Student Loans

The Ultimate Guide to Student Loan Forgiveness Programs

federal student loan forgiveness

According to the Social Security Administration, men with bachelor’s degrees earn more than male high school graduates who have no degree by $900,000 over the course of their lifetime. Women with bachelor’s degrees earn an additional $630,000 more than their female peers who only have a high school diploma.

The takeaway? A college diploma clearly pays dividends. And yet, a recent analysis from Pew Research revealed that many college graduates don’t feel that way. Among graduates ages 25-39 who carry student loan debt, only 51% said it was worth it.

Student loan debt is so overwhelming that it’s skewing the perception of the value of college for many workers headed toward their prime earning years. Luckily, there are ways out for many borrowers who find themselves in over their head. The most alluring of these paths is student loan forgiveness.

In this guide, we’ll explain everything you need to understand loan forgiveness – how it works, who it’s best for and where the future of loan forgiveness stands in the current political climate.

Understanding student loan forgiveness

Student loan forgiveness is when an organization writes off your debt or pays it off for you. This forgiveness may be total or it may only take care of a portion of your debt.

Typically when we’re talking about organizations that write off your debt via forgiveness, we’re talking about the U.S. Department of Education forgiving a loan issued by the federal government.

Organizations that pay off your debt as a form of forgiveness may be tied to your profession, state, locality or any combination of the three.

The positive aspects of student loan forgiveness are powerful. Large chunks of your debt fall away, allowing you to strive toward new financial goals like owning a home or fully funding your retirement account every single year.

However, it’s important to learn about the drawbacks, too. First of all, you can’t necessarily plan for a program to last forever. For example, the PROSPER bill has been introduced in Congress. This bill would eliminate the largest federal forgiveness program — Public Service Loan Forgiveness (PSLF) — for students who begin borrowing for college on June 30, 2019.

This bill may not pass, and if it does, it will likely undergo several revisions before being sent to the president’s desk. But it does demonstrate that these programs are subject to the whims of our legislative branch, and that we can’t count on them to be around in perpetuity.

Aside from lack of permanency, you should also be aware that in most cases, you will be liable for taxes on any amount that is forgiven. That means that if you had $5,000 forgiven, it would count as $5,000 of taxable income on your Form 1040.

Types of student loan forgiveness programs available

There are at least a dozen different options if you’re looking for student loan forgiveness, but none is a one-size-fits-all solution. Be sure to consider carefully the eligibility requirements, and the pros and cons of each.

Income-driven repayment plans

The education department offers student loan forgiveness for several different types of income-driven repayment plans. Any amount forgiven on an income-driven repayment plan is taxable. In the table below, check out the four different IDR plans and who they’re best for.

 

