If you’re one of the 44 million Americans with student loans, there’s probably been a point where you wish you could close your eyes, snap your fingers, and make the loans disappear.
Unfortunately, that’s not quite how it works. And let’s be honest, even though the loans do represent a burden, they did help you get through school. Without the loans, you wouldn’t have been able to afford it in the first place. So there are certainly positives to the situation.
Whether you like it or not, the truth is that you have student loan debt, and it needs to be repaid.
Fortunately, though, there are programs that offer loan forgiveness. Loan forgiveness gives you a clear path to paying off your student debt in a reasonable manner.
In this guide, we’re going to break down all aspects of loan forgiveness programs. We’ll help you understand how they work, as well as cover all of the forgiveness programs, so you can determine which, if any, work for you.
What Is Student Loan Forgiveness?
Before we get started, you need to know the difference between having your loan forgiven and having your loan discharged.
Loan discharge is rare. When you have a loan discharged, it is because you can’t pay it due to death, disability, fraud, identity theft and in very rare circumstances, bankruptcy.
When you have your loan forgiven, it’s because you work at a qualified job, such as teaching in a high-need area, for a specific length of time, and have a specific amount remaining on your loan. This remaining amount is forgiven.
In this article, we will be discussing the programs available that will enable you to have your student loans forgiven.
#1. Public Service Loan Forgiveness (PSLF)
The Public Service Loan Forgiveness program, or PSLF, helps individuals working in the public sector, and is designed to encourage students to pursue careers in the public service sector.
Any full-time employee at a federal, state, or local government agency or at a 501(c)(3)-designated organization will qualify for PSLF. However, religious-based nonprofits are excluded.
All Direct Federal Student Loans qualify for PSLF. Private students loans aren’t eligible for the program.
To receive loan forgiveness under PSLF, you must make ten years of on-time monthly payments after consolidating your federal loans in a qualified repayment program.
Jobs That Qualify For The PSLF Program:
- Any position in a government organization at the federal, state, local or tribal level
- Not-for-profit organizations that are designated tax-exempt under Section 501(c)(3)
- Other nonprofit organizations that are not tax-exempt but provide a qualifying public service
- Full-time AmeriCorps and Peace Corps volunteers
Repayment Plans That Qualify For PSLF:
- Income-Based Repayment Plan (IBR)
- Income-Contingent Repayment Plan (ICR)
- Pay As You Earn Repayment Plan (PAYE)
- Revised Pay As You Earn Repayment Plan (REPAYE)
Keep in mind that if you intend on applying for a PSLF program, you need to enroll in a repayment plan that extends your loan term beyond ten years. Otherwise, there won’t be anything left to pay off after the ten years.
When you apply for PSLF, you must fill out an Employment Certification Form every year and make pay stubs, W-2 forms, or other documentation available as requested.
Once accepted into the program, check your progress at least once a year to be sure you’re meeting all the requirements.
#2. Forgiveness with Income-Based Repayment (IBR)
With the Income-Based Repayment program, after making consistent payments for 20 or 25 years, any remaining loan balance will be forgiven. You don’t need to be working in a specific career to qualify for loan forgiveness based on your repayment history.
There are a few repayment programs that will qualify you for IBR. The first is the Pay As You Earn Repayment Plan. This plan qualifies you for loan forgiveness after 20 years of on-time payments. Typically, this plan offers the lowest monthly payment. To enroll in this repayment plan, you must demonstrate financial hardship.
The Revised Pay As You Earn repayment plan is almost exactly like the Pay As You Earn Repayment Plan, except you don’t have to prove financial hardship.
The Income-Contingent or Income-Based Repayment Plans will qualify you for loan forgiveness after 25 years of on-time payments.
When applying for the program, you will need documentation of personal and financial information. You can also get an application from your loan servicer.
The IBR program is only available to Federal Student Loans. Private student loans do not qualify.
#3. Forgiveness with Pay As You Earn (PAYE)
Similar to the IBR program, the Pay As You Earn program can be used after borrowers make payments for 20 years, with the remaining balance becomes eligible for forgiveness. To be eligible, your PAYE payments must be less than what they would be under the 10-year standard repayment plan.
