The Easy Guide to Student Loan Forgiveness Programs and Options

Student loans are a major monthly financial commitment for many Americans. The average student loan debt in 2021 is $37,693, and the average monthly payment borrowers are making on student loans is $393. As the cost of higher education continues to rise, financial aid will continue to be a necessary tool for many people to pursue college attendance and middle-class jobs.

Many people with student loans are eager for any avenue to alleviate the burden they place on their monthly budgets and buying power. While only a small number of borrowers may qualify, student loan forgiveness and assistance programs are available to some.

For those who qualify, student loan forgiveness could be life-changing. 

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What does student loan forgiveness mean?

There is a lot of uncertainty about whether or not large-scale student loan forgiveness is on the horizon. While future policy decisions around student loans may not be certain, numerous student loan forgiveness programs already exist, and many borrowers may be eligible for a loan forgiveness program that they don’t even know about. 

Those in certain circumstances are eligible to have some or all of their student loan debt forgiven, and given that nearly 45 million people owe trillions of dollars in student loan debt, it’s important to be familiar with the options and to avoid scams that might try to charge you for services you can get for free. 

How does student loan forgiveness work?

Student loan forgiveness programs exist to incentivize highly qualified candidates to pursue certain types of work that are in the public interest, but that may not pay as well as more competitive corporate jobs. Some other types of loan forgiveness exist to right a wrong, such as a for-profit college that closed without allowing a student to finish a degree. 

While most borrowers won’t qualify for student loan forgiveness, it can be a boon to those who do, since they tend to work in lower-paying jobs than peers with similar amounts of education who work in private-sector or corporate jobs.

Student-loan forgiveness is a constantly changing issue. As recently as Aug. 19, 2021, President Joe Biden announced that federal student loan debt would be wiped out for 323,000 borrowers

According to Forbes, the administration is canceling debt through the Total and Permanent Disability discharge program. The TPD Discharge program allows student loan borrowers who are unable to maintain gainful employment due to a physical or psychological medical impairment to get their federal student loans canceled. However, if you think you qualify, you’ll need to submit a formal application. 

Loan forgiveness vs. loan discharge

Although the terms are often used interchangeably, student loan forgiveness is different from loan discharge. Loan discharge applies only in specific circumstances, generally beyond the borrower’s control. 

Loans may be eligible for discharge in the event of:

The borrower’s death or permanent disability

In the event of the borrower’s death, a parent may have the balance of the loans for which they cosigned discharged. If a parent took out a Parent PLUS Loan for their child, that loan is also eligible for discharge. They must submit proof of death to the student loan servicer to obtain a discharge.

In the event of Total and Permanent Disability (TPD), borrowers may apply to have their loans discharged by submitting proof of disability either through VA documentation (for veterans), Social Security documentation, or a physician. 

School closure before the borrower obtains a degree

If a borrower is able to transfer to another school or had withdrawn before the school closed, those loans may not be eligible for closed school discharge

School’s falsification of loan qualifications

Schools are required to certify that borrowers are capable of benefiting from their course of study, as well as whether the borrower qualifies for student loans based on several factors. If a school misrepresents any of these qualifications, the borrower may qualify for discharge based on false certification

School’s failure to refund required loans to lender

When a student withdraws from a school before using a portion of their student loan, the school must refund that unused portion back to the loan servicer. If a school fails to do so, borrowers may be eligible for an unpaid refund discharge

Identity theft used to secure a loan in another name

Borrowers should report suspected identity theft to the loan servicer to pursue a discharge of fraudulent loans.

Misleading or illegal conduct on the part of the school

Borrower Defense Loan Discharge offers to discharge loans for students whose schools violated state law by misleading students about the promise of a job upon graduation, practicing illegal recruiting tactics, or in other circumstances. 

How to get your student loans forgiven

Perhaps one of the best-known loan forgiveness programs, Public service loan forgiveness (PSLF) applies to borrowers who choose to work in qualifying jobs for ten or more years while making payments towards loans. 

