How to qualify and apply for student loan forgiveness to eliminate debt from your school loans.
What is student loan forgiveness?
Loan forgiveness for student loans refers to any solution that eliminates at least part of your debt without penalties. There are several legitimate student loan forgiveness programs that exist, depending on your profession. You must meet certain eligibility requirements to qualify for each program. Once you meet those criteria, the loan servicer forgives all or part of the balance you still owe. It’s treated as if you paid the balance off as required, so forgiveness won’t damage your credit; it will improve it!
Finding the right option for student loan forgiveness
There are several different programs that offer forgiveness:
Debt.com can connect you with a certified student loan specialist that can help you make a plan to eliminate your student loan debt!
- Public Service Loan Forgiveness (PSLF) is the biggest and most widely used program. It applies to people who work in a qualified public service profession, such as teaching or nursing. Once you meet the criteria for qualifying, it forgives ALL the remaining balances on your qualified federal student loans.
- The Federal Student Loan Repayment Program is a specialized option that forgives student loan balances for military Service Members. The Department of Defense pays up to $10,000 per year to a maximum cap of $60,000; you must serve for three years to qualify. DoD loan repayment can also apply to students who serve in the Army National Guard.
- Veterans Total and Permanent Disability Discharge offers Veterans total loan forgiveness if they have a service-related disability and cannot continue active duty.
- Volunteer Student Loan Forgiveness is a collection of programs that forgive student loan debt for volunteer service:
- You can qualify for up to $4,725 in debt if you work for AmeriCorps for 12 months
- You can also qualify for $4,725 in loan forgiveness through 1,700 hours of service in VISTA (Volunteers in Service to America)
- Peace Corps volunteers can receive up to 70% loan forgiveness cancellation for Perkins Loans after two years of service
- The National Defense Education Act also forgives up to $17,500 in remaining loan balances for teachers who work with low-income students.
Each federal student loan forgiveness program requires you to meet different eligibility requirements. PSLF has the most hoops to jump through for qualification, but it’s also the program that forgives the most debt. Depending on your school and profession, there also may be other smaller programs offered locally. Check with professional or trade associations and your school for a full list that applies to you.
Student loan forgiveness if your school closed or offered false certification
In addition to the options above, there is another way to qualify for government student loan forgiveness. It’s used for school closures and issues with false certifications from unaccredited institutions. This specifically relates to 2-year for-profit trade schools. If your school closes before you are able to graduate then education service agencies may agree to cancellation. Student loan cancellation is basically like forgiveness – it erases the debt as if you never took the loans out.
This also applies to higher education institutes that provide false certification. If you graduate and find your certification is not legit, you may qualify for discharge. Closed school discharge has made headline in the past few years, after school closures for institutes like ITT and Corinthian.
Student loan forgiveness program reference chart
|Program||Amount Eligible for Forgiveness||Requirements|
|Public Service Loan Forgiveness||Any amount||10 years of service in qualified public service profession while making payments on a hardship-based repayment plan|
|Federal Student Loan Repayment Program||Up to $10,000 per year; capped at $60,000 total||3 years of qualified military service, including National Guard Service|
|Veterans Total and Permanent Disability Discharge||Any amount||Service-related discharge from the military|
|VISTA||Up to $4,725||1,200 hours of qualified full-time volunteer service|
|Peace Corps||70% Perkins loan cancellation||2 years of service|
|AmeriCorps||Up to $4,725||12 months of service|
|National Defense Education Act||Up to $75,000 of remaining balances on Stafford/PLUS graduate loans||Must be a full-time teacher at school that serves low-income families|
|School closure discharge||Any amount||Enrolled within 120 days of school closure|
How does student loan forgiveness work?
Each program has a different set of rules that apply for how forgiveness works. In general, you receive the money after you take out the loans and finish school. That’s why it’s called forgiveness, because you’ve incurred a debt that you need to eliminate.
How Public Service Loan Forgiveness works
- First you must enroll in a hardship based federal repayment plan. The following programs count:
- You must work in a qualified public service profession. You can certify your position through StudentAid.gov.
- Then you make 120 qualified payments on your repayment plan.
- You must remain in that position or another qualified position during the repayment period.
- Each time you switch jobs, make sure to recertify.
- After 10 years, you qualify for total student loan forgiveness of your remaining balances.
It’s worth noting here that the federal government does not forgive your loans directly. For that matter, you do not owe the federal government directly, even when you have federal student loans. The government selects loan servicers to be qualified service agencies. Companies like Navient service loans for borrowers who apply through FAFSA. So, you must also apply for student loan forgiveness through your servicers as well.
How the Federal Student Loan Repayment Program works
This program may actually apply to more government agencies than just the military. However, the Department of Defense is the largest agency to use it. It’s designed to help government agencies recruit and retain top candidates for employment.
- You must sign a service agreement with the government agency you work for.
- The agreement states you will work for the agency for a period of at least three years.
- Each agency sets the rules for when and how you get your funds or forgiveness of existing balances.
- You can receive up to $10,000 per calendar year; you can’t receive more than $60,000 total
- If you leave the position, you must pay the money back if it was already disbursed to cover your education costs.
How forgiveness works if your school closed
You must complete a Student Loan Forgiveness Application for School Closure. The Department of Education reviews your application and determines if you qualify. In most cases, you only qualify for school closure forgiveness cancellation and discharge if you were enrolled during the close or withdrew within 120 days of when the school closed.
Questions about Student Loan Forgiveness
Q: Is student loan forgiveness real?
