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Student Loan Forgiveness: How to Cancel Your Debt

ALERT: PSLF Time-Limited Waiver Opportunity

On Oct. 6, 2021, the U.S. Department of Education (ED) announced a time-limited waiver opportunity to its PSLF program rules. Under the time- limited waiver opportunity, borrowers could receive credit for past payments which would not have been previously classified as qualifying payments or instances in which payments were not made, specifically, servicemembers who were advised to put their loans in a deferment or forbearance status and did not make payments while on active duty.  The months the borrower spent on active duty can be counted toward the PSLF.

Borrowers will need to submit a PSLF form—the single application used for a review of employment certification, payment counts, and processing of forgiveness—on or before October 31, 2022 to have previously ineligible payments counted.

The time- limited waiver essentially waives all requirements except the employment requirement. If you have Federal Family Education Loans (FFEL) or Perkins loans, you will still be required to consolidate your loan with a Direct Consolidation Loan by Oct. 31, 2022. However, any payments made on your federal student loans, under any repayment plan (partial, full, or late), on any FFEL, Perkins, or Direct Loan, will count towards your 120 qualifying payments.

Under the new time-limited waiver, you need to have been employed or are currently employed by an eligible employer (government, 501(c)(3) not-for-profit, or other not-for-profit organization which qualifies), and working full-time. You can still qualify for the full-time requirement if you are working multiple part-time jobs (that totals at least 30 hours per week) with eligible employers. For more information on which employers meet PSLF Program requirements visit the PSLF Help Tool.

Student loans can be burdensome to repay, especially if your chosen career doesn’t pay well. Student loan forgiveness releases your obligation to pay all or part of your student loan if you meet specific requirements and qualify for a loan forgiveness program.

Another option to remove student loan debt is student loan discharge. This will cancel your debt and can feel very similar to student loan forgiveness, but there are very different circumstances that qualify you for one or the other. For example, forgiveness is offered when something “good” has happened. Like you completed the requirements under the federal government’s Public Service Loan Forgiveness program, which is offered to those who serve as public servants for 10 years. And discharge, well that is offered when something “bad” has happened, like loans under your name were obtain fraudulently, or you become permanently disabled.

It’s worth investigating to see if you qualify for student loan forgiveness. And if you are dealing with unfortunate circumstances, it may be worth it to see if you (or the borrower who may be a family member or friend) qualifies for a student loan discharge.

How to Get Student Loans Forgiven

There are a variety of programs to choose from. It’s important to research them thoroughly as some require very specific types work experience and years worked as well as certain forms that need to be submitted to qualify. Ensure in advance that you meet the qualifications and submit the correct forms to apply for forgiveness. If your application is approved, you will be relieved of making some or the rest of your student loan payments.

Student Loan Forgiveness Programs

For the most part, student loan forgiveness options are only available for federal student loans. It’s not common to see forgiveness programs to be offered to private student loan borrowers, but there could be a few programs that will extend repayment benefits to private student loans. Federal Student Loan Forgiveness

Public Service Loan Forgiveness (PSLF).

PSLF forgives the balance of your Direct Loans AFTER 120 qualifying payments in an eligible repayment plan, while working full-time at an eligible employer. 

Only Direct Loans are eligible for PSLF. Eligible loans include:

  • Direct Stafford Loans, both Subsidized and Unsubsidized
  • Grad PLUS Loans in the Direct PLUS Loan Program
  • Parent PLUS Loans* in the Direct PLUS Loan Program
  • Direct Consolidation Loans

*For Parent PLUS Loan Borrowers: your loans are not eligible for PSLF unless you consolidate them with a Direct Consolidation Loan and agree to repay them under an income-contingent repayment plan.

Other loans such as FFEL and Perkins loans do not qualify. That said, you can consolidate those loans into a Federal Direct student loan. If you choose to do this, please note, that you MUST consolidate before making the 120 qualifying payments. Payments made before the consolidation will not count towards the 120 needed.

Working full-time at an eligible employer means that you are working at least 30 hours at an eligible employer. You can work multiple part-time jobs to meet the full-time requirement. Eligible employers include federal, state, or tribal governments, as well as 501(c)(3) not-for-profit employers. Your job title doesn’t matter, any employee of an eligible employer is eligible for PSLF.

When it comes to payments, you need to make 120 qualifying payments in an eligible repayment plan, while working full-time at an eligible employer. Eligible repayment plans include:

  • 10-year Standard*
  • Income-Based Repayment (IBR)
  • Income-Contingent Repayment (ICR)
  • Pay As You Earn (PAYE)
  • Revised PAYE (REPAYE)
  • Others if payment greater than or equal to 10-year Standard

*You do need to be in an income-drive repayment plan to get the benefit of PSLF. If you repay under a 10-year Standard plan, you will not have anything to forgive after 120 payments.

Your PSLF qualifying payments need to be 120 separate monthly payments, made after Oct. 1, 2007. Payments should be made in full and within 15 days of your due date. Qualifying payments do not need to be consecutive. Which essentially means you could make 60 payments with an eligible employer and switch jobs. Your new employer isn’t considered an eligible employer for PSLF, so you don’t make any additional qualifying payments, but you will still have your 60 qualifying payments made. If you then return to an eligible employer, you will still be working towards your 120 payments.

Employment Certification Forms PSLF

You don’t technically apply for loan forgiveness until you meet the full requirements for PSLF. However, you can submit an Employment Certification Form (ECF) to start tracking your eligibility for PSLF. At this time, you will also confirm your employer’s eligibility and that you’re on the right track for PSLF forgiveness.