Workers qualify if they work for a federal, state, local, or tribal government agency (including a public school), a tax-exempt 501(c)(3) nonprofit organization, or a limited number of non-tax-exempt nonprofits. 

PSLF requires annual recertification of qualifying employment and requires borrowers to use one of a small number of eligible repayment plans, most calculated based on their income. 

Once enrolled, they must make 120 qualifying on-time payments, after which the balance of the loans is forgiven. Borrowers seeking PSLF should be vigilant to ensure they are submitting their employer recertification and updating their income annually, since the PSLF program has a notoriously low acceptance rate to this point. 

What if you have an FFEL loan?

While FFEL loans aren’t eligible for public service loan forgiveness, they may be consolidated into direct loans in order for FFEL borrowers in qualifying jobs to enroll in PSLF. Only qualifying payments on the new Direct Consolidation Loan can be counted toward the 120 payments required for loan forgiveness, though Temporary Expanded Public Service Loan Forgiveness (TEPSLF) may allow for some exceptions. 

What is a Perkins loan?

A Perkins loan is a federal student loan made by a school for students who demonstrate financial need. These loans were available through September 2017. If you have received a Perkins loan, you may be eligible for partial or full forgiveness or discharge under certain conditions. 

If Perkins loans are consolidated into Direct Loans (for example, to be included in Public Service Loan Forgiveness), they become ineligible for Perkins Loan Forgiveness, though, so be careful about consolidating Perkins Loans.

If you fall into any of these categories, you will qualify for partial Perkins Loan Forgiveness for each year you hold such a position, up to 5 (or 7) years:

  • Teacher in one of the following roles or settings:
    • A low-income school in which 30% or more of students qualify for Title I services
    • A shortage area such as math or science. Find a comprehensive list of teacher shortage areas by state and by year here
    • Providing instruction or services to students with disabilities as a special education teacher.
  • Childcare provider in a Head Start program or a low-income or high risk area
  • Professional provider of early intervention (disability) services
  • Member of Tribal colleges and universities
  • Employee at a child or family services agency
  • Speech pathologist (with master’s degree at Title I school)
  • Librarian (with master’s degree at Title I school)
  • Faculty member at a tribal college or university
  • Nurse or medical technician
  • Full-time firefighter
  • Full-time law enforcement or corrections officer
  • Military service
  • Attorney (public defender)
  • Volunteer service  with AmeriCorps VISTA or Peace Corps

Income-driven repayment forgiveness

Income-driven repayment forgiveness is available to low-income borrowers enrolled in one of four different payment plans that calculate payments based on the borrower’s income. After 20 or 25 years of payment, any remaining balance is forgiven. For each of these plans, borrowers must submit an application each year and have their income reassessed. Payments will then be adjusted to reflect changes in income.

Teacher Loan Forgiveness Program

While teachers may qualify for Public Service Loan Forgiveness and Perkins Loan Forgiveness, the Teacher Loan Forgiveness Program is another option. This program offers up to $5,000 in loan forgiveness for highly qualified teachers in low-income districts, and up to $17,500 to special education, math, and science teachers. These funds are available after the completion of 5 years of teaching in a qualifying position. 

Teachers hoping to take advantage of this program should be cautious. A borrower cannot count monthly payments toward both teacher loan forgiveness and Public Service Loan Forgiveness, so only borrowers with smaller balances (small enough that $5,000 or $17,500 would significantly impact their loan balance after five years) are likely to benefit from this program.

Other options

There are several options for loan assistance for nurses in addition to Public Service Loan Forgiveness for Direct Loans and Perkins loan forgiveness for Perkins loans. 

  • The Nurse Corps Loan Repayment program pays up to 85% of unpaid nursing education debt for qualifying nurses who work in a critical shortage facility or eligible nursing school.
  • The National Health Service Corps Loan Repayment program offers repayment of student loans in exchange for 2 years of full- or half-time service as a healthcare provider in a NHSC approved site (up to $25,000 for half-time service or $50,000 for full-time service), with the option to continue in the program and earn additional assistance up to full repayment of all student loans. NHSC-approved sites are generally outpatient facilities providing primary medical, dental, and/or mental and behavioral health services. For more information about qualifying sites, click here
  • Other programs from the National Health Service Corps assist providers who work in substance use disorder care,  qualifying rural communities, or Indian Health Service facilities. Refer to the NHSC loan repayment comparison page for help finding the repayment program that is right for you. 

