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.
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 the 120 qualifying payments, you need to repay them under an eligible repayment plan. Eligible repayment plans, that would allow for payments to be counted, include, the 10-year Standard Repayment plan, and any Income-Driven Repayment plan offered to Direct Loan borrowers.
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
Now when it comes to employment, there is a requirement for you to be working full-time for an eligible public service employer while making your 120 qualifying payments. In order to start determining how many qualifying payments you have made, it’s best to complete an Employment Certification Form (ECF) provided by the U.S. Department of Education. You can use the PSLF Tool to help you complete and submit the form . It is recommended that you complete an ECF at least annually.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
- 15% + interest
- 15% + interest
- 20% + interest
- 20% + interest
- 30% + interest
Total Cancellation: 100%
To determine your eligibility for 100% cancellation, it’s best to reach out to your Federal Perkins Loan servicer. They can let you know what type of forgiveness programs are available and determine if you qualify.
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
- 15% + interest
- 15% + interest
- 20% + interest
- 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.
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.
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