With the rising costs of higher education, student loans have seemingly become an unavoidable way to invest in your future. But the burden of these loans can stick with you for the rest of your life.
More than 44.7 million Americans have student loan debt. That’s 20% of all adults living in the US. The total student loan debt has surpassed $1.47 trillion.
If you can’t pay off your debts, you might qualify for student loan forgiveness. Under specific circumstances, your loans could be partially canceled or even eliminated in-full.
What is Student Loan Forgiveness and How Does it Work?
Student loan forgiveness relieves your obligation to pay back all or part of your federal loan debts. Qualification for student loan forgiveness varies based on the type of loan, your job, and personal situation.
Private student loans are not eligible for student loan forgiveness. Only Federal Direct student loans qualify for exoneration.
In most cases, there are three ways to have your loans canceled, forgiven, or discharged:
- Working in public service.
- Income-contingent payment plans.
- Circumstances beyond the borrower’s control like permanent disability, school closures during enrollment, falsification of loan qualifications, identify theft, or death
Dropping out of college or struggling to find a job would do not qualify as “circumstances beyond the borrower’s control.”
However, other rare circumstances could cancel your student loans. In 2015. the US Department of Education relieved $95.5 million of student debt from borrowers after the Corinthian Colleges for-profit college chain was accused of using illegal and high-pressure tactics to recruit students. I wouldn’t plan on having this happen to your loans though, it’s quite rare.
7 Student Loan Forgiveness Programs
To see if you qualify for student loan forgiveness, there are seven different programs for you to check. It’s unlikely that you’ll be eligible for all of these, so use this guide to see which program fits your unique situation.
Public Service Loan Forgiveness Program (PSLF)
The Public Service Loan Forgiveness Program (PSLF) was created by Congress in 2007. The purpose of PSLF is to encourage college graduates to take public service jobs.
In exchange for working in these positions, graduates with debt can have a portion of their student loans forgiven. According to Forbes, Over 60% of the people who applied for PSLF borrowed more than $50,000 in federal loans.
Examples of public service jobs that qualify for the Public Service Loan Forgiveness program include:
- Any position in local, state, or federal government organization.
- Nonprofit organizations that are Section 501(c)(3) tax exempt.
- Nonprofit organizations that provide eligible public services.
- Peace Corps and AmeriCorps full-time volunteers.
You must work full-time (minimum of 30 hours per week) to qualify. Furthermore, you must also make at least 120 on-time monthly payments (10 years) after your federal loans have been consolidated into a qualifying repayment plan.
If you work in the public sector, definitely take advantage of this program.
Repayment Plans For Loan Forgiveness
If you’re struggling to meet your payments or worry about defaulting, look into the different repayment options.
Repayment plans for loan forgiveness include:
- Income-Based Repayment (IBR) — Monthly payments will be a maximum 15% of your discretionary income. After 25 years of qualifying payments, you’ll be eligible for forgiveness.
- Income-Contingent Repayment (ICR) — Monthly payments are calculated annually based on gross income, family status, and the balance of outstanding federal loans. Forgiveness eligibility comes after 25 years of qualified payments.
- Pay as You Earn (PAYE) or Revised Pay as You Earn (REPAYE) — Also known as the Obama Loan Forgiveness Program. Monthly payments will be a maximum 10% of your discretionary income. Forgiveness is eligible after 20 years of qualified payments. With a PAYE plan, you need to prove financial hardship to qualify. This is not a requirement in the REPAYE program.
Each of these programs has different requirements for who can apply..
Teacher Cancellation Low Income (TCLI)
The teacher loan forgiveness program allows educators at qualifying schools to have up to $17,500 in student loans forgiven.
Originally created in 1998, the program was made to encourage teachers to fill positions at schools serving low-income households.
To get your loans canceled, you must teach full-time at a qualifying school for five years consecutively. Qualifying schools appear on the Teacher Cancellation Low Income (TCLI) Directory.
Loan Forgiveness for Military and Armed Forces
There are several different loan forgiveness programs for members of the US armed forces. The programs, details, and qualification terms vary based on your branch.
The most popular student loan forgiveness programs for military personnel include:
- Military College Loan Repayment Program (CLRP)
- Servicemembers Civil Relief Act (SCRA)
- Army Student Loan Repayment Program
- Navy Student Loan Repayment Program
- National Guard Student Loan Repayment Program
- Coast Guard Loan Repayment Program
- National Defense Student Loan Discharge
- CLRP For Reserve Servicemembers
- USAF Judge Advocate General Corps Repayment Program (JA-SLRP)
- Veterans Total and Permanent Disability (TPD) Discharge
Forgiveness terms vary depending on your active duty status, loan interest amount, time served, and other qualifying factors.
