Even if you think you want to commit to public service for such a long time, its hard to predicthow your career goals could change over the years.What might seem like a foolproof path to loan forgiveness shortly after graduation could end up changing after years in the workforce. That said, earning a higher income in a stable job could make you a good candidate for another useful strategystudent loan refinancing.Through refinancing your debt, you could qualify for a lower interest rate. And by saving on interest, you might be able to pay off your debt ahead of schedule, even without the help of student loan forgiveness.4. You could end up with a big tax billWhen you get loan forgiveness from an income-driven plan, your balance will be wiped out completely. But you still might have to pay one more bill before you can say goodbye to your loans forever.Under forgiveness from an income-driven plan, your forgiven amount is treated as taxable income. And those taxes will be due in full the year your debt is forgiven.Lets say that when your loans are forgiven, you have a balance of $30,000 and your income puts you in the 25% marginal tax bracket. That means you will have a tax liability of $7,500 thats due to the IRS in its entirety when you file your taxes.Coming up with a lump sum of that size could be difficult, especially if you werent preparing for it. While owing $7,500 is better than owing $30,000, the IRS tends to be much less flexible than the Department of Education in terms of repayment options.If youre not sure whether or not youll owe taxes under a certain forgiveness program, check out ourguide to forgiveness and taxes.5. Not many people have received student loan forgiveness so farNot everyone supports student loan forgiveness programs. In fact, programs such as PSLF and borrower defense to discharge (which allows loan cancellation to defrauded borrowers) have become hot-button political topics as of late.These issues have come to a he ad recently as the first borrowers apply for PSLF. This program was implemented in 2007, so the first borrowers became eligible in 2017.Only a fraction of applicants have received loan forgiveness so far, so it remains to be seen if future borrowers will have a smoother time getting their applications approved.Whats more, none of the income-driven plans have been around long enough for anyone to attain loan forgiveness yet. If youre wondering whether student loans are forgiven after 20 years, the only real answer is that it remains to be seen. Likewise, its tough to say what changes future administrations will make to these policies.While this does not necessarily mean these programs are ineffective, skeptics may be reluctant to put their trust in something that has yet to benefit many borrowers. While no changes have been made yet, it would be unfortunate to make payments for 10 years or more, only to have Congress pass a law that abolishes the program or renders you ineligible.6. Your private student loans might not be eligibleSo far, weve mainly focused on federal student loan forgiveness programs, which only wipe away federal student loans, such as unsubsidized or subsidized direct loans. If you have private student loan debt, however, you dont have as many options.Although federal forgiveness programs arent applicable, you might find somestudent loan repayment assistance programs (LRAPs) that will help you pay off your debt. Some states and private organizations offer partial student debt relief in exchange for qualifying service.Often, these LRAPs only require two or three years of service, rather than the 10 years youd need to put in for PSLF. Some common careers that qualify for LRAPs include doctor, lawyer, nurse and teacher.Another option is to look for an employer thatoffers a student loan repayment assistance benefit. Although rare, some jobs do offer this perk to help the 44 million borrowers currently burdened by student loan debt.If youre drowni ng in private student loan debt, a federal forgiveness program wont be able to help, but you might find alternative options that could offer relief.Student loan forgiveness is rarely a quick fixWhen deciding the best way to handle your student loan debt, its important to consider the pros and cons of any strategy.Were not trying to scare you away from student forgiveness programs by any means. But you must also be realistic and recognize that loan forgiveness might not be a cure-all to your debt situation and it certainly wont happen overnight.Whatever you decide, know that being proactive about your debt already puts you a step ahead. Bychipping away at your debt, youre well on your way to a life free of student loans.Honey Smithcontributed to this report.--This story originally appeared on Student Loan Hero.