A: Yes. All the programs we list above offer legitimate student loan forgiveness. However, that’s not to say that qualifying for student loan forgiveness is easy. Most programs have very specific eligibility requirements, and if you miss one it means you won’t qualify.
We recommend that anyone who wants to qualify for student loan debt forgiveness should work with a student loan specialist. They understand the requirements to qualify for student loan forgiveness, so they can help you navigate the process.
Q: Do all federal loans qualify for student loan forgiveness?
A: When it comes to public student loan forgiveness (PSLF), not all loans qualify directly. PLUS loans to parents almost never qualify for federal relief programs. In other cases, like with Perkins loans, you need to consolidate them first with other loans. If you have at least one Direct Loan or FFEL Program Loan, you can use a Direct Consolidation Loan or FFEL Consolidation Loan. This makes all your loans eligible for a repayment plan, and thus you can qualify for forgiveness.
Other programs, such as the Peace Corps volunteer program only forgive Perkins loan amounts. So, you need to check the loan qualification requirements for the specific program you wish to use. For the most part, the following loans can easily qualify for forgiveness:
- FFEL (Federal Family Education Loan) program
- PLUS for graduates
- Perkins loans
Note that forgiveness applies to both subsidized and unsubsidized student loan debt.
Q: Do you have to pay taxes on student loan forgiveness?
A: Any time a lender forgives a debt, you must generally pay taxes on the amount that’s forgiven, cancelled or discharged. You can apply for an exemption if you can prove the debt was discharged during a period of financial hardship. But this is where things get tricky with student loans. Unlike when you settle a debt during bankruptcy, getting student loans forgiven doesn’t always mean you’re struggling.
Any loan amounts forgiven through government student loan forgiveness plans are not considered taxable income. However, loan amounts forgiven through other methods may be taxable. Closed school and false certification cancellation requires you to pay taxes.
The good news is that in early 2018, Congress established that discharge for total and permanent disability automatically qualifies you for the exemption. So, for instance, if you’re a Veteran, you don’t need to apply for the exemption with the IRS to avoid taxes on the forgiven student loan debt.
Q: What about private student loan forgiveness?
A: Private student loans do not qualify for student loan forgiveness under any of the programs we describe above. In general, you can’t use a government program to forgive debt issued by a private loan servicer. These programs only forgive debt that you take on through FAFSA.
Q: What is Obama student loan forgiveness?
A: For the record, Obama did not create any of these student loan forgiveness programs. Most of them, including PSLF, were created under the Bush administration just before him. However, Obama did make significant changes to Public Service Loan Forgiveness. For example, he removed the cap on how much debt you can forgive through PSLF. He also expanded the qualified public service professions to include lawyers and doctors.
The criticism now is that high income earners are abusing the program. Doctors and lawyers with 6-figure debt are using it to get their full balances forgiven. As a result, the program is now estimated to cost $12 billion more. That’s a main reason why fiscal conservatives want to revise the program again.
Q: What is Trump student loan forgiveness?
A: This has not been fully defined yet. President Trump and his Department of Education have proposed sweeping changes. For instance, they want to eliminate most of the hardship-based repayment plans; instead, there would only be income-based repayment. They’ve proposed capping the amount of debt you can forgive. But they also discussed getting rid of PSLF entirely and replacing it with something else.
One change that came recently was when Betsy DeVos asked the DOE to adjust qualified professions for PSLF. As a result of the change, some higher education borrowers (particularly graduate students like lawyers) received letters than their position no longer qualified. So, if you fall in that type of situation, contact a student loan debt specialist immediately!
Q: What is the Student Loan Forgiveness Act?
A: This is a new law proposed in 2012 specifically designed to help graduate students. It proposes a few things, including capping student loan interest rates. However, >the most important part of the legislation allows you to convert private student loan debt to federal. This would be a game changer in school loans, because it means that private loans could qualify for things like PSLF.
The other big change in the law is that it reduces 10 year student loan forgiveness to 5 years. You would only need to make 60 qualified payments instead of 120. IN addition, those payments would be capped at 10% of your discretionary income. That’s in line with PayE and RePayE repayment plans, which are the most affordable options. If the act passes, student loan repayment plans would be faster, easier and apply to all your loans.
Unfortunately, the bill stalled in 2012 just after it was introduced.
More Resources for Student Loan Forgiveness
PSLF is the primary federal student loan forgiveness program that most people use. However, qualifying for forgiveness may not be as easy as you think. We explain five key facts about PSLF that could make or break your eligibility. Read this carefully if you plan to apply for student loan forgiveness through the PSLF program.
Professional firefighters are one of the key groups that can qualify for loan forgiveness under PSLF. There are also opportunities for volunteer firefighter student loan forgiveness, although they may not work locally. Click here to learn about all the ways firefighters can qualify to have loans forgiven.
Becoming an RN is a high calling, but it can also come with high amounts of debt that don’t always match your salary. Like firefighters, nurses not only qualify for PSLF, but may also qualify to have loans forgiven. Learn how Registered Nurse student loan forgiveness works, depending on which nursing career path you choose.
Police officers also qualify for loan forgiveness under PSLF. There’s also first responder loan forgiveness for professionals like EMTs. Learn how to ensure you maintain eligibility for PSLF loan forgiveness.
The last main group of professionals that usually qualify for student loan forgiveness are teachers. Teachers can qualify through PSLF; but they also have special qualifications through other programs like the National Defense Education Act. Click here to learn all the ways that teachers can qualify for student loan forgiveness.
Article last modified on June 12, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Student Loan Forgiveness Program - AMP.