How MOHELA Student Loan Forgiveness Works – Forbes Advisor
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Over the past two years, there has been a lot of turmoil within the federal student loan system. Some of the proposed changes brought relief to borrowers, such as temporarily pausing monthly payments and interest charges due to the Covid-19 pandemic. But other long-term adjustments have only added to the confusion.
One of the biggest disruptions is the transfer of federal student loan accounts that were previously held by FedLoan Servicing to the Missouri Higher Education Loan Authority (MOHELA). If you have federal student loans managed by MOHELA and want loan forgiveness, here’s what you need to know about MOHELA student loan forgiveness.
What is MOHELA?
MOHELA has over 40 years of experience as a federal student loan manager. It is one of the loan services, along with others like Nelnet and Great Lakes, that has extended its federal service contract until at least 2023.
As a loan manager, MOHELA helps borrowers manage their federal loan accounts and payments. This includes handling billing questions and general inquiries as well as providing information on refund options.
Responsibilities of the New MOHELA Loan Manager
MOHELA recently became the exclusive student loan manager for two federal programs: the Public Service Loan Forgiveness (PSLF) and the Teacher Education Assistance Grant for College and Higher Education (TEACH). This role previously belonged to the Pennsylvania Higher Education Assistance Agency (PHEAA), also known as FedLoan Servicing, which will exit the service industry after its contract expires.
Borrowers who were on track for student loan forgiveness under the PSLF program or who received a TEACH grant will have their student loan accounts transferred to MOHELA beginning in July 2022. As interim manager for PSLF, MOHELA will now be responsible for guiding the two new PSLF-eligible borrowers through the program requirements and application process.
Can I get student loan forgiveness through MOHELA?
Although you can work directly with the service agent, there is no specific MOHELA student loan forgiveness program. Instead, MOHELA oversees your eligibility for the Ministry of Education’s PSLF and TEACH grant programs.
For example, if you are pursuing PSLF and believe you have met the requirements, you will submit an official application to MOHELA. The servicer will process this and review your student loan account, work history, and repayment records. If MOHELA finds that you meet the eligibility criteria, it will update your account accordingly.
If you have received a TEACH grant, MOHELA will monitor your progress toward completing the required five-year service obligation. If you do not respect your teaching contract, your loan will be converted into a direct subsidized loan managed by MOHELA.
4 forgiveness programs via MOHELA
Here are some of the remission programs available for federal student loans, including those serviced by MOHELA.
As mentioned, the PSLF is a notable federal student loan forgiveness option available to borrowers with direct loans, which is now managed by MOHELA. You may be eligible for this program if you:
- Work full-time for an eligible employer. This includes federal, state, local, and tribal government organizations as well as nonprofits.
- Make 120 qualifying payments. You must enroll in one of the Income Contingent Repayment (IDR) plans and make 120 qualifying payments for your direct loans.
If you meet these conditions, the remaining balance of your direct loan may be tax exempt.
Teacher loan forgiveness
Another option is teacher loan forgiveness. Unlike the PSLF, this program is not managed by MOHELA. But if you have loans managed by MOHELA and you meet the conditions, you could be eligible to have some of your debt forgiven.
To be eligible, you must:
- Be a highly qualified teacher. This means that you have earned at least a bachelor’s degree, received full state certification, and certification or licensing requirements have not been waived on an urgent, temporary, or interim basis.
- Complete a service contract. You must teach full-time for five full, consecutive academic years at a low-income school or educational service agency.
You can get $5,000 or $17,500 rebated on your loans, depending on the subject you teach. Also note that you cannot get credit for Teacher Loan Forgiveness and PSLF at the same time.
If you’re struggling to make your payments, signing up for an income-driven repayment plan might be a good idea. In this type of plan, your monthly payments will be based on your adjusted gross income and your family size. All managers, including MOHELA, can place borrowers on an IDR plan upon request.
Additionally, any remaining balance on your loans could be canceled after making payments for 20 or 25 years, depending on the plan. Keep in mind that unlike the PSLF, IDR remittance is not tax exempt.
You can choose from four types of IDR plans:
- Pay as you earn (PAYE): If you sign up for PAYE, your payments will be capped at 10% of your Discretionary Income, and you could have your remaining balance canceled after 20 years. To qualify, you must be able to demonstrate partial financial hardship.
- Pay As You Earn Review: On the REPAYE plan, your payouts will be 10% of your Discretionary Income – note that this payout amount is not capped as with other IDR plans. If you borrowed for an undergraduate degree, you may be eligible for forgiveness after 20 years, while graduate loans can be forgiven after 25 years.
- Income Based Reimbursement (IBR): On this plan, your payments are limited to 10% or 15% of your discretionary income, and your loan balance can be canceled after 20 or 25 years, depending on when you took out your loans. As with PAYE, you must have demonstrable partial financial hardship to qualify for IBR.
- Income Contingent Reimbursement (ICR): If you enroll in ICR, your payments will be 20% of your Discretionary Income (or the amount you would pay on a 12-year income-adjusted plan) and your loans can be forgiven after 25 years. Note that this is the only IDR plan available to borrowers with parent PLUS loans, although a PLUS loan must first be consolidated into a direct consolidation loan before you can enroll.
Federal loan release programs
In some cases, borrowers might be eligible to have their federal student loans forgiven, which might be helpful if you don’t qualify for the forgiveness.
Some of the output programs available include:
- School outing closed: For borrowers whose schools closed during their enrollment or shortly after their withdrawal
- Exit from total and permanent disability: For borrowers in total and permanent disability
- Deadly discharge: Available if the primary borrower or the student who received a PLUS parent loan dies
Generally, a loan release involves a special circumstance that allows you to stop making further payments for your federal student loans. Each program has its own criteria that you will need to meet as well as the documentation that you will need to provide to qualify.
How to contact MOHELA
If your student loans have recently been transferred to MOHELA and you have questions about your loan forgiveness options and eligibility, contact Student Loans directly. You can call their customer service toll-free at 888-866-4352 during their business hours:
- Monday: 7 a.m. to 10 p.m. CT
- From Tuesday to Friday: 7 a.m. to 7 p.m. CT
- Saturday: 9 a.m. to 1 p.m. CT
You can also contact the repairer by fax at (866) 222-7060 or by mail at:
633 Spirit Drive
Chesterfield, MO 63005-1243
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