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How can people get rid of their student loan debt and when is loan forgiveness an option? Statistics show how deep in student loan debt U.S. college graduates are and the sums can be alarming to individual borrowers. Fortunately, students may be able to take advantage of income-based repayment plans and forgiveness for public service employees to ease their debt burdens.
Only direct loans made by the federal government and Stafford loans, which were replaced by direct loans in 2010, are eligible for forgiveness programs.
If you have other kinds of federal loans, you might be able to consolidate them into one direct consolidation loan, which may give you access to additional income-driven repayment plan options. Nonfederal loans by private lenders and loan companies do not qualify for forgiveness.
In 2020, borrowers with federal student loans who attended for-profit colleges and sought loan forgiveness, because their school defrauded them or broke specific laws, were dealt a setback when then-President Donald Trump vetoed a bipartisan resolution, which would have overturned new regulations that make it much more difficult to access loan forgiveness. The new, more onerous regulations went into effect on July 1, 2020.
In August 2022, the Biden administration, along with the U.S. Department of Education, approved $32 billion in student loan debt relief for more than 1.6 million borrowers. However, in November 2022, federal courts issued orders blocking the student loan forgiveness plan. On June 30, 2023, the Supreme Court ruled that the Biden administration lacked the authority to cancel up to $20,000 federal student debt per borrower.
The following specific programs are still available and offer applications and student debt relief to those who qualify.
For federal student loans, the standard repayment period is 10 years. If a 10-year repayment period makes your monthly payments unaffordable, you can enter an income-driven repayment (IDR) program.
Income-driven programs stretch out payments for a term of 20 or 25 years. After that term, assuming you’ve made all of your qualifying payments, whatever balance is left on the loan is forgiven. Historically, payments are based on your household income and family size, and they will typically be capped at 10%, 15%, or 20% of your discretionary income, depending on the plan.
Below are the four types of IDR plans offered by the U.S. Department of Education, in addition to the repayment periods and monthly payments of each:
An IDR plan can be a good option for people in low-paying careers who have large amounts of student loan debt. Eligibility varies among plans, with some federal loans being ineligible for repayment under all but one plan. Additionally, you will have to recertify your income and family size annually, even if neither has changed from one year to another.
In August 2023, the Biden administration replaced the Revised Pay As You Earn (REPAYE) plan with the Saving on a Valuable Education (SAVE) plan. The plan promised to lower monthly payments, prevent interest from capitalizing, and make it easier to qualify for forgiveness.
On July 18, 2024, a federal appeals court blocked the SAVE plan until two court cases centered around the IDR plan can be resolved. The Department of Education has moved borrowers enrolled in the SAVE plan into an interest-free forbearance while the litigation is ongoing. It has also outlined options for borrowers who were nearing Public Service Loan Forgiveness (PSLF)—borrowers can either "buy back" months of PSLF credit if they reach 120 months of payments while in forbearance or switch to a different IDR plan.
Applying for an IDR requires you to submit an Income-Driven Repayment Plan Request, which can be completed online or via a paper form, the latter of which you must request from your loan servicer. You can either choose a specific IDR plan by name or ask your loan servicer to place you on the income-driven plan you qualify for with the lowest monthly payment amount.
If any of the loans that you wish to include in an IDR plan have different loan servicers, you will have to submit a separate request to each of them.
To determine your eligibility for specific plans and calculate your monthly payment, you will have to provide either your adjusted gross income (AGI) or alternative income documentation. If you’ve filed a federal income tax return in the prior two years, and your current income is largely the same as that reported on your most recent return, then you will use your AGI. If you are unable to meet either of these criteria, then alternative documentation of income will be required.
Student loan forgiveness for teachers can allow the forgiveness of up to $17,500 in federal direct and Stafford student loans (but not Parent Loan for Undergraduate Students (PLUS) or Perkins loans). Teachers must teach for five complete and consecutive academic years and teach at a qualifying low-income school or educational service agency.