Revised Pay As You Earn (REPAYE)
Who is eligible? -Those with direct Subsidized or Unsubsidized loans.
-Students with direct PLUS loans.
-Those with direct consolidation loans — as long as these loans don’t include any PLUS loans issued to parents.
What your monthly payments will look like Subtract 150% of the Federal Poverty Line (annual) from your income. Divide by 12. Your monthly payment will be 10% of the dividend. If you are married, your spouse’s income will be counted, too.
Student loan forgiveness -Remaining balance will be forgiven after 20 years of payment on loans taken out for undergrad studies.
-Remaining balance will be forgiven after 25 years of payments on loans take out for graduate or professional studies.
Who is the plan best for? Those planning to enter low- to middle-income professions.
Who should steer clear? Those planning to enter higher income professions. Ten percent of your discretionary income may end up being more than you’d pay on a Standard Repayment Plan.
Pay As You Earn (PAYE)
Who is eligible? -Those with direct Subsidized or Unsubsidized loans.
-Students with direct PLUS loans.
-Those with direct consolidation loans — as long as these loans don’t include any PLUS loans issued to parents.
What your monthly payments will look like Subtract 150% of the Federal Poverty Line (annual) from your income. Divide by 12. Your monthly payment will be 10% of the dividend. You do not qualify for this program if your monthly payment would exceed the amount you’d be paying on a Standard Repayment Plan.
Student loan forgiveness Remaining balance will be forgiven after 20 years.
Who is the plan best for? Low- or middle-income earners who want their debt forgiven earlier than the REPAYE program allows.
Who should steer clear? Those carrying direct consolidation loans which include a Parent PLUS loan.
Income-Based Repayment (IBR)
Who is eligible? -Those with direct Subsidized or Unsubsidized loans.
-Those with Subsidized and Unsubsidized Federal Stafford Loans.
-Students with PLUS loans.
-Those with direct or FFEL consolidation loans — as long as these loans don’t include any PLUS loans made to parents.
What your monthly payments will look like Those who started borrowing from the federal government for school on or after July 1, 2014 can subtract 150% of the Federal Poverty Line from your income. Divide by 12. Your monthly payment will be 10% of this number. Those who started borrowing prior to July 1, 2014 will pay 15% instead of 10%.
Student loan forgiveness Remaining balance will be forgiven after 20 years of payment for borrowers who took out their first federal loan on or after July 1, 2014.
Remaining balance will be forgiven after 25 years of payments for borrowers who took out their first federal loan prior to July 1, 2014.
Who is the plan best for? Those who started borrowing on or after July 1, 2014.
Who should steer clear? Those who started borrowing prior to July 1, 2014. Your payment would be lower on REPAYE or PAYE.
Income-Contingent Repayment (ICR)
Who is eligible? -Those with direct Subsidized or Unsubsidized loans.
-Students with direct PLUS loans.
-Those with direct consolidation loans.
What your monthly payments will look like Subtract 100% of the Federal Poverty Line from your income. Divide by 12.
Your monthly payment will be 20% of the difference.
If that 20% would exceed the amount you’d pay monthly on a 12-year fixed plan, your monthly payment will be reduced to the 12-year fixed rate.
Student loan forgiveness Remaining balance will be forgiven after 25 years.
Who is the plan best for? -Those who have direct consolidation loans with include Parent PLUS loans.
-Those with a variable income, as your payment has a cap regardless of how much you earn.
-Those anticipating larger salaries as they progress in their career.
Who should steer clear? Low- and middle-income earners who don’t expect to see a huge jump in salary throughout their career. You’ll pay more per month on this program than PAYE, REPAYE or IBR.

 

If you decide you’ve found your best match in one of the above programs, you can begin the application process here.

Federal Perkins loan cancellation

If you have a federal Perkins loan, you may be able to have it partially or fully forgiven, depending on your profession and the population you serve with your education.

5-year service cancellation

How it works: In years one and two, you will see 15% of your debt principal forgiven. In years three and four, you’ll see 20% of your debt principal forgiven. On the fifth year of service and onward, you’ll see the final 30% forgiven.

Who’s eligible: The following professionals may apply for 100% forgiveness over the course of five years:

  • Full-time, non-administrative educational professionals in:
    • Nonprofit, private elementary or secondary schools.
    • Preschool or pre-kindergarten programs considered to be part of elementary education by your district.
    • Any low-income school.
    • Educational service agencies, as long as your service happened on or after Aug. 14, 2008.
    • Special education programs as a full-time special education teacher.
    • Special education programs as a certified, licensed or registered speech and language pathologist, audiologist, physical therapist, occupational therapist, psychological or counseling professional, or recreational therapist.
    • Teacher shortage areas.
    • Title-I eligible schools as a speech pathologist or librarian with a master’s degree. Your service dates must have occurred on or after August 14, 2008.
  • Full-time nurses or medical technicians.
  • Full-time firefighters as long as your eligible service dates are on or after Aug. 14, 2008.
  • Full-time early intervention professionals working with disabled children.
  • Full-time faculty members at tribal colleges and universities.
  • Full-time law enforcement/corrections officers.
  • Full-time public and community defenders.
  • Professionals serving low-income, high-risk children and families through a public agency or nonprofit.

