How Do I Get My Student Loans Forgiven?

Student loan indebtedness is always a hot topic these days, and there’s been a lot of media coverage recently about various federal loan forgiveness, discharge, and cancellation programs. Every program is a little bit different, and it can be downright confusing to figure out which program, if any, might work for you. We’ve decided it’s time to provide you with a summary of what’s out there. We’re going to start with a list of the most well-known (and recently news-worthy) federal programs, and then we’ll wrap up with a mention of some lesser-known options. Due to space limitations, we can’t provide a lot of detail about each program—click the links to learn more. Public Service Loan Forgiveness How It Works: If you make 120 payments on your loans while you are in an income-driven repayment plan or a standard repayment plan, and while you were working at a non-profit or government agency, the federal government will forgive what’s left of your loans. The 120 qualifying payments do not need to be consecutive. Which loans qualify: Any loan made through the William D. Ford Federal Direct Loan Program (including other federal loans that are consolidated under this program). Federal Direct PLUS Loans borrowed by a parent can qualify if they have been consolidated. Important to Know: If you end up qualifying for PSLF, the amount of loans forgiven will NOT be considered taxable income by the IRS. Also, the Department of Education has recently released a new tool to help you ascertain how far along you are toward completing the 120 qualifying payments. PSLF was implemented in 2007, so it is only recently that borrowers could submit applications to have their loan balances forgiven. So far, there has been a very low approval rate for PSLF, in some cases because borrowers have been in the wrong type of repayment plan while working at an eligible employer. Congress recently tried to remedy this by making some temporary funding available to borrowers using an expanded definition of “eligible” repayment plan (including graduated and extended repayment plans). These funds will be used to forgive loans on a first-come, first-serve basis, so if you meet the other requirements of the program, check soon to see if you might qualify. Teacher Loan Forgiveness How It Works: If you teach for five consecutive and full academic years in a low-income school district, you may qualify to have up to $17,500 of your federal loans forgiven. The amount that will be forgiven will depend on the subject you teach (the highest amount of forgiveness is available for math, science, and special education teachers). Which Loans Qualify: Direct Subsidized and Unsubsidized Loans, Grad PLUS Loans, and Federal Stafford Loans (made under the FFEL program). Portions of a Direct Consolidation Loan that paid off the above loans can also be forgiven. Federal PLUS Loans borrowed by a parent on behalf of a student do not qualify. Important to Know: If you qualify for Teacher Loan Forgiveness, the amount that is forgiven will NOT be considered taxable income by the IRS. Teacher Loan Forgiveness should not be confused with TEACH Grant program, which is a grant that is awarded to eligible teacher education students who agree to teach in high need districts for four years within eight years of program completion. If those requirements aren’t met, then the TEACH Grant is converted to an Unsubsidized Loan and the borrower is charged interest retroactively. The TEACH Grant program has been in the news lately because of an NPR investigation that found that the Department of Education had been converting a high percentage of TEACH Grants to loans, mostly because of paperwork delays. The DOE has now remedied these issues and is providing TEACH Grant recipients whose grants were converted to loans the opportunity to apply to have their grants reinstated. If you know someone who might be affected keep an eye on this website – they have promised to provide the details of a process for reconsideration soon. Loan Cancellation After 20 or 25 Years in an Income-Driven Repayment Plan How it Works: It is a feature of various income-driven repayment plans that after twenty or twenty-five years of making payments in that program, if you still have a balance remaining on the loan, it will be forgiven. Which Loans Qualify: The type of loan that qualifies will depend on which income-driven repayment plan you utilize, but generally all federal student loans have a plan available with forgiveness as a possibility. Therefore, all Direct Subsidized and Unsubsidized Loans, Grad PLUS Loans, Federal Stafford Loans (made under the FFEL program) and Consolidation loans (Federal Direct or FFEL) can qualify. Federal PLUS Loans (once they have been consolidated into a Direct Consolidation Loan) can also qualify. (Very) Important to Know:  The IRS may consider the forgiven loan taxable income, so while you will no longer have to pay on your student loans, you could owe the IRS a significant bill for taxes. Closed School Discharge How It Works: If your school closes while you are enrolled, or soon after you have withdrawn, you could be eligible to have your federal loans forgiven. Which Loans Qualify: All loans made under the William D. Ford Direct Loan, the Federal Family Education Loan (FFEL) program and the Perkins Loan program. Important to Know: If your school closed more than 120 days after you withdrew, your loans won’t be discharged unless there are extenuating circumstances. Also, if you completed all of your coursework (even if you didn’t receive a diploma or certificate) or you are completing your program through a teach-out arrangement or a transfer of your credits, you won’t qualify for the discharge. Borrower Defense to Repayment How It Works: You might be eligible for a discharge of your federal loans if a school misled you or engaged in other misconduct that violated certain state laws. Which Loans Qualify: All loans made under the William D. Ford Direct Loan, the Federal Family Education Loan (FFEL) program and the Perkins Loan program. Important to Know: The Department of Education tried to put a halt to this program in 2017. After several court challenges, according to NPR, in October a judge ordered the Department to begin forgiving loans, and they seem to be in compliance. If you attended Corinthian Colleges (Everest, Heald, and WyoTech) with a first date of attendance between July 1, 2010 and September 30, 2014, you will need to complete a Corinthian-specific application for this program. If you attended another school and feel you may qualify for Borrower Defense to Repayment, there is an application available using the link above. Also, you may choose to have your loans place in forbearance or stopped collections while your application is being processed. Other Reasons Loans Might Be Canceled, Discharged, or Forgiven If you have a Federal Perkins Loan, it has its own set of cancellation provisions you might want to review. All types of federal loans are also discharged in the event of the death or total and permanent disability of the borrower. And, in extremely rare cases, student loans can be discharged in bankruptcy. You can see more detail on these situations here. And finally, there are some state and national loan forgiveness programs for teachers, physicians, and other health care professionals who are willing to work in under-served areas—if you aspire to those professions, check out your state’s education department and your college or university’s financial aid office to explore these options.