Buying a home for the first time is an impressive endeavor. However, it can also be challenging if you have thousands of dollars in student loan debt. After all, lenders will assess your ability to repay your mortgage payments, and if you have a lot of student debt, they may hesitate to approve a loan for you.
Key Points
The Biden administration and the U.S. Department of Urban Development are working to make homeownership easier for borrowers with student loans. As a first-time homebuyer, you may be eligible for a state-level student loan forgiveness program. The federal government also offers student loan forgiveness programs, including public service forgiveness and teacher loan forgiveness.
Can First-Time Homebuyers Get Student Loan Forgiveness?
Currently, there are state-level student loan forgiveness programs available for first-time homebuyers. While no federal options are available, as of 2022, the Biden administration and the U.S. Department of Urban Development are exploring ways to remove barriers to homeownership for those with student loans.
In the past, FHA mortgage lenders were required to calculate the borrower’s monthly loan payment at 1% of the outstanding balance of loans that were not in repayment status. This included borrowers who were in deferment or under an income-driven repayment plan. As newer rules eliminate this requirement, lenders can now use actual monthly loan payments for borrowers, making the approval process easier.
Additionally, the Biden administration has discharged student loan debt for fraud victims as well as disabled veterans. Furthermore, there are plans to resolve administrative issues that previously prevented loan forgiveness for some borrowers enrolled in income-driven repayment plans. According to the U.S. Department of Education, this initiative will lead to the cancellation of student loan debt for at least 40,000 borrowers, who will ultimately be eligible for public service loan forgiveness.
States Offering Special Student Loan Forgiveness Programs
First-time homebuyers are not the only ones eligible for some state programs offering student loan forgiveness. Here’s a brief overview of the programs currently available in some states.
California
The California State Loan Repayment Program offers up to $50,000 in student loan repayment for physicians, dentists, nurses, pharmacists, certified midwives, and mental health professionals. To qualify, you must work in the public or nonprofit sector in an area with a shortage of healthcare workers. The state also requires a commitment to work full-time for at least two years or part-time for four years.
Delaware
Delaware offers the Delaware State Loan Repayment Program (SLRP) with rewards ranging from $30,000 to $100,000 for residents with advanced degrees in behavioral/mental health, dentistry, and medicine. To be eligible, you must work in a medically underserved area for at least two years full-time or four years part-time.
Georgia
The Georgia Board for Health Care Workforce (GBHCW) has several debt repayment assistance programs aimed at healthcare professionals in the state who work at least 40 hours a week in rural areas with populations of 50,000 or less. Lincoln, Monroe, and Polk are some cities that qualify as rural areas.
Iowa
Iowa offers student loan repayment assistance programs for residents who work full-time in rural areas that need professionals in certain fields. Designed for doctors, teachers, healthcare workers, attorneys, veterinarians, and other health professions. Through these programs, participants can receive forgiveness of between $4,000 to $200,000 of their federal student loans, depending on the program.
Kansas
Kansas offers
Kansas offers student loan repayment assistance programs in rural opportunity zones through the Kansas Department of Commerce. If you move to the state and work in a city such as Wallace, Rush, Franklin, or Bonnie for an eligible employer, you can receive a 100% income tax credit and up to $15,000 to repay your student loans over five years.
Maine
Through the Opportunity Maine Tax Credit, you can receive compensation for your student loan payments. To qualify, you must be a full-time resident of Maine and meet other criteria based on your graduation date.
Maryland
The SmartBuy 3.0 program in Maryland provides up to 15% of the home purchase price or $30,000 (whichever is lower) to repay your student loans. To be eligible, you must live in the state, have a down payment of at least 5%, purchase property owned by the state, and have a credit score of at least 720.
Michigan
If you are a healthcare provider in a Health Professional Shortage Area in Michigan, you may receive federal student loan forgiveness of up to $300,000. The program is intended for dentists, physicians, and mental health providers. You are required to work full-time for at least two years at a nonprofit health clinic in an area with a shortage of healthcare providers.
Texas
Texas has several student loan repayment assistance programs. These include the University Nursing Faculty Loan Repayment Assistance Program, the Texas Teaching Loan Repayment Assistance Program, and the Texas Access to Justice Foundation Loan Repayment Assistance Program.
Other Ways to Get Loan Forgiveness
While these state programs are worth exploring, it’s also wise to consider federal student loan forgiveness programs, such as:
Public Service Loan Forgiveness
The Public Service Loan Forgiveness program is designed for public service workers such as teachers, nurses, and firefighters. To qualify, you must be a full-time eligible employee with a government entity or a nonprofit organization. You must also be enrolled in an income-driven repayment plan. After making 120 qualifying payments, your remaining loan balance may be forgiven.
Teacher Loan Forgiveness
The Teacher Loan Forgiveness program is a federal program for full-time teachers working in low-income schools or educational service agencies. It was created to encourage teachers to work in areas with a shortage of qualified teachers. To qualify, you must be considered a highly qualified teacher by the U.S. Department of Education and have federal student loans.
Frequently Asked Questions (FAQs)
How can you apply for student loan forgiveness?
You can apply for federal student loan forgiveness through the U.S. Department of Education. If you are interested in a state-run loan forgiveness program, you will need to follow its unique application requirements.
Can you get student loan forgiveness for private loans?
Private student loans do not qualify for federal forgiveness programs. However, if you have private student loans, you may want to consider refinancing to reduce your monthly payments and make repayment more manageable.
How long does it take to get student loan forgiveness?
The time it takes to obtain student loan forgiveness depends on the program. If you apply for Public Service Loan Forgiveness, for example, you will need to make 120 qualifying payments before your loans are forgiven.
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Source: https://www.thebalancemoney.com/can-first-time-homebuyers-get-student-loan-forgiveness-5323395
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