26 Sep My student loans were in default. Can they be forgiven?

Q. I worked for 20 years at a nonprofit office. For three years, I had $300 garnished from my paycheck for student loans. The student loan forgiveness says those payments don’t qualify because they were forced. I don’t think that is right seeing that I was a single mom and couldn’t afford $300 a month for student loans. Why don’t my payments count?
— Borrower

A. Sounds like you’re in a tough financial position.

Talk about student loan forgiveness under President Joe Biden’s plan has been a very popular topic.

Before we get to that, let’s look at your situation.

It sounds like your loan was in default status for those three years, said Matt Rembish, a certified financial planner with JFL Total Wealth Management in Boonton.

“Your loan holder can withhold up to 15% of your disposable pay until your loan is paid in full or doesn’t have a default status,” he said.

Because you work for a nonprofit, the Public Service Loan Forgiveness Program (PSLF) might be the forgiveness program you’re talking about, he said. That program was in place long before the new forgiveness plan.

To qualify, you must be employed full-time by a U.S. federal, state, local or tribal government or not-for-profit organization.

Then you must have Direct Loans, or have consolidated other federal student loans into a Direct Loan, and are repaying your loans under an income-driven repayment plan.

You must also make 120 qualifying payments, Rembish said.

“Income-driven repayment plans are intended to make payments affordable based on your income and family size. You would have to fill out an application for these programs,” he said. “It’s a possibility that since your wages were garnished, it would not be considered a part of the income-driven repayment plan, and not a qualified payment.”

He recommends you calling the PSLF servicer at (855) 265-4038 to get a full understanding of your situation.

If you don’t qualify for the PSLF, he said, you may qualify for the new student debt forgiveness plan, which may give up to $20,000 in relief.

If collections on your loan were suspended during the pause in student loan payments during the pandemic, experts say they expect those loans to be forgiven. Forbes reported that defaulted loans, too, are included.

But if you have to get your loans out of default first, the Department of Education’s new Fresh Start program may be able to help.

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This story was originally published on Sept. 26, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.