Forgiveness is a beautiful thing—and certainly it is when we are talking about student loan debt. If you’re a recent graduate, chances are good you’re saddling a decent amount: Student loan debt currently stands at $1.6 trillion, and the average cumulative student debt balance in 2017 was $26,900 for graduates of public four-year schools, and $32,600 for graduates of private nonprofit four-year schools, according to the College Board.
Make no mistake—these loan payments can be crushing. In fact, a study by the Brookings Institution revealed that most borrowers who left school owing at least $50,000 in student loans in 2010 had failed to pay down any of their debt four years later. Even worse, their balances had grown, based on the interest that had accrued.
Unfortunately, short of a 2020 presidential candidate who institutes a law and cancels student debt, or a wealthy benefactor gracing everyone with the best graduation gift ever, you’ll typically have to chip away at those student loans little by little.
Unless, that is, you don’t—if you are able to enroll in one of the programs that will forgive student loan debt. The options are only open to people who meet strict, limited criteria, but if you are one of those, then your burden could be erased once the requirements are fulfilled.
Here’s more on student loan debt forgiveness and the current programs for which you might qualify.
What is student loan debt forgiveness?
Student loan debt forgiveness, also known as “cancellation,” means that once you have reached the requirements by making sufficient payments on specific types of loans for the duration of a program, the rest of your student loan debt will be erased. Confused? We’ll give you more details below.
There’s another category of debt removal called student loan “discharge,” but that relates to loans that are eliminated for another reason, such as if you were to become disabled or your school closed while you were attending or shortly after you graduated.
Note that your loans can’t be forgiven just because you didn’t complete your degree after borrowing, or because you believe your education wasn’t adequate for employment in a profession that would allow you to earn sufficient income to pay back those loans.
It’s important to be aware that none of these current student loan debt forgiveness programs apply to any private loans you might have taken out; for relief on those, you’d have to look into student debt consolidation. So those are the caveats, but if you meet the criteria of programs like these below, it could be a sweet deal.
The Public Service Loan Forgiveness Program (PSLF)
Full-time employees of the government and nonprofits that are tax exempt under Section 501(c)(3), members of the military and those serving in AmeriCorps or the Peace Corps are eligible to have their Direct Loans forgiven after making 120 “qualifying” payments (10 years’ worth, but they do not have to be consecutive) under a qualifying repayment plan. (Find out more about your choices here; in short, it needs to be an “income-driven repayment plan,” which bases your monthly payment on your income).
There are very strict requirements for meeting all the criteria, and a host of people have learned the hard way that they didn’t qualify. In fact, as of March 2019, just 206 out of more than 41,000 applicants had realized loan forgiveness—less than .05%. (The first possible month for potential loan forgiveness after making 120 payments was Oct. 2017, because the program was introduced in Oct. 2007.)
Here are some tips to help you meet the requirements:
Verify your employer qualifies; for example, labor unions, partisan political organizations and non-profits that aren’t considered “tax exempt” would not. Complete an Employment Certification form annually and any time you change jobs to stay current.
Note that making larger payments doesn’t reduce the number of payments—a full 120 payments must be made.
Consolidate other federal student loans that you might have, such as the Federal Family Education Loan (FFEL) Program or the Federal Perkins Loan (Perkins Loan) Program into a Direct Consolidation Loan; only then will those types of loans qualify for PSLF. And only after consolidation will your 120-payment threshold begin; previous payments do not count.
Submit the PSLF application to receive loan forgiveness once you’ve met all the requirements, as you will not automatically have your loans forgiven. Also note that you must still be working for a qualifying employer at the time you submit the application and until the remaining balance on your loan is forgiven.
If you believe you should have qualified for PSLF and been denied, look into a temporary opportunity that might still allow you to receive forgiveness, based on your circumstances. The Temporary Expanded Public Service Loan Forgiveness (TEPSLF) is offering help to individuals who made some or all of the payments to a non-qualifying repayment plan. It’s worth taking a look to see if you can rectify your situation—the sooner, the better, as funds are available on a first come, first served basis.
Income-Driven Repayment Plan
Have a sky-high monthly student loan that’s not commensurate with your salary? An income-driven repayment plan is designed to set your monthly payment at an amount the government considers to be “affordable” based on your income and family size. That amount will be roughly 10 percent of your discretionary income, although the percentage varies according to which of the four available plans you choose.
After participating for 20 to 25 years, depending on your situation and the type of plan you choose, the remainder of your balance is forgiven, assuming you have met all the criteria.
You’ll want to confirm your particular loan is eligible and that you meet other criteria—and note that the eventual payoff will be subject to income tax. But that might be a small price to pay to take care of a whopper of a student loan.
Perkins Loan Forgiveness
Perkins Loans are a specific type of loan that were offered to students with extreme financial need. But as of 2017, this loan program has been canceled. However, if you have an existing Perkins Loan, certain occupations—such as teachers, speech pathologists, librarians and more—who work mainly with disadvantaged populations may qualify for student loan forgiveness. This chart gives more details on the specifics for each profession and how to apply.
Finally, certain careers might qualify for student loan debt forgiveness, particularly if you serve lower income populations.
The best known of these is the Teacher Loan Forgiveness Program, which offers forgiveness of up to $17,500 on certain loans if you teach full-time for five complete and consecutive academic years in a low-income school, educational service agency or disciplines identified by a state education agency as having a shortage of qualified teachers in that state. Double-check the additional requirements as well; you may want to review the final paperwork you’ll need to submit so you can make sure there are no surprises.
Other programs may be available for law school alumni who pursue careers in public interest, healthcare providers working in what are considered shortage areas and those who serve in the military. Verify you are eligible by reading all the fine print before assuming student loan debt forgiveness through one of these programs.
And finally, it’s not as fancy as total student loan forgiveness, but companies are increasingly offering student loan payment assistance as one of their benefits. Ask your employer or potential employer what programs they may be able to offer.
As you can see, student loan debt forgiveness can be a boon for those who seek to serve their communities in a variety of ways. But the onus is on you as the borrower to confirm the requirements to ensure you are qualified as a successful candidate.