🌎 A question I couldn't answer. Student Loan Forgiveness.

[TerryP]

I haven't paid a lot of attention to these stories over the last few years. I know one person (holding a BS and two Master's degree—one in medical technology) who had their loans "forgiven." I'd call it "dismissed" considering she works at MUSC making six figures.

A neighbor brought this up a few minutes ago and asked, "if their loans are forgiven and they're behind on payments, doesn't that mean these reports on late payments/defaults would be removed from their credit history?"

I don't have a clue. Has anyone heard how that's proposed to be handled?

A lot of debt hurts people; I get that. But if you remove the debt but leave the derogatory ratings on credit reports aren't they still pretty much at square one?

 

[rocknthefreeworld]

Loan forgiveness is usually just for the remainder of the loan outstanding. A lot of forgiveness is attained by working in certain fields or for certain companies for a period of time. There is the Public Service Loan Forgiveness. Teachers, nurses, and a whole list of others can get forgiveness of a certain amount of the original loan (which may be all that is left in some cases if they have been making payments and/or got money from their employer to pay back loans). Then there is cancellation and discharge, which are more for those who aren't paying and can't pay.

They should actually remove the bad stuff in a lot of cases, but someone might have to fight for it.

 

[Rolltide24]

It’s a good question. Removing credit blemishes is no small feat. No matter the circumstance. Usually a good bit of documentation involved, at least in the past when I was a banker. It will be interesting to see how they structure that.

 

[TerryP]

Loan forgiveness is usually just for the remainder of the loan outstanding. A lot of forgiveness is attained by working in certain fields or for certain companies for a period of time. There is the Public Service Loan Forgiveness. Teachers, nurses, and a whole list of others can get forgiveness of a certain amount of the original loan (which may be all that is left in some cases if they have been making payments and/or got money from their employer to pay back loans)

Forgiveness is not the best term then. I know a few teachers in this area that had their loans "forgiven" when they agreed to teach a set number of years in the SC school system.

Then there is cancellation and discharge, which are more for those who aren't paying and can't pay.

This is what I'm talking about. Is it still a mark on their credit once these are cancelled/discharged?

 

[rocknthefreeworld]

This is what I'm talking about. Is it still a mark on their credit once these are cancelled/discharged

Yes. No. Maybe. Some are and some aren't, it would be in the terms of the cancel or discharge.

 

[TerryP]

Yes. No. Maybe. Some are and some aren't, it would be in the terms of the cancel or discharge.

Which should be standard across the board, right? I'm assuming they're talking about the Federally guaranteed loan programs and I would think the conditions would be the same no matter who took the loan. To do otherwise would be discriminatory, would it not?

 

[rocknthefreeworld]

Which should be standard across the board, right? I'm assuming they're talking about the Federally guaranteed loan programs and I would think the conditions would be the same no matter who took the loan. To do otherwise would be discriminatory, would it not?

Depends on the program rules under which it is forgiven. I believe most cases do clear it up. Is it discriminatory? Depends on the rules. Honestly, if it is discharged/cancelled due to inability to pay then that seems no different than an inability to pay for anything else. If you can't pay for your car they come take it and you generally don't owe any more, but that doesn't remove the prior bad payment history.