Even if you were unable to complete a full academic year of teaching, it may still be counted toward the required five academic years if:
Qualified teachers must have at least a bachelor’s degree and full state certification and have not had certification or licensure requirements waived on an emergency, temporary, or provisional basis, with additional qualifications varying based on whether or not they are new to the profession.
Only full-time science and math teachers at the secondary level, as well as special education teachers at the elementary or secondary level, are eligible for $17,500 in forgiveness. Forgiveness is capped at $5,000 for other full-time elementary or secondary education teachers.
If you had an outstanding balance on a direct loan or an FFEL on Oct. 1, 1998, or have had one since then, then you will be ineligible for the program. Additionally, only loans made before the end of your five academic years of qualifying teaching service will be eligible for Teacher Loan Forgiveness.
You can potentially qualify for both the Teacher Loan Forgiveness and Public Service Loan Forgiveness (PSLF) programs, but you can’t use the same years of teaching service to meet the eligibility requirements for both programs. So, you would need 15 years of teaching service to qualify for both programs and meet all the specific requirements to earn each type of forgiveness.
Once you have finished your five complete and consecutive years of qualifying teaching, applying for the Teacher Loan Forgiveness Program only requires submitting a completed Teacher Loan Forgiveness Application to your loan servicer.
If any loans you wish to have forgiven under the Teacher Loan Forgiveness Program have different loan servicers, you will have to submit a separate form to each of them.
The application’s certification section will have to be filled out by the chief administrative officer of the school or educational service agency where you undertook your qualifying teaching service, meaning that you will need to send them the form before you can submit it.
If you have a full-time job with a U.S. federal, state, local, or tribal government or with a nonprofit organization, you may qualify for student loan forgiveness. You’ll need to make 120 payments, which don’t have to be consecutive, under a qualifying repayment plan to be eligible.
This option isn’t for the recent graduate, as it takes at least 10 years to earn. Additionally, you’ll need to either have a federal direct loan or consolidate your federal loans into a direct loan.
Unfortunately, this program has been rife with controversy. The U.S. government created the PSLF program in 2007, and when the first borrowers became eligible for forgiveness in 2017, almost all of their applications were denied, often over technicalities. In some cases, borrowers found that their loan servicers had misled them about their eligibility for the program.
Temporary Expanded Public Service Loan Forgiveness (TEPSLF) might help you if your Public Service Loan Forgiveness (PSLF) application was previously denied.
On Oct. 6, 2021, the Education Department announced temporary changes to the PSLF program that allowed borrowers to receive credit for past payments regardless of payment plan or loan program and regardless of whether payments were made on time or in the full amount.
Many of the previous requirements for PSLF were waived as part of the change, with two key requirements remaining:
The waiver also allowed active-duty service members to count deferments and forbearances toward PSLF. The final major change involved in this update is that the U.S. government reviewed denied PSLF applications for any errors and allowed borrowers to have their PSLF determination reconsidered. The limited PSLF waiver opportunity ended Oct. 31, 2022.
Applying for PSLF boils down to a four-step process, each of which requires utilizing the online PSLF Help Tool:
For the final step, send the completed form, along with your employer’s certification, to MOHELA, the U.S. Department of Education’s federal loan servicer for the PSLF Program. If MOHELA is already your loan servicer, you may upload your PSLF form directly to their website. In addition, you may fax or mail the form based on the address provided on the U.S. Department of Education's website.
The Closed School Discharge is a federal student loan forgiveness program for borrowers whose schools close during their enrollment or within 180 days of withdrawal, or a 120 days if loans were received by or after July 1, 2020.
To be eligible, borrowers must meet certain criteria, including the school closing while enrolled or within 180 or 120 days of withdrawal, not having completed their program of study at the closed school, not transferring credits earned at the closed school to another institution, and not completing a similar program at another school through teach-out agreements or other means.
