5 Financial tips for the third week of January 2013

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Check out the financial tips for the third week of January 2013.

Tip no1: Federal student loan debts are forgiven in case the debtor passes away.

The federal government forgives unpaid student loan when the original borrower passes away. The federal government pardons both the subsidized and unsubsidized Stafford loans after the debtor releases his last breath. If your father has taken out federal student loans and passed away, then the government won't try to collect money from his estate.

Some private student loan lenders forgive debts after the debtor leaves this world. However, one thing should be known that not all the private lenders offer this option. Borrowers should check the agreement and see if there is any clause, which states that the debt will be discharged after the death of the borrower.

Tip no 2: Perkins and Stafford student loans are eligible to be forgiven over a period of 5 years if the debtor is employed as a full time schoolteacher.  

If you're working as a teacher for 5 continuous years in some secondary and elementary schools, then the government will forgive your Subsidized and Unsubsidized student loans. If you're a teacher of an educational institute in a low-income locality, then also your student loans will be forgiven. The government may agree to forgive up to $17,500 on federal student loans. You can take advantage of the same opportunity to reduce your Perkins loans too. You can get detailed information about this from the official website of federal student aid. Go through the articles to increase your knowledge on Teacher Loan Forgiveness program.

Tip no 3: Volunteering for AmeriCorps, VISTA or Peace Corps will facilitate in having a part of your federal student loan debt forgiven.

Are you struggling to pay off your federal student loans? If yes, then you can consider becoming a member of Americorps, Vista or Peace Corps. If you become a member of these organizations and work there, then you can get a part of your federal student loan debt forgiven by the government. Keep it in mind that federal government will not forgive the complete amount. The federal government will forgive only a specific amount. The amount changes from year to year. So, make sure you check it before applying for forgiveness program. You'll have to find out ways to repay the remaining amount by any means.

Tip no 4: Under the new PAYE plan, repayments are capped at 10 percent of the debtor's discretionary income.

The federal government introduced income based repayment plans to assist debtors avoid defaults. The Pay As You Earn (PAYE) option is only a part of the income based repayment plans such as Income-Contingent Repayment (ICR), Income-Sensitive Repayment and Income-Based Repayment (IBR). The rules of the PAYE plan have been changed recently. As per the new rules and guidelines, repayments are capped at 10 percent of the existing and future graduates.

Only those graduates will qualify for PAYE plan who have taken out their first federal loan after 30th September 2007. The graduates must also have taken out federal loans post 30th September 2011.

Tip no 5: Working for a minimum of 20 years in the Military will make you eligible for Veteran's pension and funds can be withdrawn from the account at any time after retirement.

If you’ve given your 20 years to military, then you'll be able to qualify for Veteran's pension. Military officials who have been in the service for 20 long years will qualify for Veteran's pension. In addition to that, they'll be allowed to take out money from the account at any moment after retirement. If you're an ex-army official and want to know more about veteran plans, then talk with an accredited agent or representative. You may also directly talk with an VA employee at the regional office.

Last Updated on: Fri, 1 May 2015

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