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How does Navy Credit debt forgiveness work?

Dena Standley | October 19, 2022

Dena Standley
Legal Expert, Paralegal
Dena Standley, BA

Dena Standley is a seasoned paralegal with more than 20 years of experience in legal research and writing, having received a certification as a Legal Assistant/Paralegal from Southern Technical College.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Navy Federal Credit Union has many debt forgiveness to help brave US military and veterans.

Summary: Navy Federal Credit Union has many programs in place to help military service members who have fallen behind on their payments. Here's everything you need to know about Navy Credit debt forgiveness.

It's a life-changing experience to join the US armed forces. A career in the military provides opportunities and experiences that few jobs can match, but it is a challenging life that requires sacrifice and courage. Enlisting for education opportunities during service and after returning to civilian life is attractive for many people who consider enlisting.

If you're one of these people, you might be searching for loan forgiveness options or repayment plans for your credit debt loans after completing your undergraduate or graduate education and having student loan debt. This article outlines the Navy Federal Credit Union debt forgiveness programs available to servicemen and women and how they work. But briefly,

What is Navy Federal Credit Union?

Navy Federal Credit Union is a member-owned credit union that exclusively serves military service members, veterans, and their families. Founded during the great depression by a small group of US Navy department employees, Navy Federal Credit Union's mission is to give military members access to financial security in a safe place. As a not-for-profit credit union, any leftover funds go directly back to the members.

Navy Federal Credit Union ultimately has its members' best interest in mind. It offers a series of services including: credit cards, mortgages, student loans, auto loans, and even personal loans. If you've fallen behind on your payments to Navy Federal Credit Union, they have several debt forgiveness programs that can help you get back on track.

Here's everything you need to know.

Credit debt forgiveness: what does it mean?

Credit forgiveness combines part debt management, part debt consolidation, and part debt settlement to eliminate bankruptcy from the equation. As part of a forgiveness agreement, you pay a fixed monthly payment (similar to debt management) on credit card bills rolled into one (similar to debt consolidation) for less than what you owed initially (similar to debt settlement).

Speak to a certified counselor to determine if this is the right solution for your problem. A counselor will ask you about your income and expenses and pull your credit report to verify how many bills you have and how much you owe on them to determine the extent of your hardship.

Once the counselor determines that the forgiveness program is the best solution, they will send the credit card company a detailed agreement that includes the monthly payment and ask for their approval. Upon the creditor's approval, you will make monthly payments, and within 36 months or fewer, you will repay the debt. Early repayment has no penalty. Debt management, consolidation, and settlement have similar goals. However, you should be aware that any attempt to manage, settle, or consolidate debt can have a significant impact on your credit score.

The Servicemembers Civil Relief Act (SCRA) may protect you

SCRA covers service members absent from duty because of illness, wounds, or leave. SCRA also protects public health service (PHS) and national weather service (NOAA) officers in active service. Service members are encouraged first to contact a military legal help office in their area. Should military legal help not resolve a concern, or if the matter must be handled urgently, the Department will inspect the complaint to see if action is warranted.

As specified in 50 USC ** 3901-4043, the Servicemembers Civil Relief Act (SCRA) offers many benefits and protections to members of the armed forces. Under the SCRA, military service includes:

  • Full-time active-duty personnel in any of the five military branches (Navy, Marine Corps, Army, Air Force, and Coast Guard);
  • Reservists on active duty with the federal government
  • National Guard members on orders from the federal government for over 30 days

The SCRA also provides protection and benefits to the dependents of service members, including borrowers who co-signed loans or took out loans with them, for instance. Service members' dependents include their spouse, children, parents, grandparents, or other relatives for whom the service member has contributed more than half of their financial support for the past 180 days.

The SCRA protects most service members from the moment they enter active duty. Upon receiving specific military orders, protections begin for reservists. The benefits and protections include:

  • A six percent interest rate cap on financial obligations that were incurred before military service, the ability to stay civil court proceedings
  • Protections in connection with default judgments
  • Protections in connection with residential (apartment) lease terminations
  • Protections in connection with evictions, mortgage foreclosures, and installment contracts, such as car loans

Public Service Loan Forgiveness (PSLF)

After making 120 qualifying monthly payments under a qualifying repayment plan while working full time for a qualifying employer, Public Service Loan Forgiveness (PSLF) program will forgive any remaining balance on your Direct Loans.

How to qualify for PSLF

  • Be an employee of a US federal, state, local, or tribal government or not-for-profit organization (national service includes US military service.
  • Employed full-time by that agency or organization
  • Direct Loans (or merge all federal student loans into Direct Loans
  • Plan your loan repayment according to your income
  • Must make 120 qualified payments

For your safety, submit a Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application (PSLF Form) annually or when changing employers. When you fill out the form, you will learn whether your PSLF payments qualify. This will enable you to determine your progress as early as possible.

A limited PSLF waiver will apply on October 31st, 2022. Enlistees will defer payments while serving. Check with your student loan servicer to see how it may affect the PSLF timeline.

Process of PSLF

Since you need to make 120 qualifying monthly payments, wait at least ten years to be eligible for PSLF. When you submit the form of forgiveness, and at the time the remaining balance on your loan is forgiven, you must be employed by a qualifying employer.

The type of job you do for your employer does not determine your eligibility for the PSLF Program. It is your employer that determines your eligibility. If you work for one of the following organizations, you are eligible for PSLF:

  • The US government at any level (federal, state, local, or tribal) - including the armed forces
  • Organizations that are exempt from taxes under Internal Revenue Code Section 501(c) (3

As part of the PSLF Program, full-time AmeriCorps or Peace Corps volunteers also qualify.

Having your debt forgiven has consequences

One of the significant consequences of debt forgiveness is its impact on your credit. Tax implications may also arise. Be aware of these effects before you sign up for a debt forgiveness program to know if it's in your best interest.

  • Because of the write-off, you will have a blemish on your credit report for delinquent payments and uncollectible debt. A creditor will probably sell your debt to a collector, who may sue you and pursue you aggressively for the money.
  • Your credit report will note that the debt was settled for a lesser amount if the creditor settles the debt with you. This can negatively affect your credit score. The IRS and your state government will tax the forgiven amount as taxable income.

Know what you're entitled to and get it. You have access to a wide range of legal benefits as a service member, veteran, or spouse, and it is never too late to gain financial stability and manage your debt.

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