Write the Check or Wait For Debt Forgiveness?

Laura's father left her an inheritance, and one of Laura's student loans may qualify for student loan forgiveness. Should she hold off on paying the debt or go ahead and pay it with her inheritance?

QUESTION: Laura in Niagara Falls recently lost her father. He left her an inheritance, and one of Laura’s student loans may qualify for student loan forgiveness. Should she hold off on paying the debt or go ahead and pay it with her inheritance?

ANSWER: You’re not on a plan for debt forgiveness. You’ve just heard of a theory. You’d have to have a plan. I want you to check into it. Number one, it’s for Sallie Mae loans only. Some of your student loan debt—if it’s federally insured—might be forgiven if you were to be employed in the medical field in what’s called an underserved area, which is typically like an inner-city hospital that has trouble getting nurses or a rural hospital where they have trouble drawing people to work out in the country, so to speak. If you can get on an underserved position, there is forgiveness, and I think it tops out at $50,000. It’s usually done over five years.

There is another plan that says if you are poor and broke and you’re struggling and you pay a small amount for 10 years and then it hasn’t been forgiven, they just walk away from it. That plan is welfare, and that plan is not a plan you want to submit yourself to. That’s not worth it.

You would just need to investigate if your position qualifies for debt forgiveness due to working in an underserved market. It’s possible you do if you’re in a rural hospital. But then you’d have to find out exactly what that is. I think it’s limited at $50,000, and I think it’s done over five years usually. It’d be $10,000 a year forgiven up through that.

The balance you might as well go ahead and pay, number one. Number two, if you got on that plan—only if you get on that plan—set aside the amount that the plan is going to cover in a separate account. Let’s pretend for a minute that it’s $50,000. You pay $18,000 and get rid of the rest down to $50,000 today. Then you put $50,000 over in a separate savings account that you don’t touch for anything in addition to your other Baby Step stuff. It would’ve been $50,000 you paid on the student loan. We’re just going to pretend like we don’t have that money. Then you get on this rural underserved nuclear tech debt forgiveness program, and if something happened that that program blew up or you had a sick child and had to quit and come home and then you couldn’t finish, you’ve always got that money at that moment to write that check and be done with it. But if you go through the whole five years and the debt is forgiven in that program, then you’ve got the $50,000 lying there as an extra savings. You’ve covered it.

You don’t have access to this money either way. You’ve either got to set it aside, or you’ve got to pay it off. You didn’t really win anything as far as buying a car with the money. Don’t do that and just hope that this program is out there. Only do that if you find the program, you enroll in the program, and you’re really doing it. If you’re not going to do all that, just write a check and be out of debt.