Student Loan Forgiveness

Student Loan Forgiveness [The Best Programs Available 2022]

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Student Loan Forgiveness

Americans are currently carrying over $1.6 trillion in student loan debt these days, and most students graduating from college enter the workforce with an average of $29,200 in outstanding student loans. 

Living with all of that debt can be difficult, especially if you don’t land a great job right away, or if you have family and other expenses to contend with. 

One of the best ways to deal with student loan debt is to get rid of it altogether, via student loan forgiveness. There are many student loan forgiveness programs that can erase all of your outstanding student loan debt. 

Each program is different, with its own requirements, advantages, and drawbacks. Here is what you need to know about dealing with student debt right now. 

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Student Loan Forgiveness Program

Key Takeaways

Student loan forgiveness relieves you of the responsibility of repaying a portion or more of your federal debt. Loan redemption is only available for federal direct loans—private loans are not eligible.

Serving in public service or paying on an income-contingent payment plan for a (long) period of time are the two primary ways to gain student loan forgiveness. Federal loans can also be forgiven in the event of a borrower’s impairment or the college’s closure, which are outside the borrower’s control.

Students who believe their educational institution has defrauded or seriously misled them in violation of state law may apply for loan relief through the Department of Education’s “borrower protection” category. If you believe you qualify, talk to your loan servicer.

If you have a Perkins Loan, contact the school that issued it, or the loan servicer that the school has designated.

What is Student Loan Forgiveness?

There are several terms that deal with the reduction or elimination of student loan debt. The three most common words used are forgiveness, cancellation, and discharge. 

If you enter a job or program where you no longer have to make further payments on part or all of your student loan, this is generally referred to as student loan forgiveness or cancellation

On the other hand, student loan discharge generally refers to when a borrower is released from the contract to repay a student loan due to exceptional circumstances, such as a debilitating permanent injury or the closure of a school. 

How to Get Student Loans Forgiven

Loan forgiveness is available in several ways. Serving in public service or making contributions on an income-contingent payment plan for a (long) period of time are the two main ways to receive student loan forgiveness, each with its own set of conditions and restrictions. As previously stated, student loan discharges may occur as a result of school misconduct, such as those that have occurred with for-profit educational institutions.

There are several different types of student loan forgiveness. Let’s look at some of the most common programs you may be eligible for. 

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Public Service Loan Forgiveness (PSLF) Program

If you desire to have a career in public service by working at the Federal, state, or local government, you may be eligible for some form of public student loan forgiveness (PSLF). 

Working in tribal governments and nonprofit organizations may qualify you for student public service loan forgiveness as well. 

Generally, once you’re employed full-time by one of the designated public service organizations and have made 120 qualifying payments on your student debt, you can apply for student loan forgiveness. If your application is approved, this program will forgive the balance on your direct loans.  

This program is a great opportunity if you work in the public service sector and are carrying high levels of student loan debt. However, in most cases, you cannot accelerate the qualifying payments process, so you will not be eligible for PSLF until after working in government or a nonprofit for at least ten years.

The one exception to this period is for people who participate in the AmeriCorps national service program; AmeriCorps participants can have their time in that program counted towards their qualifying payment period. 

So, if you weren’t in AmeriCorps and wish to achieve student loan forgiveness more quickly, you may need to consider other options. 

Student Loan Forgiveness for Nurses

People who enter the nursing field may be qualified for a variety of student loan forgiveness programs. 

Any nurse who works in the public service sector may be eligible for the PSLF program described earlier. Additionally, Nurses who received a student loan under the Perkins Program, which ended in 2017, may be eligible for complete student loan forgiveness after five years of full-time qualifying service. 

The National Health Resources & Services Administration’s Nurse Corps Repayment Program will also pay back up to 85 percent of a qualifying nurse’s student loans in exchange for working in a designated healthcare facility facing critical nursing shortages. There are often loan forgiveness programs for eligible nurses at the state level and for serving in the military as well. 

Student Loan Forgiveness for Teachers

If you plan to be a teacher, there are also opportunities for loan forgiveness in this career field as well. Teachers who opt to work in designated low-income schools or education service agencies can qualify for student loan forgiveness. 

Teachers who meet this requirement and teach in these types of education settings for five consecutive years can have up to $17,500 of their student loans forgiven. 

There are additional requirements to be eligible for this program. For example, you must have received your student loan or loans before the start of the five-year period, and you have to provide additional documentation attesting to your qualifications as an elementary or middle school teacher. 

However, if you’re a teacher and believe you meet this program’s eligibility requirements, it could provide a great opportunity to erase a great deal of your student loan debt. 

Total and Permanent Disability (TPD)

If you are injured or become ill and receive a total and permanent disability, you can be eligible for a discharge of the remaining debt you owe on most student loans. 

You have to apply for this program and the main documentation you have to provide for eligibility is proof of your total disability. 

If you’re a veteran with military service, you can use the disability documentation they receive from the Veteran’s Administration following their retirement or discharge from the military. 

