Loans.org Says Pursuing Loan Forgiveness is Risky Business

    RANCHO CUCAMONGA, CA, April 15, 2012 /24-7PressRelease/ -- The government-sponsored Income-Based Repayment (IBR) plan allows borrowers to obtain student loan forgiveness after either 10 or 20 years, depending on career choice. However, Loans.org issued a warning in a recent FAQ about the amount of interest that accrues while pursuing forgiveness. If borrowers begin pursuing forgiveness but don't follow through, they may find themselves in worse positions than when they began.

The IBR plan's forgiveness of student loans is an attempt to help our nation's financially struggling youth escape what's become, for some, unending holes of college-related debt. Those who use their degrees to pursue a career in public service can qualify for forgiveness after just 10 years. Those in all other fields can qualify after 20 years.

But the catch is that borrowers are expected to make 120 full and on-time payments for the 10-year option and 240 full and on-time payments for the 20-year option.

Each of the payments must be made in full and within 15 days of their due dates, otherwise late payments will not count towards the 120 or 240 required payments.

Source: http://studentaid.ed.gov/students/attachments/siteresources/LoanForgivenessv5_051511.pdf

This should be of particular concern for borrowers who are counting on forgiveness and making only the minimum payment on their college financing.

Making only the minimum payment maximizes the amount of accruing interest, which means if students default on their payments and are removed from the student loan forgiveness program, they will be left in a worse position than if they simply tried to pay their debt off early with larger payments.

Paying the bare minimum on student loans is how some borrowers find themselves owing more than they originally borrowed even after years of steady payments.

For more information on student loan forgiveness, you can go to http://loans.org to find a frequently updated library of financing information. Additionally, prospective loan applicants can access a free-to-use quote-comparison generator that is designed to help consumers receive the lowest interest rates possible.

To access the full FAQ on forgiveness of college debt, readers can follow the "Questions" link at the top of any page on the site.

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