Student loan forgiveness continues to be a hotly debated topic as millions of Americans find themselves drowning in student loan debt—$1.762 trillion of it, to be exact. With the average student loan balance owed per borrower being $37,014 and the average student loan interest rate being 5.8%, you're in good company if your student loan statement makes your eyeballs water a little every time you think about it.
The pressing question is: Can you reduce or eliminate your student loan debt through a forgiveness program?
Whether you qualify for student loan forgiveness depends on the debt forgiveness program and its requirements. Currently, only loans obtained through the federal government are eligible. However, forgiveness is mostly income or job-based or only applies in special circumstances like fraud.
If you want to understand more about who qualifies, which loans are eligible, and how to apply, you'll find all you need to know in this post.
Who Qualifies For Student Loan Forgiveness?
If you received a direct loan or Stafford loan (which replaced direct loans in 2010) for your studies from the federal government, there's a chance you may be eligible to apply for student loan forgiveness. You may also qualify if you consolidated other federal loans into one Direct Consolidation Loan. However, the chance is small.
Let's put it into perspective for you:
There are currently 43.4 million borrowers with federal student loan debt. Of that group, around 9 million people are eligible for forgiveness programs. Of that group, only 130,730 have had debt canceled. That's less than 2%.
True, the approval rate doesn't sound promising. But the upside is that there is a chance. With a private loan, you cannot get any forgiveness at all. While certain private lenders may offer some forms of relief, such as lower interest rates or pausing payments for a period, private student loans don't qualify for forgiveness through government or independent programs.
So, who within the group of federal student loan borrowers qualifies?
You may qualify if:
- You're a full-time government or nonprofit employee (includes military service members, frontline healthcare workers, etc.)
- You've been consistently making payments on your loan for at least 20 years
- You teach in a low-income school or educational service agency
- You are permanently disabled
- Your school defrauded you or broke specific laws
- Your school closed
Does it sound like you fall into any of these categories? If so, let's explore your next steps.
How To Apply For Student Loan Forgiveness?
Since there are several programs for federal student loan forgiveness, the steps for applying depend on which program is relevant to your situation. We outline each of these programs and how to apply below. However, you should still contact your student loan servicer to determine your eligibility before submitting an application.
Without further ado, let's dive in!
1. The Public Service Loan Forgiveness Program
Qualifying loans: Direct Loan Program loans.
How it works: The Public Service Loan Forgiveness Program (PSLF) is designed to encourage students to pursue low-income careers in government, teaching, nursing, the military, firefighting, public interest law, and religious work.
The program discharges a borrower's remaining federal student loan balance after the individual makes 120 qualifying monthly loan payments under an income-driven repayment plan while working full-time for a U.S. federal, state, local, or tribal government or a nonprofit.
To fix issues with this program, lawmakers temporarily expanded the program to count payments made under an incorrect repayment plan. This is called the Temporarily Expanded Public Service Forgiveness Program (TEPSLF). They expanded it a second time (known as the Limited PSLF Waiver) to give borrowers an opportunity to get credit for Federal Family Education Loan (FFEL) payments, late payments, and payments made under a repayment plan that's ineligible.
Eligibility: You're a full-time employee of the government, a 501(c) (3) nonprofit organization, a qualifying employer that provides a public service, AmeriCorps or the Peace Corps, or a religious organization. Use the PSLF Help Tool to check your eligibility based on your employer and the types of loans you have.
How to apply: Download the PSLF Form or use the help tool already mentioned. Once completed, submit your application to MOHELA. The form is the same whether you're submitting it for the PSLF, TEPSLF, or PSLF Waiver programs. You should submit the form annually or when you change employers to ensure you're on the right track and making qualifying payments.
*Note: You can consolidate FFEL and Perkins Loan Program loans into a Direct Consolidation Loan and also take advantage of PSLF.
2. Income-Driven Repayment (IDR) Plans
Qualifying loans: Direct Loan Program loans and FFEL Program loans, including Parent PLUS Loans.
How it works: The federal government offers four IDR plans that essentially cap your loan repayments at a percentage of your monthly income.
These plans include:
- Income-Based Repayment (IBR),
- Pay As You Earn (PAYE),
- Revised Pay As You Earn (REPAYE), and
- Income-Contingent Repayment (ICR).