The following loans are eligible for PAYE:
- Direct subsidized and unsubsidized loans
- Direct Grad PLUS loans
- Consolidated Subsidized and unsubsidized FFEL Stafford loans
- Consolidated FFEL loans made to grad students
- Consolidated Federal Perkins loans
- Direct consolidation loans, unless they repaid parent PLUS loans or FFEL loans made to parents
To qualify for the program, you need to be a new borrower as of Oct. 1, 2007, with a direct loan disbursement after Oct. 1, 2011. If you apply, be prepared to send in income documentation.
#4. Forgiveness with Revised Pay As You Earn (REPAYE)
Revised Pay As You Earn (REPAYE) is remarkably similar to PAYE. With this plan, your payments are capped at 10% of your discretionary income.
Undergraduate loans will be forgiven after 20 years of consistent payments, and graduate school loans will be forgiven after 25 years of regular payments.
With REPAYE, there’s no income eligibility requirement, meaning that anyone with eligible loans can apply.
However, if your income increases substantially while on the program, you could end up paying more on REPAYE than you would on the standard 10-year plan.
REPAYE is open to everyone with these types of loans:
- Direct subsidized and unsubsidized loans
- Direct Grad PLUS loans
- Consolidated FFEL Stafford loans
- Consolidated FFEL PLUS loans made to grad students
- Consolidated Federal Perkins loans
- Direct consolidation loans, unless they repaid parent PLUS loans or FFEL loans made to parents
Like the other income-based programs, be sure to have proper income documentation available when you apply.
#5. Forgiveness with Income-Contingent Repayment (ICR)
With Income-Contingent Repayment, your monthly payments will be adjusted according to your income. You’ll pay based on a fixed 12-year plan or 20% of your discretionary income whichever is less.
While OCR might not lower your payments as much as the other programs, it is the only plan available to borrowers with Parent PLUS loans. As long as you consolidate them first, you can apply for ICR if you have Parent PLUS loans.
Anyone with federal student loans can apply for ICR, and after 25 years of on-time payments, you will get the rest of your loan forgiven.
#6. Federal Perkins Loan Cancellation
With Federal Perkins Loans, your school is the lender, so they come with a separate forgiveness program. To apply, all you need to do is contact your financial aid office.
To qualify, you’ll need to be a full-time employee in one of these qualifying careers:
- Soldier in an imminent danger pay areas
- Firefighter
- Law enforcement or corrections officer
- A nurse or medical technician
- VISTA or Peace Corps volunteer
- Librarian with a master’s degree (employed by Title 1 eligible schools or public
libraries that serve those schools) - An attorney employed in a federal, public or community defender organization
- An employee for a public or nonprofit organization that helps high-risk children
- A staff member for the educational component of the Head Start program
- A staff member for a state-licensed or regulated pre-kindergarten or child care program
- Professional provider of early intervention services for the disabled
- A speech pathologist with a master’s degree (employed by Title 1 eligible schools)
- Special education teacher for children with disabilities in public, other nonprofit schools or educational service agency
- Teacher in a field designated by the state as teacher shortage areas
- Teacher in a designated educational service agency that serves students from low-income families
- A faculty member at a tribal college or university
With the Federal Perkins Loan cancellation program, You can have up to 100% of your Perkins Loans canceled over five years. In the first and second year, you’ll get 15%, 20% for the third and fourth years, and 30% for the fifth year.
#7. Student Loan Forgiveness For Teachers
Created in 1998, the Teacher Loan Forgiveness program seeks to encourage teachers to take jobs at high-risk elementary schools, secondary schools, and educational service agencies that serve low-income families. The Department of Education posts the list of low-income schools every year.
Once you’ve taught at a qualifying school for five years, you are eligible from $5,000 to up to $17,500 in loans forgiven.
Only Direct subsidized, and unsubsidized loans qualify. 13 states offer this program with varying requirements.
To apply, complete the Teacher Loan Forgiveness Application and submit it to your loan servicer.
#8. Student Loan Forgiveness For Nurses
If you’re a registered nurse, a nurse practitioner, or a member of a nursing facility and work in a high-need area, you could have up to 85% of your loan forgiven under the NURSE Corps Loan Repayment Program.
If you’re qualified, you can have 60% of your loans forgiven after working two years in a high-need area, and another 25% forgiven after working the third year. Your state may also offer loan repayment assistance.
