While it may seem too good to be true, you can have your student loans forgiven. That said, you must qualify for a federal student loan forgiveness program and meet the strict requirements. For some borrowers, student loan forgiveness is a good option. Others are better off setting up a manageable repayment plan.
Written by Attorney Kassandra Kuehl.
Updated November 17, 2021
Even though taking out federal student aid for higher education is generally a good value, many people struggle to pay back their student loans. If you’re struggling to repay your student loans, you’re not alone. Thankfully, there are some ways to have your student loan debt forgiven.
Federal student loan forgiveness programs have strict requirements and aren’t always easy for borrowers to qualify for. Depending on your circumstances, you may benefit from pursuing forgiveness or you may be better off setting up a manageable repayment plan. Here are the facts so you can make the best decision for your unique situation.
Student Loan Forgiveness Is Real
There are legitimate government programs that borrowers can participate in to have their student loans forgiven. Once forgiven, their remaining balance is erased. Student loan forgiveness may also be called debt cancellation or discharge. All of these terms mean the same thing — your student loan balance goes away. There are several different programs available for student loan borrowers, and they each have their own set of rules. These include programs for:
Public service workers
Students who went to a school that closed while they were enrolled or soon after
Perkins loans borrowers
People with disabilities
There are also other programs, including forgiveness due to death and bankruptcy, though discharge of student loan debt in bankruptcy is rare. Each program has specific requirements. To have your student loans forgiven under one of these programs, you’ll have to follow these rules carefully. Some steps apply to when you begin repaying your student loans and other need to happen annually each year that the student loan remains in repayment.
If you have a student loan and are eligible for any federal student loan forgiveness programs, make sure that you know the rules and have a plan for ensuring that you follow them. Missteps can lead to disqualification from eligibility for forgiveness.
Forgiving Federal Student Loans
All of the student loan forgiveness programs listed above are from the federal government. These programs apply to federal student loans, not private student loans.
Federal Family Education Loan (FFEL) Program loans are federal loans that are backed by private lenders. FFEL loans are not ordinarily eligible for forgiveness because they are privately backed. But FFEL loans that have been consolidated (into a federal student loan) are eligible for certain student loan forgiveness programs, including the unpaid refund discharge and the false certification discharge.
While legitimate federal government programs for student loan forgiveness are available, there are also many scammers out there who are only interested in taking your money and giving you little or nothing in return. To better ensure that you are dealing with a legitimate U.S. government website, look for the .gov domain extension. Only real U.S. government websites can operate under the .gov extension.
Typical scam schemes include companies that say they’ll forgive student loan balances for a fee and companies that charge people to fill out free government forms that are available online. You don’t need to pay to fill out forms required for loan forgiveness. You can find all the forms you need on the U.S. Department of Education’s Federal Student Aid website.
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Legitimate Federal Student Loan Forgiveness Programs
There are several different federal student loan forgiveness programs. Securing student loan forgiveness can take a long time. Meeting all of the qualifications required for forgiveness can be challenging for borrowers. Also, repaying federal student aid in full over a standard repayment period is cheaper for some borrowers than pursuing forgiveness is. Why? Decades of repayment according to schedules that facilitate forgiveness can cost borrowers more in interest than they’d repay via a standard repayment plan.
Repayment via a standard plan can also be less time-consuming than trying to jump through the hoops and eligibility requirements of loan forgiveness programs. Some borrowers even discover that the amount of debt they stand to have forgiven after decades of repayment simply isn’t worth their time and trouble. But, the standard repayment approach only works if you can afford the monthly payment amounts required under this plan. This just isn’t an option for many borrowers.
There is no one “right answer” when it comes to forgiveness over time versus repaying your debt via a standard repayment plan. It’s important to weigh your options carefully, considering how long you’ll need to pursue repayment, how much interest you’ll be charged, and a host of other personal financial factors before you can make the best choice for you and your family. Consider each of the forgiveness options that you are eligible for and compare them to standard repayment before making a decision either way.
Public Service Loan Forgiveness
Public Service Loan Forgiveness (PSLF) is a program available for people who work in government organizations or for eligible nonprofits. It’s not about your job title. It’s about who employs you. You must be a full-time employee to qualify for debt forgiveness. You can be employed at any level of government, including federal, state, local, or tribal. But if you work for a political party or other political organization you won’t meet the eligibility requirements for student loan forgiveness under the PSLF program.
Other qualifying employers include:
501(c)(3) charitable organizations
Full-time volunteer service in Americorps
Full-time volunteer service in Peace Corps
To qualify for this program, you must work directly for one of the employers listed above. Contract work for one of these organizations is not enough.
It takes 120 on-time qualifying payments (which don’t have to be consecutive) to qualify for the public service debt relief program. You’ll have to make every student loan debt payment on time, and you must be in an income-driven repayment plan to qualify.