IDR plans are particularly helpful for borrowers who are struggling financially, as they are based on discretionary income and family size. Depending on your plan, repayments will be 10% to 20% of your discretionary income for a 20 or 25-year term. As part of this process, you'll need to recertify your income and family size annually, as well as ensure you make payments on time.
Six months before you're due to make your final payment, your student loan servicer will inform you that your final payment is approaching. Once you make your final qualifying payment, the Education Department will write off your remaining loan balance.
Eligibility: Your loan payments are up to date, and your payment under an IDR plan is less than what you pay under a standard plan with a 10-year repayment term.
How to apply: Submit an Income-Driven Repayment Plan Request. The application lets you select a specific IDR plan or request that your student loan servicer determine which plan you qualify for and put you on the plan with the lowest monthly repayment amount. You'll need to submit a separate request for each loan servicer you have if you have more than one.
*Note: Federal Perkins Loan Program loans are also eligible if consolidated into a Direct Consolidation Loan.
3. Teacher Loan Forgiveness Programs
Qualifying loans: Direct Loans and FFEL Program loans.
How it works: The Teacher Loan Forgiveness Program forgives up to $17,500 if you work full-time for your local school district, an educational service agency, or a nonprofit school for a minimum of five years. The amount forgiven depends on the category of teacher. For example, math, science, or special education teachers may receive the full $17,500 in forgiveness, while other eligible teachers can only qualify for up to $5,000.
Eligibility: You're a highly qualified teacher who has been working full-time at an eligible low-income elementary or secondary school for five complete and consecutive academic years. One of those years must have been after the 1997-98 academic year.
How to apply: Download the Teacher Loan Forgiveness Application, fill it out, and submit it to your student loan servicer.
4. Total and Permanent Disability (TPD) Discharge
Qualifying loans: Direct Loans, FFEL Program loans, and Perkins Loans.
How it works: If you suffer a severe and permanent mental or physical disability that leaves you incapable of working full-time, the Department of Education will eliminate any student loan balance you carry. Although you can still work, your income must be below Poverty Guidelines for a family of two, no matter your family size. You'll need to provide relevant documentation proving your claim.
Eligibility: A doctor, VA, or SSA can certify that you are unable to engage in substantial gainful activity due to medically diagnosed mental or physical impairment, you're a veteran with service-connected disability, or you receive Social Security Disability benefits.
*Note: Many private lenders also offer forgiveness for permanent disability, so you'll need to explore your options for applying if you have private loans.
5. Borrower Defense to Repayment
Qualifying loans: Direct Loans.
How it works: If your for-profit school defrauded you, the Borrower Defense to Repayment program lets you file a claim to have your loan completely discharged. Some well-known cases of school fraud include Corinthians Colleges, ITT Technical Institute, DeVry University, the University of Phoenix, Grand Canyon University, and the Art Institutes,
Eligibility: Your school misled you, engaged in misconduct, or violated state law concerning your loan or the educational services provided.
6. Closed School Discharge
Qualifying loans: Direct Loans, FFEL Program loans, and Perkins Loans.
How it works: If your school closes while you are in attendance or soon after you withdraw, your student loan servicer will discharge your federal student loan debt so that you don't have to settle the outstanding balance. However, you will need to continue to make repayments while you wait for your approval. If approved, you may be refunded some or all of this money.
Eligibility: Your school closed while you were enrolled, or you left within 120 days of closure. You also didn't complete your program at the school in question or at a new school.
How to apply: Download the Loan Discharge Application Form, fill it out, and then submit it to your student loan servicer.
While these are just some student loan forgiveness options, there are loads more that offer opportunities for debt forgiveness, cancellation, and discharge. Look for job-related programs, as well as state-specific programs, for which your federal loan is eligible. Be sure to do your due diligence to see if it's the right solution for you.
Although having your student loan debt wiped out may be cause for celebration, the harsh reality is that there are some cons to the process. Besides possible tax consequences, your debt could increase while you wait to meet certain requirements, and you may lose out on earning a higher salary. Forgiveness approval can also take years and isn't guaranteed, so you'll need to consider this before applying.
Student loans are an overwhelming burden for millions of Americans. You're not only at the mercy of unyielding student loan providers, but your loan is also subject to ever-changing political powers that seek to modify forgiveness programs. Although it's not easy to get forgiveness, and it may even take years, it's not impossible.
To ensure you give it your best shot, make sure you meet all eligibility criteria before you apply to the relevant forgiveness program. You'll also want to have all of your correct and complete information along with the required documentation.
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.