Applicants who are receiving Social Security Disability Insurance or Supplemental Security Income can use their documentation from the Social Security Administration to qualify for this program. 

Finally, a physician who is licensed to practice in the United States can certify that you are totally and permanently disabled as well. 

After you apply for a total and permanent discharge (TPD), you do not have to make any further student loan payments to Nelnet while the application is pending. 

If it is approved, you will enter a three-year monitoring period where, as long as you continue to meet the eligibility requirements of the TPD program, your student loan repayment requirements will remain suspended. 

If you fail to meet these requirements – based on an increase in income, a change in your disability status or you obtain an additional student loan – your original student loan obligation will be reinstated. 

However, following that three-year monitoring period, the loan will become permanently discharged. 

Student Loan Repayment Assistance

State Programs 

Beyond the programs discussed so far, many states have programs that are worth exploring. 

For example, New York’s NYS Get on Your Feet Student Loan Forgiveness Program provides up to 24 months of student loan relief for residents of the state who are in a federal income-driven repayment plan. 

In California, the State Loan Repayment Program (SLRP) provides student loan forgiveness for eligible healthcare professionals who agree to work in underserved areas. 

In Texas, the Texas Student Loan Repayment Assistance Program will forgive up to $4,800 of student loan debt annually to qualifying Texas residents serving in a Texas legal aid program. 

There are many unique programs like these in nearly every state. As you attempt to deal with your student loan debt, you should check to see if your state has any forgiveness or relief programs available. 

Repayment Plans With Loan Forgiveness

In many cases, you may still be able to get a portion of your student loans forgiven, even if you don’t work in a public service job. However, it may take longer, and you may have a few extra hurdles to deal with.

Income-driven repayment programs, which are intended to assist graduates who would struggle to make payments during the normal 10-year repayment period, often allow for certain debt relief after a certain period.

These income-driven repayment programs include:

Income-Based Repayment (IBR) 

Payments will range from 10% to 15% of disposable income each month. After 25 years of qualifying payments, forgiveness becomes possible.

Income-Contingent Repayment 

Payments are recalculated each year based on gross income, family size, and the remaining federal loan balance; they typically account for 20% of discretionary income. After 25 years of qualifying payments, forgiveness is possible.

Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) 

Payments would be limited to 10% of net income each month. After 20 years of qualifying payments, forgiveness is possible.

The government could also cover a portion of the loan’s interest. Furthermore, if you work for a federal agency, the Federal Student Loan Repayment Program allows the employer to repay up to $10,000 of your loans each year, up to a total of $60,000. 

Connect with your student loan servicer to engage in a repayment plan or change your existing plan for your federal student loans if you are in this situation. This can usually be done on the student loan servicer’s website.

Borrower Defense

You may also be eligible for a loan discharge, also known as “borrower protection to loan repayment redemption,” if your school deceived you or participated in any wrongdoing in violation of state laws.

The borrower defense, which applies to any William D. Ford Direct Loan (Direct Loan) Program loan, used to mean that if you could show that you were defrauded or significantly misled by the college you attended, you could get all of your existing federal student loan debt forgiven. 

Borrower protection, which was implemented during the Obama administration, targeted private, for-profit schools that engaged in questionable activities.

The US Department of Education, for example, promised debt relief to students at the Corinthian Colleges chain, which suddenly closed campuses and declared bankruptcy in the wake of federal and state inquiries into its operations.

During the Trump administration, however, Secretary of Education Betsy DeVos sought to abolish the program by halting claims processing, rejecting claims without due process, increasing the burdens of evidence, or only providing partial forgiveness, measuring relief through a complicated methodology that granted applicants $0.

The Department of Education declared in March 2021 that it “would be rescinding the formula for measuring partial loan relief” and will now waive student loans in borrower protection applications fully and promptly under the Biden administration.

To have your loans forgiven under the borrower protection scheme, you must file a petition on the Department of Education’s website, along with proof that the school violated the law, deceived you substantially, or misrepresented itself.

Specialized Loan Forgiveness Programs

Additional services that may repay or reduce your student loans could be available if you work or volunteer with those organizations.

Consider the following scenarios:

AmeriCorps State and National programs, AmeriCorps VISTA, AmeriCorps NCCC, and AmeriCorps VISTA.

The Segal AmeriCorps Education Award allows volunteers in these projects to earn up to the full Pell Grant award for repaying eligible student loans (federally guaranteed loans). This amounts to $6,495 for the 2021-2022 academic year.

The Student Loan Repayment Program of the Army National Guard will help you receive up to $50,000 in loan repayment. However, in most cases, this would involve you signing up for and serving in the National Guard in your state.  Direct, Perkins, and Stafford loans are among the loans that are covered.

Teachers who work full-time in low-income schools or educational support organizations are also eligible for student loan forgiveness in some cases.

After five years of service, teachers can be eligible for up to $5,000 or $17,500 in loan forgiveness through the Teacher Loan Forgiveness Program.

Certain math, science, and special education teachers are eligible for a higher stipend.