Options for doctors and other healthcare professionals

In addition to potentially qualifying for Perkins Loan Forgiveness or Public Service Loan Forgiveness, doctors and other healthcare professionals have additional loan repayment options:

  • Healthcare providers may be eligible for loan forgiveness through the National Health Service Corps.To qualify, providers must meet certain criteria, including providing medical, dental, or behavioral and mental health services at an NHSC-approved site. NHSC-approved sites are generally outpatient facilities providing primary medical, dental, and/or mental and behavioral health services. For more information about qualifying sites, click here.
  • Other programs from the National Health Service Corps include specific providers who work in substance use disorder care, qualifying rural communitiesIndian Health Service facilities, or — if you are a student in your last year of medical school training — in any of a range of health professional shortage areas. Refer to the NHSC loan repayment comparison page for help identifying the type of repayment program that might be right for you. 
  • Many states offer student loan repayment options for doctors and healthcare providers. Check the Association of American Medical Colleges’ database of state forgiveness programs that may be available to you. 
  • The National Institute of Health offers student loan forgiveness for medical doctors with qualifying degrees who commit to biomedical or biobehavioral research careers. The NIH will pay up to $50,000 annually of a researcher’s qualified educational debt in return for a commitment to research the organization prioritizes. 

Loan repayment assistance for lawyers

Like other professions, lawyers may qualify for Perkins Loan Forgiveness or Public Service Loan Forgiveness. However, many other profession-specific loan assistance options exist for attorneys:

  • Through the Attorney Student Loan Assistance Program, the Department of Justice offers loan repayment assistance for attorneys who commit to work for them for three years. The DOJ requires attorneys to have a balance of at least $10,000 in student loan debt to qualify, and they match the qualifying attorney’s loan payments up to $6,000 
  • The John R. Justice Foundation offers grants to public defenders and other qualifying attorneys. Grantees receive funds to use towards outstanding student loans. 
  • The Herbert S. Garten Loan Repayment Assistance Program provides grants to attorneys selected through a lottery system. 
  • The Loan Repayment Assistance Program provides forgivable loans to attorneys in low-paying public-interest sectors. Attorneys can use these funds to pay off their loans, and the balance on the loans is forgiven once the required service term ends.

Military student loan forgiveness and assistance

Those who serve in the military can also qualify for Perkins Loan Forgiveness or Public Service Loan Forgiveness. In addition, the following programs provide opportunities for assistance on student loan repayment or those serving in the military.

  • The Army’s College Loan Repayment Program offers to pay up to ⅓ of of the outstanding principal balance, less taxes of the Soldier’s student loans annually (or $1,500, whichever is greater) after each year of service up to three years total (up to $65,000, less taxes). This program is available for newly enlisting soldiers who are specified Military Occupational Specialties. Full time members of the Army National Guard or Army Reserves can qualify, too, but the requirements and payout amounts can vary. The Navy and Air Force run  similar programs, paying up to $65,000 over 3 years to qualifying service members who enlist. 
  • The Army also provides loan assistance for officers in the U.S. Army Medical Department. They offer up to $120,000 over 3 years towards student loans for doctors, dentists, and physician’s assistants. Even those in the Army Reserves qualify for a portion of this benefit. 
  • For those holding Perkins loans, the National Defense Student Loan Discharge program for those who served in “hostile-fire” or “imminent-danger” locations. This program can provide discharge of up to half of the loan balance for those who completed service prior to Aug 14, 2008, or up to all of the loan balance for those who completed service after that. 
  • In addition to loan assistance or discharge, other benefits such as specific deferments and waivers may be available. The Department of Federal Student Aid provides this resource that identifies key benefits. 