Learn more

7-Year service cancellation

How it works: For the first six years, 15% of your loan principal will be forgiven. In the seventh year, you will see the remaining 10% wiped out.

Who’s eligible: These professionals may apply to have your federal Perkins loan completely forgiven over the course of seven years:

  • Full-time Head Start staff members.
  • Full-time staff members in educational pre-kindergarten or child care centers. Your place of employment must be regulated or licensed by your state, and only service dates on or after Aug. 14, 2008 are eligible.

Learn more

Partial or full cancellation for military service members

Who’s eligible: If you served prior to Aug. 14, 2008, you may be eligible 12.5% forgiveness for the first four, full years you received Imminent Danger Pay (IDP) or Hostile Fire Pay (HFP). If you served on or after Aug. 14, 2008, your entire debt can be wiped out with five years of service with IDP or HFP.

Partial cancellation for AmeriCorps VISTA and Peace Corps volunteers

How it works: With this program, you can receive up to 70% forgiveness. During your first and second years of service, you will be eligible for 15% forgiveness. If you go on to a third and fourth year, you can receive 20% forgiveness of your loan principal each year.

Learn more

Perkins loan discharge programs

How it works: Under select circumstances, your Perkins loan can be discharged. The potential for discharge is available if:

  • You declare bankruptcy and the judge determines the loan causes undue hardship. This is extremely difficult to prove.
  • Your post-secondary school closed before you could complete your course of study. This only applies to education dates on or after Jan. 1, 1986.
  • The person who took out the loan dies.
  • The VA determines that a military-related injury has made it impossible for you to work.
  • You are eligible for Social Security Disability Insurance or Supplemental Security Income.
  • Your physician certifies that you are totally and permanently disabled.

How to apply for federal Perkins loan forgiveness

Because Perkins loans are issued directly by your school, you will have to contact your financial aid office to coordinate any cancellation efforts.

The process for discharge is slightly different. If you are trying to get your loan discharged because of bankruptcy, you will have to work closely with your lawyer to file something called an adversary proceeding.

If your school shut down before you could finish your education, you will have to get in touch with your loan servicer to initiate the discharge process. You will also contact your loan servicer if you need to discharge your Perkins loan due to death.

To file for total and permanent disability (TPD) discharge, visit Disability Discharge — the Department of Education’s application website.

Loan forgiveness by profession

Public service loan forgiveness

President Trump has made it clear he intends to end this program. Most recently, his education budget proposal called on the program to end in July 2019. But, for now, it still exists.

How it works: If you work full time for a nonprofit or governmental organization, and you have the right type of federal loans, you may qualify for Public Service Loan Forgiveness (PSLF) after making 120 on-time payments. There are several intricate stipulations to this program; make sure you understand them completely before placing your bets on eligibility.

What is a qualified employer?

You may have questions about whether your employer counts as a nonprofit or governmental organization. Here are some examples of employers who will qualify you for PSLF:

  • 501©(3)s
  • Federal, state, local or tribal governmental organizations
  • Nonprofits who are not tax-exempt — if they provide one of the following as their primary service:
    • Emergency management
    • Military service
    • Public safety
    • Law enforcement
    • Public interest law services
    • Early childhood education
    • Public service for those with disabilities
    • Public service for the elderly
    • Public health
    • Public education
    • Public library services

Does PSLF only apply to specific federal loans?

Yes. Only direct loans are eligible for the PSLF program. If you have federal Perkins or FFEL loans, you can qualify only if you consolidate them into a direct consolidation loan. Then you can start making qualified payments toward your 120.

In addition to having the right type of loan, you must also be on the right type of payment plan. While the Standard Repayment Plan does qualify for PSLF, if you’re on it, you will finish paying off your loan in 120 payments anyway, and there will be nothing left to forgive. So if you’re going for PSLF, you’ll want to be on one of the income-driven repayment plans listed above.

The uncertain future of PSLF

While the first eligible applications for forgiveness under PSLF opened in October of 2017, we do not know how many students have received forgiveness under this program.