The Department of Education’s website has additional details.

Finally, under certain programs in some states, physicians and nurses who work in underserved areas may be eligible for student loan repayment as well. 

Federal Policy Changes Regarding Student Loans

There have also been some recently enacted temporary amendments to the rules on student loan repayment that were included in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020.

The new laws, in particular, allowed for the suspension of loan payments, the halting of defaulted loan collections, and the imposition of a 0% interest rate on loan balances. Those regulations will be in force until at least September 30, 2021.

As long as you fulfill the program’s other conditions, your monthly loan contributions will continue to count against Public Service Loan Forgiveness as though you had made them.

Although you can still make loan payments if you want to, the Department of Education warns that doing so could be counterproductive. “They will not make you qualify for PSLF faster if you make payments during the time of suspended payments,” it writes on its official site. “Since the suspended $0 payments already count against your necessary 120 PSLF payments, making additional payments would increase the amount forgiven.”

Special Considerations and Ongoing Policy Debates Regarding Student Loan Forgiveness

The decline of for-profit colleges and the COVID-19 pandemic have heightened already-existing fears about rising student debt. In political circles, the idea of wider loan forgiveness – for all borrowers, not just those who work in public service, engage in a repayment plan, or are generated by a for-profit college – is gaining traction.

President Biden has proposed a number of initiatives, including more generous income-driven repayment plans (cutting monthly payments to 5% of income, providing relief for national or community service), and the cancellation of $10,000 in debt per borrower.

Senators Chuck Schumer and Elizabeth Warren also led a bipartisan coalition in Congress advocating for the cancellation of up to $50,000 per loan, if possible by executive order.

Congress may also act to relax borrower protection laws even further, bringing them back to Obama-era levels, and pass legislation canceling student debt.

So, pay attention to any ongoing executive orders or legislation pertaining to student loans, since upcoming policy changes could definitely affect your financial situation. 

My Application Was Approved

You are no longer required to make loan payments if you qualify for loan repayment, cancellation, or dismissal of the entire amount owed. You are liable for repaying the outstanding balance if only a part of your loan is forgiven, canceled, or discharged.

If you qualify for some forms of loan discharges, you can also obtain a refund of any or all of your loan payments, as well as any negative details about your loan delinquency or default being removed from your credit report.

If the loan was in default before the discharge, the default status can be erased. You would regain eligibility for federal student assistance if you had no other defaulted loans.

My Application Was Denied

If your application is rejected, you will always be liable for repaying your loan in accordance with the terms of the promissory note you signed. If you have a Direct Loan or FFEL Program loan, talk to your loan servicer about repayment options. Examine your options for repaying.

If you’ve fallen behind on your payments, go to Getting Out of Default to learn how to get back on track and what choices you have for getting out of default.

For more details, contact your loan servicer if you believe your application was rejected in error.

Drawbacks of Student Loan Forgiveness and Repayment Plans

If you become eligible for a student loan extension which lowers your payments over a longer time horizon, there are definitely some drawbacks. You will likely accrue and then pay much more interest over that time period than you otherwise would have during a conventional repayment scheme. Carrying that amount of debt for such an extended time can affect your credit rating, and make it harder to qualify for other types of loans as well

Additionally, under the IBR and PAYE programs, loan payments can be negatively amortized, digging the borrower deeper into debt. Borrowers who expect a substantial improvement in their income a few years into repayment may prefer a repayment plan like extended repayment or phased repayment, where the monthly payment is at least as much as the new interest that accrues, and the loan balance does not increase. Also, you should keep in mind that payments vary from year to year depending on your salary. According to Reyna Gobel, author of “CliffsNotes Graduation Debt: How to Manage Student Loans and Live Your Life,” “as your income increases, your payment will increase as well” under these types of programs. 

Even if you are able to reduce your monthly payments, Gobel advises against going on a spending binge with the extra cash. “If you’re currently piling up debt in anticipation of these plans in the future, stop! If the legislation shifts in the future, you never know what will or will not happen for graduates.”

Moreover, forgiveness programs aren’t without flaws, either. Jobs that qualify you for student loan repayment typically pay far less than jobs in the private sector. And if you don’t qualify for loan repayment, you will be able to repay your loans more easily by working in a career with higher earning potential.

If you have all or part of your student loans forgiven, keep in mind that the IRS may consider the forgiven debt to be revenue, and you will be required to pay taxes on it. Thankfully, however, for the next few years, this will not be the case. Student loan forgiveness earned between 2021 and 2025 is not taxable revenue for those years, according to Section 9675 of the American Rescue Plan of 2021. Overall, when you decide to enroll in a loan repayment program, make sure you have written confirmation of the amount that will be forgiven and when it will be forgiven.

Parting Thoughts: Seek Student Loan Forgiveness Today

Dealing with high levels of debt can be difficult as you are starting your professional life. If you don’t want to be held back by a crushing load of student loan debt, you may not have to be. You can check out some of the options described in this article, or research your opportunities, and find a program that offers student loan forgiveness today. 


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