Will your student debt be forgiven? Watch this video to learn more:

“Obama Student Loan Forgiveness”

Obama Student Loan Forgiveness was a term adopted by companies looking to take advantage of desperate borrowers struggling to make student loan payments. While many student loan forgiveness programs existed during the Obama administration, these programs have their own rules, benefits, and qualification criteria. In general, companies calling borrowers or sending out mailers advertising Obama Student Loan Forgiveness are trying to convince borrowers to pay to enroll in what should be a free student loan forgiveness program. 

If the federal government or a state government establishes student loan forgiveness programs, they will be free for participants. Your loan servicers may be able to help you identify programs you qualify for and advise you about which might be the best fit for you, or you can do your research online and identify those programs yourself. 

Whatever you do, never pay someone to enroll you in a loan forgiveness program. Anyone asking for payment to enroll you in a free program is simply trying to exploit your student loan debt for their own benefit. 

Repayment plans with loan forgiveness

If you are enrolled in any forgiveness program that comes along with the requirement to have your loans on an income-based repayment plan, these are your options. They are similar; they determine your monthly payment based on your discretionary income. But they differ in some ways that may make one a better fit than another.

Pay as You Earn (PAYE) and Revised Pay as You Earn (REPAYE)

These programs are very similar: Both are calculated based on 10 percent of your discretionary income. However, the PAYE plan is never more than the standard repayment plan option. This difference could matter if your income increases significantly due to a raise at work or marriage to a high-income earner.

Under these plans, borrowers will qualify for loan forgiveness after 20 years of on-time payments if the loans are for undergraduate study. For graduate loans on the REPAYE plan, you will take 25 years to reach forgiveness. 

Income-Based Repayment (IBR)

If you were a new borrower before July 1, 2014, your payment will generally be 10 percent of your discretionary income. For these borrowers, loans can be forgiven after 20 years of on-time payments. 

For borrowers on this plan with older loans, the payment is generally 15 percent of your discretionary income. Loans can be forgiven after 25 years of on-time payments. 

In both cases, payment is never more than the 1-year Standard Repayment Plan amount. 

Income Contingent Repayment (ICR)

Monthly payments on this plan will be 20 percent of your discretionary income, or what you would pay on a repayment plan with a fixed payment over the course of 12 years –whichever is lower. These loans can be forgiven after 25 years of on-time payments. 

Employer assistance

The federal student loan repayment program permits agencies to repay a portion of federally insured student loans as a recruitment or retention incentive for job candidates or current agency employees. Check with your human resources department to see if your employer participates.

Borrower Defense Loan Discharge

Borrower Defense Loan Discharge offers to discharge loans for students whose schools violated state law by misleading students about the promise of a job upon graduation, practiced illegal recruiting tactics, or in other circumstances. 

Perhaps the most famous example of a for-profit school defrauding its students is Corinthian College. This chain of schools closed in 2015 after defrauding students out of millions of dollars using false job placement data and other deceptive practices. Students who obtained federal student loans to attend this school are eligible to have all of their student loans forgiven.

In order for your loans to be discharged through the borrower defense program, you’ll need to file a claim via an application on the U.S. Department of Education website.

Drawbacks of student loan forgiveness and repayment plans 

Longer repayment term means more interest

Most student loan forgiveness programs require or encourage borrowers to enroll in an income-driven repayment plan. Depending on a borrower’s income, the resulting monthly payments may be much lower than on a standard repayment plan, extending the life of the loan. Income-driven repayment plans require 20-25 years of on-time payments, while standard repayment schedules generally take only 10 years. You’ll likely end up paying more over the course of those 20-25 years than you would have if you’d paid off the loan yourself on a standard repayment plan.

It might be better to find a job with better earning potential

If you are pursuing Public Service Loan Forgiveness or any of the profession-based loan forgiveness options, you may need to work in a lower-wage job in order to qualify for the forgiveness program. If you decide to leave your job before the end of the required years of service, you may no longer qualify for the forgiveness program and have to return to the standard repayment plan. You may pay off your loans more quickly and pay less in interest if you opt for a job with higher earning potential, even if it means you don’t qualify for forgiveness. 