However, a spokesperson for the education department relays that as of Jan. 5, 2018, about 7,500 applications for forgiveness were received. The department expects to approve 1,000 applications in 2018, accounting for the fact that ten years ago, only 25% of the student loans were direct loans, and those individuals would have had to work for a qualifying employer consistently for the past ten years.

PSLF has an uncertain future, though. The proposed PROSPER Act we mentioned would eliminate the program completely in its current state with the issuance of federal ONE loans, and the phasing out of direct loans — which are the only ones eligible for PSLF. The last direct loans would be issued on Sept. 30, 2024, and it is unclear if the PSLF program will continue to accommodate these borrowers.

Who should take advantage of PSLF?

If you have made a significant amount of qualifying payments on your income-driven repayment plan, it’s worth seeing how many more you’d need to make to become eligible for PSLF. If you plan to work in the nonprofit sector or in other service positions that do not traditionally have exorbitant salaries — regardless of forgiveness — you may want to make sure you have direct loans now while they’re still around.

However, it’s not a program to bank on. Its future is not guaranteed, and those who enter high-income fields may want to consider the income they’d be losing versus the potential forgiveness they’d receive. If you want to enter public service because it’s your calling, that’s one thing. But if you’re basing your decision purely on the financials of PSLF, you may want to sit down and seriously think out your numbers.

Teacher loan forgiveness

Teachers with a bachelor’s degree and full state certification may qualify for the teacher loan forgiveness program. Note that if you have had certification requirements waived — for emergency, provisionary or even temporary reasons — you do not qualify for this program.

As with all federal student loan forgiveness programs, you have to have the right type of loan to qualify.

The following loan types qualify for this program:

  • Direct Subsidized and Unsubsidized loans
  • Subsidized or Unsubsidized federal Stafford loan
  • The portion of your direct consolidated loan that originated from a federal direct or Stafford loan.

You will also have to work at a low-income school or educational service agency for five years. You can also qualify if you work at a school associated with the Bureau of Indian Education (BIE).

How much will be forgiven?

The amount that will be forgiven varies based on your position. If you’re a math or science teacher at the secondary level and you meet all other requirements, you can get $17,500 forgiven. Also in this bracket are elementary or secondary special education teachers who work directly with a student population in their area of expertise.

All other qualifying teachers are eligible for $5,000 worth of forgiveness.

Who is teacher loan forgiveness best for?

This program is particularly advantageous for special education teachers and math and science teachers at the secondary level. Other teachers will still benefit, but the incentive is nowhere near as large.

Also keep in mind that teacher salaries vary greatly by region. For example, the average elementary special education teacher in West Virginia makes $42,420/year. Let’s say you’re working at that salary in a low-income school which qualifies for teacher loan forgiveness.

Then, you get a job offer at a school in upstate New York at the state’s average salary: $72,350. The populace in this district is a bit more affluent, so the school does not qualify for teacher loan forgiveness.

However, that’s a salary bump of $29,930. In one year, you’ve more than made up the difference of the teacher loan forgiveness loss. Over the course of five years, you will have made an additional $149,650. While cost of living should be considered, pulling in almost $150,000 should make you pause and reweigh the benefits.

Some teachers would prefer to stay in West Virginia to serve their students and take advantage of the teacher loan forgiveness program despite the pay discrepancy. There’s nothing wrong with that as long as they have carefully considered the numbers to make an informed decision.

If you decide this program is for you, you can submit this form to your loan servicer after you have completed your five years of service.

Other programs for teachers

Depending on the types of loans one has, teachers can also qualify for PSLF and federal Perkins loan cancellation as outlined above. Another good resource to check is your state’s department of education; many will provide their own forgiveness program to attract highly qualified teachers to their state.

Loan forgiveness for nurses

There are numerous areas in our country that do not have adequate medical care due to lack of medical professionals. The Health Resources & Services Administration is attempting to combat that problem by offering student loan forgiveness for nurses through the NURSE Corps Loan Repayment Program.