Automatic discharge may occur if the Department of Education is informed of a school's closure. If borrowers are eligible but haven't received an automatic discharge, they can apply for loan forgiveness by contacting their loan servicer for necessary application forms and instructions. In most cases, they'll receive the discharge application through the Department of Education.
Total and Permanent Disability Discharge is a program for borrowers with total and permanent disabilities to apply for a discharge of their federal student loans. This program also applies to a variety of federal loans.
To qualify, borrowers must provide documentation from a physician or the Department of Veterans Affairs (VA) certifying their disability. This disability can be physical, mental, or a combination of both. Borrowers can apply for the discharge through the Department of Education's Total and Permanent Disability Discharge website, which typically requires medical documentation.
Death Discharge is another program for borrowers who die. The loan servicer or the Department of Education must be notified about the borrower's death, and a certified copy of the borrower's death certificate is typically required for the discharge process to begin. The responsibility for repaying the loans does not pass to the borrower's estate or surviving family members.
Forgiveness eliminates your debt; forbearance postpones your payments. If you’re having trouble making student loan payments, you can ask your lender for forbearance. Your lender may not give you a forbearance if you don’t meet eligibility requirements, such as being unemployed or having major medical expenses.
Interest on your loan will still accrue, and you can pay that interest during the forbearance period if you want. If you don’t pay it, the accrued interest will be added to your principal balance once your forbearance period is up. Your new monthly payment will be slightly higher as a result, and you’ll pay more interest in the long run.
The only relationship between forbearance and forgiveness is that when you’re in forbearance, since you’re not making payments, you’re not making progress toward the payment requirements of a forgiveness program you might be participating in.
The federal government granted automatic forbearance for federal student loans under the Coronavirus Aid, Relief, and Economic Security (CARES) Act for more than three years. During the pause, no interest accrued, and payments were not required.
The pause on student loan payments and interest ended Sept. 1, 2023; interest began accruing again, and payments restarted Oct. 1, 2023.
Under normal circumstances, you can’t make progress toward loan forgiveness during forbearance. Importantly, though, under the CARES Act, you could. You’ll receive credit toward income-driven repayment forgiveness or PSLF for the payments that you normally would have made during this period.
Earlier, on March 30, 2021, the U.S. Department of Education extended the pause benefit to defaulted privately held loans under the FFEL Program.
There may be tax obligations tied to any loan forgiveness.
The IRS likes to tax things, and forgiven debt is no exception. On the one hand, public service loan forgiveness is not considered taxable income. On the other hand, any balance wiped out through an income-driven repayment plan can be counted as income and taxed.
Borrowers may be less inclined to make regular payments or work toward financial discipline if they anticipate that their debts will eventually be forgiven. The instability of student loan forgiveness programs and frequent pausing of payments can also make payment planning challenging for borrowers. Keep in mind those PSFF applicants who were declined on technicalities; the government has proven to be unpredictable for those thinking of planning their forgiveness.
There may also be credit score implications. Credit scores are partially determined by outstanding debt and the payment history against them. Should a loan be forgiven in full, an individual may no longer have that payment history factored into their credit score.
The pause on student loan payments and interest ended Sept. 1, 2023. Required payments resumed in October.
Direct loans made by the federal government qualify for forgiveness. Loans made by private, non-governmental lenders do not qualify. Bear in mind that, while the federal government doesn't levy taxes on the amount of a student loan that's forgiven, certain states may do so.
Private student loans aren't eligible for federal student loan forgiveness, and they cannot be consolidated into a direct consolidation loan.
The burden of student loans can be overwhelming, and student loan forgiveness isn’t easy to earn, no matter which route you pursue. It commonly relies on years of employment or the ever-shifting political winds that seek to change forgiveness programs.
All student loan forgiveness programs come with certain conditions, requirements, and limitations. Student loan forgiveness might be a welcomed possibility—offering some relief to student borrowers toward the end of their repayment period—but its future is uncertain. Students should be wary of incurring debt beyond their means based on the assumption that a good chunk of it will be forgiven.