IRS ramifications

At one time, borrowers who received student loan forgiveness sometimes were required to pay taxes on the amount of forgiveness they received. Due to 2021’s American Rescue Plan Act, any student loan debt that’s been forgiven will not count as taxable income for the 2021-2025 tax years, but it’s unclear how that forgiveness will be treated in the years that follow. Additionally, other forms of student loan assistance such as grants may need to be claimed as income, so be sure you check with the granting institution for details. 

Be sure to get written verification if you participate in any debt forgiveness program

Loan forgiveness programs have very specific criteria for qualification. Some programs, like PSLF, have a notoriously high rejection rate, usually for applicants who simply didn’t have their documents in order. It’s important that you know for sure that you qualify for a forgiveness program, that you know how to apply, and that you take all the necessary steps for the life of the loan to avoid losing that forgiveness.

Specialized student loan assistance programs

AmeriCorps is an organization that enlists members to work in high-needs nonprofit and public service jobs for a small stipend for a set amount of time, typically two years. AmeriCorps members are eligible for interest-free student loan deferments while they work with the program. Upon completion of the program, service members can receive the Segal AmeriCorps Education Award, which can be used to repay student loans or for other educational expenses. The amount of this award is equal to the maximum amount of the Pell Grant for the year. In 2021, that amount is $6,495.

How do I apply for student loan forgiveness?

Each type of student loan forgiveness requires a different process. For some, you must enroll and recertify employment and income for the life of the loan. For others, you can simply apply when you’ve satisfied the requirements. Refer to the pages for each specific type of forgiveness to find links that will guide you through the program-specific application details. You may also check with your loan servicer for help enrolling in a loan forgiveness program. 

How do I apply for student loan discharge?

Each type of loan discharge has its own criteria and application process. 

  • In the event of the borrower’s death, their parent or cosigner can submit proof of death to the student loan servicer,
  • For Total and Permanent Disability, borrowers may apply here.
  • For school closure discharge, borrowers may apply here
  • For discharge based on the school’s false qualification of the borrower, choose the type of falsification you’re claiming from the list here
  • For an unpaid refund discharge, complete the application here and submit it to your losn servicer.
  • For the Borrower Defense Loan Discharge program, apply here

Federal policy changes and COVID-19 exceptions

The coronavirus pandemic has only made the catastrophic student debt situation worse. As a result, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020, which did the following for student loan borrowers: :

  • Suspended loan payments 
  • Stopped collections on defaulted loans
  • Instituted a 0% interest rate on federal loans

These measures have been extended several times, most recently by the Biden Administration on Aug. 6, 2021. The COVID-19 emergency relief measures have now been extended until Jan. 31, 2022. The Department of Education warned that there would be no further extensions and that borrowers should prepare to resume payment in February 2022.

Good news for students working towards Public Service Loan Forgiveness or an income-driven repayment plan: these months will still count towards your loan forgiveness as long as your other eligibility requirements are met. Contact your loan servicer to ensure you are doing everything you need to do to remain eligible.

Collapse of for-profit colleges

While for-profit colleges continue to enroll students (and at higher rates than other schools during the coronavirus pandemic), many have recently closed and, at times, left students with few options. The Department of Education has been stepping up to provide aid to students who were defrauded or left without options by for-profit colleges like Corinthian College, ITT Tech, and the Art Institute. If you attended a for-profit college that behaved in a deceitful way and/or closed while you were enrolled, you may qualify for loan discharge.

Do your homework to see if you qualify for student loan forgiveness

For low-income earners, those working in public service, those who have been defrauded or misled by schools, or those working in key industries serving the public interest, student loan forgiveness or discharge may be possible. Borrowers who qualify should contact their servicers to see how to enroll in, maintain, or apply for forgiveness or discharge, and those who qualify for other forms of assistance should apply to those repayment programs directly. 

For students who don’t currently qualify for forgiveness programs, there are other options such as debt consolidation that may be beneficial. In addition, staying informed about student loan-related legislation could benefit many borrowers, particularly those who don’t currently qualify for a forgiveness program but might in the future.