Nurse Corps Loan Repayment Program
Registered nurses working in high-need areas or areas with a critical nurse shortage can qualify for a special loan forgiveness program. This applies to nurse practitioners and anyone working at a qualifying nursing faculty as well.
In total, up to 85% of student loans can be forgiven under this program. Up to 60% of loans can be canceled after working a nursing position in an underserved location. You can be relieved of an additional 25% of your loans after three years.
Visit the Health Resource & Services Administration website to determine your eligibility and apply to the program.
Attorney Student Loan Repayment Program (ASLRP)
Lawyers who practice in a government office or public service office can have a portion of their law school loans forgiven. Like other programs on the list, it’s an incentive for lawyers to take a job serving the greater good.
ASLRP can forgive up to $60,000 in loans for lawyers working at least three years in a qualifying position. Visit the US Department of Justice to apply.
Health Professions Loan Forgiveness Program
Doctors, dentists, physicians, physicians assistants, mental healthcare workers, veterinarians, and pharmacists have several different options to receive student loan forgiveness.
The National Health Service Corps Loan Repayment Program (NHSC LRP) is a popular option.
Licensed healthcare providers can receive up to $50,000 in student loan relief after working two years at an approved site.
Other options include:
- Students to Service Loan Repayment Program (S2S LRP)
- Faculty Loan Repayment Program (FLRP)
- Indian Health Services (IHS) Educational Loan Repayment
- National Institute of Health (NIH) Loan Repayment Program
- Health Professionals Loan Repayment Program (HPLRP)
Medical professionals can also qualify for some of the military loan forgiveness programs (mentioned earlier) for serving as active duty medical personnel in a qualifying branch.
Other Options if You Don’t Qualify For Student Loan Forgiveness
Not everyone will qualify for a student loan forgiveness program. Just 1% of the 73,000 people who applied for PSLF were approved over the last two years.
If you don’t qualify for PSLF or one of the other student loan forgiveness programs listed above, you aren’t out of hope just yet. Consider the following options to get your loans forgiven.
Contact Your Loan Servicer
If you’re struggling to make payments, the first thing you should do is contact your loan servicer. This is a better option than ignoring your student loans or defaulting on your loans.
You might be able to negotiate the payment terms with the servicer. Whether it be lowering the monthly minimums or potentially even reducing the balance. Either way, it’s worth calling them to see what your options are.
The majority of federal student loans are eligible for direct consolidation.
Rather than paying multiple loans with varying interest rates to different lenders, you can consolidate your student debt into a single loan from one lender. This will make your life much easier when it comes to making monthly payments.
Direct consolidation loans can be extended for up to 30 years, which can significantly lower your monthly balance. However, you’ll most likely pay additional interest over time.
Loan Deferment and Forbearance
Loan deferment temporarily postpones your payments. To qualify for student loan deferment, you need to demonstrate financial hardships or prove that you’re having trouble finding work.
If you meet specific eligibility requirements, your federal loan payments can be deferred for up to three years. Depending on the type of loan you have, the federal government might even pay the interest on your loans during the deferment period.
Forbearance also puts a pause on your loan payments. However, the interest will continue to accrue during this period. So your balance will be higher when payments resume.
Situations such as unforeseen medical expenses could qualify you for student loan forbearance.
Speak to Your Employer
Your employer might be willing to help you repay your student loans. Just speak to the owner or human resources department to learn about your options.
The percentage of employers helping with student loan repayments has recently increased. The percentage doubled from 4% to 8% between 2018 and 2019.
Consider a Career Change
Certain jobs in the following categories may qualify for loan forgiveness:
- Law enforcement
- Public education
- Veterinary medicine
So if you’re looking to change jobs, a career in public service could qualify you for loan forgiveness in the future. Just make sure you continue to meet all the requirements to maximize the value of the loan forgiveness.
Student Loans Can Be Reduced
Student loans don’t need to be a burden forever.
There are several different ways for your student loans to be forgiven or canceled. Check each program to see if you qualify.
For those of you who don’t qualify for loan forgiveness, review the other options. Even if your loans don’t qualify for a forgiveness plan, you can still get temporary relief or lower your monthly minimum payments.