You’ll also need to submit the PSLF form annually or certify your employer(s) when you apply for loan forgiveness. Usually, it’s easier to submit the employment certification form. To make the process easier, the U.S. government provides a free help tool. You can use the tool to confirm that you’re working for a qualified employer and get help with the submission process.
Most federal student loans qualify for income-driven payment plans. These are plans that adjust your monthly student loan payments to make them more affordable based on your income. In some cases, you may have some months that you aren’t required to make a payment.
While it may be nice to have a lower monthly payment, you should consider the long-term consequences of these repayment plans. Income-driven repayment plans for student loan debt extend how long you have to pay your loan and will increase the total interest you pay over the life of your student loan. This increases the total amount you pay for your loan. When deciding on an income-driven monthly payment plan, take into account how long it will extend your loan terms and the total additional money you’ll be required to pay during the life of the loan.
If you are planning to apply for public service loan forgiveness, you must make your payments under an income-driven repayment plan to qualify. Meaning, if you choose a standard repayment plan (instead of an income-based repayment plan), none of your student loan debt will be eligible for forgiveness.
There are four different income-driven payment plans available. They are:
All of these plans determine the repayment amounts on your loan as a percentage of your discretionary income. Discretionary income is income you have to spend on things other than basic necessities like rent. The monthly payment will change as your income changes. This is the primary reason why, if you choose an income-based repayment plan, you’ll be required to certify your income annually.
You can use the federal government student loan simulator to get an idea of how a specific payment plan will work for you. This tool can help you learn about how much you will owe overall and how long you will need to make monthly payments at the new payment rate on your loans before they are repaid in full or a certain amount is forgiven (depending on your circumstances). This is a valuable tool that will help you understand how income-driven repayments can affect you and your finances long term.
To qualify for the income-driven repayment program, you will need to verify your income. You’ll do this when you apply for the plan and again each year you’re in it. You can find the forms you need on the Federal Student Aid (FSA) website, or you can work with your loan servicer to get the appropriate forms filled out. This is a free service to student loan holders. Some people will try to charge you for these services. This is a red flag of a scam.
Teacher Loan Forgiveness
The Teacher Loan Forgiveness program allows teachers who work in low-income schools for five full, consecutive years to qualify for student loan forgiveness of up to $17,500. You can view the low-income schools listed in the TCLI Directory.
To qualify for the program, you must be considered a highly qualified teacher through the U.S. Department of Education. These are teachers who have state teacher certification, at least a bachelor’s degree, and who have demonstrated competence in each core academic subject that they teach. There are also several additional requirements based on specific circumstances, such as being a new elementary school teacher.
Under some circumstances, you can receive forgiveness under both the Teacher Loan Forgiveness program and the Public Service Loan Forgiveness program. But the teaching service terms for eligibility can’t be served at the same time. You must be current in your loan payments to qualify for forgiveness.
Total and Permanent Disability Discharge
A discharge acts in the same way as forgiveness in that the borrower will no longer be responsible for repaying the amount that’s discharged. Discharge is just a different term used in the case of disability. If you are permanently disabled, you may be able to have your entire student loan balance discharged.
To qualify for a total and permanent disability discharge, you’ll need to provide documentation of your disability from one of three places:
The Social Security Administration
The U.S. Department of Veterans Affairs
Nelnet is the loan service provider that processes disability discharges. You can apply for a discharge at the official website disabilitydischarge.com. If you’re applying for a disability discharge, you can also let Nelnet know by calling 1-888-303-7818. Borrowers can have required payments on their qualifying student loans stopped for 120 days to give them time to submit the application.
Perkins Loan Cancellation
This type of student loan forgiveness is limited to Perkins Loans. Low-interest Perkins Loans are made available to people with exceptional financial needs. The Perkins Loan program ended in 2017, and new Perkins loans aren’t available, but if you’re carrying a Perkins loan, you can still get the entire loan canceled in some situations.
You can get up to 100% of your Perkins loans forgiven if you’re serving full time in a public elementary or secondary school or a nonprofit elementary school. Full-time service roles include:
Working as a special education teacher
Working in schools that serve students from low-income families
Teaching bilingual education, foreign languages, mathematics, or science
You may qualify to have your student loans deferred while you’re waiting for cancellation if you’re teaching in one of the above capacities.
Student Loan Forgiveness or Cancellation by Profession
In addition to the public service loan forgiveness options listed above, you can get funds to apply to your student loans when you work for the National Health Corps. Many employers also offer student loan repayment programs as benefits. It’s a good idea to check with your HR department to see if your employer offers this benefit for loan relief.
There are several legitimate options for student loan forgiveness for those who work public service jobs. You could work in state, local, or federal government; the Peace Corps; or as a teacher. But these forgiveness options can take a long time and it can be hard to meet the qualifications. Make sure to compare a standard or accelerated repayment plan against loan forgiveness options and other repayment options such as income-driven repayments, refinancing, deferment, or forbearance before committing to a plan of action. That way, you can make the best decision for your unique situation.