It is recommended that you complete these forms at least annually or anytime you change your employment. Ten years is a long time and a lot can happen in that time. By submitting annual ECF forms, you will make sure you’re on the right track for forgiveness. You will need your employer to certify your employment for all the time periods you worked for them. If you switch jobs, and you work with all eligible employers, it may be difficult to go back and have your employer certify your employment from past years— especially if the business closed, or you left on bad terms. While not impossible, it won’t be as simple as completing the form while you’re still employed or right before you leave a company.

The Public Service Loan Forgiveness (PSLF) program will forgive the balance of your federal direct student loan after 120 qualifying payments while employed with an approved employer (typically a non-profit or the U.S. government). This program is attractive to military, government employees, health care professionals, teachers and others whose careers are in the non-profit sector; as you need to be employed at a qualifying employer throughout the time you make your 120 qualifying on-time payments (10 years).

Students looking to apply to this program should elect for the income-driven repayment option to maximize the amount forgiven and reduce the amount needed to pay for the required 120 payments. With the income-driven repayment program, your monthly payment is determined based upon your discretionary income (income minus necessary expenses). The monthly payment will likely be less than the payment required under traditional repayment which is generally set to be paid off in 10 years.

Teacher Loan Forgiveness Program.

Teachers who teach in approved low income primary or secondary schools for 5-years can have up to $17,500 or $5,000 of student loan debt forgiven, dependent on the subject area taught (math, science and special education subjects earn the highest levels of forgiveness).

Federal Perkins Loan Cancellation

The Federal Perkins Loan program offers up to 100% cancellation of your Federal Perkins Loan(s) if you meet certain employment or volunteer criteria. These cancellation programs will require you to work in a specified field for up to five years, and each year of completed service, a percentage of your loan will be forgiven. This type of forgiveness is only for your Federal Perkins Loan, a federal loan program which ended in 2017 (meaning, you may not have a Perkins Loan if you attended school after that year). If you consolidated a Perkins loan into a Direct Consolidation Loan, or refinanced it with a private lender, your loan will no longer be eligible for cancellation.

Perkins Student Loan Cancellation

There are 13 types of employment cancellation opportunities available for the Federal Perkins Loan program.

For the loans eligible for full, 100% forgiveness, this will be achieved over 5 years of eligible service. Each year you will qualify for a percentage of the original balance and all accrued interest.

Year of Service Forgiveness Amount

  1.      15% + interest
  2.      15% + interest
  3.      20% + interest
  4.      20% + interest
  5.      30% + interest

Total Cancellation:  100%

Employment types eligible for 100% forgiveness:

  • Early childhood education provider
  • Employee at a child or family services agency
  • Faculty member at a tribal college or university
  • Firefighter
  • Law enforcement officer
  • Librarian with master’s degree at a Title I school
  • Military service
  • Nurse or medical technician
  • Professional provider of early intervention (disability) services
  • Public defender
  • Speech pathologist with master’s degree at Title I school

If you are a volunteer with AmeriCorps VISTA or Peace Corps volunteer, you could be eligible to have up to 70% of your Federal Perkins Loan forgiven. It will take you four years.

Years of Service Amount Cancelled

  1.     15% + interest
  2.     15% + interest
  3.     20% + interest
  4.     20% + interest

Total Cancellation:  70%

Private Student Loan Forgiveness

It’s not common to have private student loans forgiven, but it’s not impossible either.  There are some programs that will forgive either federal or private loans if certain criteria are met. You’ll have to look to find the rare case such as:

Nurse Corps Loan Repayment Program. This program will forgive either federal or private student loans up to 60% of the outstanding educational loan balance incurred while pursuing an education in nursing, if 2-years of full-time employment is completed at an approved hospital or clinic that is experiencing a critical nursing shortage.

An additional 25% of debt can be forgiven if a third year of full-time employment is completed. It’s important to note here, that student loan debt forgiven by this program will be taxable. Please be sure to check all requirements, terms and conditions before applying.

Military Student Loan Repayment Programs

Being in the armed forces may qualify for you several benefits, including student loan repayment program. While you could qualify for PSLF or Perkins loan forgiveness with federal student loans, you may also qualify for additional repayment programs.

If you’re thinking about enrolling, it’s best to discuss these benefits with a recruiter. The US Army Medicine (AMEDD) Team offers repayment assistance for Doctors, Nurses, Dentists, Veterinarians, and Allied Health Professionals. The amount may vary, but for Doctors, you could receive assistance up to $250,000.

To learn more about military repayment assistance, it’s best to check out Today’s Military.

Student Loan Refinance

If student loan forgiveness is not going to work out for you, you might want to consider a Direct Consolidation Loan or even student loan refinance.

The Department of Education offers borrowers to option to obtain a Direct Consolidation loan. This loan will combine your federal student loans into one easy to manage loan. The fixed interest rate you pay will be the weighted average of your current rates rounded up to the nearest 1/8th of a percent. This option will allow you to extend the term length of your loan up to 30 years if desired, to reduce the monthly payment. Please keep in mind that the longer you pay on the loan, the more the loan will cost you in interest.

Refinancing your loan or loans will not relieve you of making payments and you will still be responsible to repay the entire amount of the loan, however, you may be able to lower your interest rate or change your terms which could save you money over the life of the loan or lower your payment to make it more manageable.  If you think this might be the best path for you, we encourage you to learn more.

Best Student Loan Refinance Lenders

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Could student loan refinancing save you money?
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