To qualify for this program, you must be a registered nurse, advanced practice registered nurse or a nurse faculty member at an accredited school of nursing.

What are the requirements?

To qualify for this program, you must offer two years of service to NURSE Corps at one of their Critical Shortage Facilities as outlined on page 9 of the application. If you want more of the loan forgiven, you can opt into a third year, as well.

How much will be forgiven?

Over the first two years of service, a total of 60% of your outstanding loan balance will be paid off. If you stay on for a third year, an additional 25% will be forgiven.

Who is this program best for?

This program is best for RNs, APRNs and nurse faculty who have debt and are willing to serve in high-need areas. However, for the past two years there have been about 10 times more applicants than there are funded slots in the NURSE Corps program.

If you need a backup plan, remember that since most hospitals operate as nonprofits, there are likely plenty of jobs in your area that qualify you for PSLF. In addition, you could potentially qualify under the federal Perkins loan cancellation program as a public health worker. It is also a good idea to check at the state level for any additional forgiveness programs that may exist.

Repayment assistance for doctors and healthcare professionals

There are several programs out there for health care professionals — particularly doctors — which pay off a set portion of your student loans. Let’s take a look at some of the most prolific:

  • Indian Health Service (IHS) Loan Repayment Program – Licensed health care professionals working in eligible fields can have up to $40,000 of their healthcare-related loans paid off for their first two years of service. If you still have a balance left over on these loans after two years, you can sign up for more service with additional repayment benefits.
  • The U.S. Army – Several programs are available to healthcare professionals. Depending on your specialty and service agreement, you can have anywhere from $50,000-$250,000 worth of health care education debt paid off — as long as that debt comes from specific federal loans.
  • National Health Service Corps (NHSC) Student to Success Program – If you are in your final year of school, graduating as an MD, DO, DMD or DDS, you may be eligible for this program which pays off up to $120,000 of debt over four years of service. If you have less debt, you can opt to serve for only three years, which is the minimum service requirement.

The NHSC also provides states with funding to run their own student loan repayment programs. Not every state participates, but if yours does, you should get in touch with your program point of contact.

Loan forgiveness for lawyers

Lawyers come out of school with big debt, but there are a myriad of programs to help them knock a good portion of it out. Here are a few to check out:

  • Department of JusticeThe DOJ pays $6,000 toward their attorneys’ student loan debts each year with a lifetime limit of $60,000. You must sign an initial service agreement for at least three years.
  • John R. Justice Student Loan ProgramThis program, facilitated by your state, pays off up to $10,000/year of student loan debt for public defenders and state or local prosecutors. Lifetime limit of $60,000.
  • Your school – Many schools have programs set up to help lawyers pay off their student debt via repayment programs.

Military student loan forgiveness

The military is interested in paying off the debt of more than just medical students. If you’re willing to join, talk with a recruiter about one of these programs, keeping in mind that in certain branches of the military, incentive programs are usually a negotiation process. If you want the max award, you’re likely going to have to ask for it.

  • ArmyThe Army will pay off up to $65,000 of specific federal student loans with a service agreement for new soldiers.
  • NavyThe Navy will pay off up to $65,000 of specific federal student loans with a three-year service agreement.
  • Air ForceIf you join the Judge Advocate General’s Corps (JAG), you may be eligible to get up to $65,000 of your loans paid off by the Air Force over the course of three service years.

Student loan forgiveness for volunteers

Work isn’t the only way to kick your student loans to the curb. Volunteering can come with some mega benefits, too.

If you have certain federal loans and volunteer with AmeriCorps, the Segal Education Award will repay a portion of your debt. The max award amount is the same as the Pell Grant award in any given year. To get the full amount you must volunteer for at least 1,700 hours, but you can receive a prorated award with as little as 100 hours.

Other circumstances that allow for cancellation or discharge

Above, we talked about loan cancellation and discharge for those who had their school shut down mid-studies, those who became disabled and those who died. We talked about them in context of federal Perkins loans, but the same rules apply for most federal loans.