#9. Loan Repayment Assistance for Doctors and Other Healthcare Professionals
If you’re a healthcare professional, more specifically a doctor, dentist pharmacist, or mental health worker, you have plenty of options at both the local and national level to have your loans forgiven.
The requirements and the amount you can have forgiven will vary widely between programs. With the Navy Financial Assistance Program, you can recieve up to $275,000 in loan forgiveness in return for an eight-year commitment for active and reserve duty. The National Health Service Corps can offer you up to $50,000 in loan repayment for two years of work at an approved site.
#10. Loan Repayment Assistance for Lawyers
If you’re a lawyer, there is a financial incentive for you to spend a few years practicing in the public sector or government offices so you can have some of your law school loans forgiven.
The Department of Justice will provide up to $60,000 in loan forgiveness if you work in the public sector for at least three years. The Air Force Judge Advocate program will offer you up to $65,000 in forgiveness.
If you’re a lawyer and you’re interested in having your loans forgiven, the best place to start looking might be your law school. Several colleges forgive all or at least a portion of the loans for students making less than $60,000 a year. That amount can vary, so check with your school.
#11. Student Loan Repayment Assistance Programs For Other Careers
Most state Loan Repayment Assistance Programs will offer you loan forgiveness if you give them two years of service. If you’re a doctor, nurse, teacher, or lawyer, you will have a better shot at having your loans forgiven, but some other career paths will qualify as well.
Other programs award people in STEM careers, such as the Alfond Leaders Program in Maine. Even if you don’t think your job will qualify, check your state’s offerings to be sure.
#12. Military Student Loan Forgiveness and Assistance
The military will offer you loan forgiveness if you’re an Army navy doctor, and it also helps you if you’re an armed forces member or veteran. The Army, Navy, Air Force and National Guard all offer you loan repayment assistance programs.
For instance, the Army’s College Loan Repayment Program pays a third of your loans every year for three years. In total, you could get up to $65,000 in aid. The Navy program also awards up to $65,000, and the National Guard LRAP will offer up to $50,000.
If you’re a member of the military, there are plenty of other programs out there that will offer you loan forgiveness, so make sure you know what you qualify for.
Student Loan Discharge for Special Circumstances:
Even though we said earlier that loan forgiveness and discharge are not the same, it’s still worth taking a minute to talk about student loan discharge.
Student loan discharge is generally awarded by a judge and could apply to both your Federal and private student loans. Keep in mind that discharge is granted under extremely rare circumstances.
Some of those circumstances are:
- Permanent disability
- Death
- Victim of identity theft
- Unauthorized signature of the loan by the school without your knowledge
- False certification of student eligibility
- Bankruptcy, but it’s extremely rare. It’s not an impossibility, but demonstrating undue hardship is very difficult.
Other Options
If you discover that you don’t qualify for any of the programs above, you may still have options. The first thing to do is to use one of the income-based repayment programs that were noted above.
If your loans don’t qualify for those, or you need a break on payments, you should consider putting your loans into deferment or forbearance.
One way to qualify for forbearance is to return to school. Another is if you encounter financial hardship. If you have a private lender, they may also put your loan into forbearance, so speak with your lender about your options.
The next step to consider would be refinancing. When you refinance, you have the chance to adjust your monthly payments and choose new payment terms, between five and twenty years.
If you qualify for a lower interest rate than you currently have, you’ve already saved money. If you have multiple loans, you can combine them into one loan to simplify repayment and cut down on interest costs.
However, keep in mind that once you refinance your loans, that turns them private. Once they’re private, you instantly lose access to all the forgiveness and repayment plans we discussed above.
If you’re comfortable with this, refinancing is a great option that can help restructure your debt and save you money on interest.
Keep Searching
Getting help repaying your loans may feel like a daunting task, but it’s one that is well worth it. There are countless ways to have your student loans forgiven and your payments restructured. Your job and where you live could qualify you for partial or total forgiveness.
Don’t need to feel obligated to stick to the plan you had at the beginning. Adjust your plan as your life, your goals, and your circumstances change.
By exploring the options above, and speaking with your state and school organizations, you are bound to find the best student loan solution for you, propelling you towards a debt-free life.
