Student loan forgiveness is the cancellation of the borrower’s obligation to repay all or part of an educational loan. In most cases, the borrower must be employed in a specific field for a certain number of years before his loan is forgiven.
What is student loan forgiveness?
Student loan forgiveness is when the federal government or other lender forgives all or part of your student loans. Forgiveness usually happens after you meet specific requirements, such as making a certain number of on-time monthly payments while working in public service or teaching full time at a qualifying school. (You can find out more about those here.)
Student loan forgiveness happens when your remaining balance is forgiven after 10, 20, or 25 years of on-time payments. Some repayment plans are eligible for forgiveness, but others aren’t. Graduates who work in certain fields could qualify for Public Service Loan Forgiveness (PSLF), which forgives any remaining balance after just 10 years of on-time payments.
There are currently five federal student loan forgiveness programs available to borrowers with federal loans.
Table of contents
1) Public Service Loan Forgiveness (PSLF)
You’ve probably heard a lot about student loan forgiveness programs like Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness.
But what are these programs exactly, and how do they relate to each other?
Here’s everything you need to know about these student loan forgiveness programs:
With PSLF, you can qualify for full forgiveness of your qualifying federal student loans after 120 qualifying payments (10 years) while working full-time for a qualifying employer.
However, the terms “qualifying payment” and “qualifying employer” have caused a lot of confusion, and not many borrowers have had their loans forgiven through this program so far.
The program is only available to federal Direct Loans and the Federal Family Education Loan (FFEL) Program loans that have been consolidated into a Direct Consolidation Loan. We’ll cover the different types of federal loans in detail later in this article, but many people have been confused by this requirement, especially if they took out private student loans that they assumed would be eligible for forgiveness as well.
The Teacher Loan Forgiveness program allows teachers who work at low-income elementary or secondary schools to receive up to $17,500 in loan forgiveness on
2) Teacher Loan Forgiveness
Teachers who work in low-income schools or education fields can qualify for forgiveness of up to $17,500 on their Stafford loans and PLUS loans. Borrowers with Perkins Loans can qualify for partial loan forgiveness, but not through the Teacher Loan Forgiveness program.
In order to qualify, teachers must have been employed full-time for five consecutive years in a Title I school, which is a school that receives federal funding because it serves a large percentage of students from low-income households. Teachers who are eligible for Teacher Loan Forgiveness must not have had an outstanding balance on any Direct or FFEL Program loans as of Oct. 1, 1998, or on the date that they obtained a Direct or FFEL Program loan after Oct. 1, 1998.
To apply for this loan forgiveness program, borrowers must complete the Teacher Loan Forgiveness Application and submit it along with any other required supporting documentation to their loan servicer.
3) Perkins Loan Cancellation and Discharge
Perkins Loan Cancellation and Discharge
If you are unable to make your student loan payments, don’t panic! The government offers several programs that can help you. One of these is the Perkins Loan Cancellation and Discharge program. This program was designed for people who work in certain professions or under certain conditions that make it hard for them to repay their loans. If you qualify for a Perkins Loan cancellation or discharge, then the federal government will forgive a portion of your loan balance.
The Perkins Loan Cancellation and Discharge program provide student loan forgiveness to people who serve in certain professions or under certain conditions that make repaying their loans difficult. This can include teachers, public defenders, nurses, and members of the U.S. armed forces. If you qualify, then you can have a portion of your loan forgiven, or even your entire balance discharged. Depending on your circumstances, the amount of forgiveness varies from 15% all the way up to 100%.
To be considered for a cancellation, you must:
- Teach full-time at a low-income elementary or secondary school, or in certain other teaching positions;
- Work full-time as an early intervention services provider in a public or non-profit program under the Individuals with Disabilities Act
- Provide nursing or medical health services to underserved populations
- Provide law enforcement or corrections officer services
- Work full-time as a staff member in a Head Start program
- Full-time work as a librarian with a master’s degree at a Title I school
- Work full-time as a professional provider of early intervention services for the disabled
- Serve in the U.S. Armed Forces (including activation from the reserves) in an area of hostilities that qualifies for special pay under the Military Compensation Act of 1982.
The Perkins Loan Cancellation program is one of the most generous federal student loan forgiveness programs available, but it’s also one of the most selective.
4) Borrower Defense to Repayment Discharge (BDR)
The Department of Education (ED) has several programs for borrower defense to repayment discharge (BDR), which is when a federal student loan is forgiven because the school did something wrong.
The BDR discharge process was established under the Higher Education Act (HEA) and later expanded by the Obama Administration. This type of forgiveness is different from other ED loan forgiveness programs, including Public Service Loan Forgiveness, which forgives loans based on your job, not based on whether you were harmed by your college.
What’s Covered Under Borrower Defense?
- Your loans can be forgiven if a college or university:
- Failed to refund tuition or fees after you withdrew from school
- Misrepresented their job placement rates when you enrolled
- Misrepresented their program requirements or cost of attendance when you enrolled
- Misled you into enrolling in their school and taking out loans for it
- Didn’t tell you about changes in accreditation status before you enrolled.
Only around 100 borrowers out of over 40 million have had their loans discharged under this program since it was created in 1995. This is because the process is both complicated and poorly advertised to borrowers.
In response to an investigation by the Senate Health, Education, Labour, and Pensions Committee, the Obama Administration developed new regulations to clarify borrower defense and make it easier to apply. These regulations were scheduled to go into effect in 2017 but were stopped by the Trump Administration before they could be implemented.
5) Total and Permanent Disability Discharge (TPD)
The total and permanent disability discharge program is a student loan forgiveness program offered by the Department of Education (the “Department”). The program is available to borrowers who are unable to work and earn money due to a disability. Some borrowers may be able to qualify for TPD without going through an application process.
The TPD discharge program can be an important tool for borrowers with severe disabilities. For many borrowers, TPD will wipe out their student debt, allowing them to live on a very limited income without having to struggle under the burden of tens of thousands of dollars in student debt.
However, there are limits on who can qualify for TPD, how long the process takes from start to finish, and how much it costs. It’s also important to keep in mind that if you qualify for TPD, your entire loan balance will be forgiven. That means that if you’ve already made payments that cover some or all of your principal balance, those payments won’t be refunded.
Private student loans aren’t eligible for discharge through federal programs like TPD discharge, so you’ll still be responsible for paying them back if you want to avoid defaulting on them.
As you can tell from the title of this article, we hope to give you a brief but comprehensive introduction to the federal student loan forgiveness programs that are available to certain types of borrowers. From Income-Driven Repayment plans to Public Service Loan Forgiveness, there are numerous ways that a borrower can have his loans forgiven. The first thing that you need to do is figure out whether or not your student loans qualify for any of these programs. Below we’ve laid out the various programs that are currently available and discussed under which circumstances they could be advantageous for you.
With some research, you may find a student loan forgiveness program that’s right for you. It’s important to also consider how these programs can impact your career and finances before signing up for one.