There are a few other circumstances where your loans may be cancelled or discharged:

  • False loan certification – If your school falsified your eligibility for a federal student loan, you may be eligible for 100% discharge.
  • False certification by reason of identity theft – If someone stole your identity in order to take out a student loan, you may be eligible for 100% discharge.
  • Unpaid refund – If you submitted a portion of your loan to be returned to the lender, and did not take and spend it as a refund instead, yet the school did not return the money to the lender, you may be eligible for discharge of the entire amount that was supposed to be returned.
  • Borrower defense discharge – If your school misled you — whether that be about the possibility of attendance or the certification you’d receive at the completion of your education — you may be eligible for full or partial discharge.

Be wary of “Obama student loan forgiveness”

It’s understandable if you get excited when someone calls you up or emails you about “Obama student loan forgiveness.” But don’t get too ahead of yourself.

These programs are likely scams at worst. At best, they are charging you for something you can do on your own for free.

The company may be trying to get you to enroll in a forgiveness program, such as the income-driven repayment plans we discussed above, for a fee. You don’t have to pay to get onto any of these plans, as enrollment is free.

If someone comes to you about “Obama student loan forgiveness,” run the other way as quickly as possible. And then apply for an income-driven repayment plan yourself — for free.

Choosing the best student loan forgiveness program for you

When evaluating which student loan forgiveness program is the right one for you, be sure to take the following criteria into consideration:

  • Your loan type.
  • Your occupation.
  • Whether or not you will work in a nonprofit or governmental position.
  • If you would be willing to move in order to gain eligibility.
  • How many years of service will be required.
  • If the debt you have is directly related to your profession (for occupation-based repayment programs.)

If you meet all eligibility requirements and find the terms agreeable — or at least more agreeable than drowning in a sea of student loan debt — you’ve likely found a winner.

Alternatives to consider

If you do not qualify for any loan programs, or you can’t fathom how you could meet the program terms, don’t give up yet. You may still have other resources available to you.

See if you can speed up your repayment in one of the following ways:

  • Some companies offer student loan repayment benefits or matches.
  • Localities sometimes offer repayment programs. One example is Kansas — where simply moving to and working in a specific county will qualify you for the program.
  • This method will elongate the payoff of your federal loans, but if you’re struggling to make payments, consider enrolling in an income-driven repayment plan to lighten your monthly payment burden.

FAQ

Is there forgiveness for Parent PLUS loans?

No. However, there is a loophole. You can consolidate your Parent PLUS loans into a direct consolidation loan, which then qualifies you for Income-Contingent Repayment and forgiveness after 25 years, or PSLF if you work for a nonprofit or governmental organization.

Does private student loan forgiveness exist?

There are programs out there that will repay your student loans — regardless of who issued them. Some examples include the NHSC’s Student to Service program and Alaska’s SHARP program for health care professionals.

What if I’m not eligible for any forgiveness programs?

If you’re not eligible for any student loan forgiveness programs, you likely have private student loans as currently, federal loans can be consolidated into a direct consolidation loan — qualifying you for some form of income-driven repayment.

If you do have private student loans that don’t qualify for forgiveness and you’re struggling to make monthly payments, you may want to consider getting them refinanced. If you refinance, be sure to compare interest rates across lenders, and beware that while your monthly payments may be lower, the overall amount you end up paying on your loan will likely be higher because you’re paying it over a longer period of time.

Are there any programs that reward volunteer work?

Yes. If you serve in the Peace Corps or AmeriCorps VISTA and have a Federal Perkins Loan, you may be eligible for up to 70% forgiveness depending on how long you serve.

If you serve with AmeriCorps, you may also be eligible for the Segal Education Award, which functions as a repayment program.

If you serve with the Peace Corps, any payments you make during your service count toward the mandatory 120 payments for PSLF — as long as you’re paying down direct loans via an income-driven repayment plan.

How do I consolidate my federal loans to get on PSLF or another forgiveness program?

Applying for and consolidating your Federal student loans is a free process you’ll complete directly with the U.S. Department of Education.