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What You Need to Know About Student Loan Forgiveness Programs » Student Loan Debt » What You Need to Know About Student Loan Forgiveness Programs



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Loan forgiveness for student loans refers to any solution that eliminates at least part of your debt without penalties. There are several student loan forgiveness programs for federal student loans. Qualifying usually depends on your profession and you must meet certain eligibility requirements for each program. Once you meet those criteria, the loan servicer forgives all or part of the balance you owe. It’s treated like you paid the balance off as required, so forgiveness won’t damage your credit; it will improve it!

Finding the right student loan forgiveness program

There are several different programs that offer forgiveness:

  • Public Service Loan Forgiveness (PSLF) is the most common program. It applies to people who work in a qualified public service profession, such as teaching or nursing. Once you meet the qualifications, the PSLF program forgives ALL the remaining balances on the federal loans you enrolled in the program.
  • 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 with a maximum cap of $60,000. You must serve for three years to qualify. This program also works for students who serve in the 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 if you volunteer:
    • You can qualify for up to $4,725 in debt if you work for AmeriCorps for 12 months.
    • You can qualify for $4,725 of forgiveness for 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 federal loans for teachers who work with low-income students.
  • Federal Perkins Loan Cancellation can help those who took out Perkins Loans instead of Federal Direct Loans. Those in public service professions, such as teaching or nursing, may be eligible.

Each federal student loan forgiveness program requires you to meet certain 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 small programs offered locally. Make sure to check with professional or trade associations and your school to find other programs that may apply to you.

Comparing student loan forgiveness programs

ProgramAmount Eligible for ForgivenessRequirements
Public Service Loan ForgivenessAny amount10 years of service in a qualified public service profession while making payments on a hardship-based repayment plan
Federal Perkins Loan CancellationAny amountWorking full-time in a qualifying career
Federal Student Loan Repayment ProgramUp to $10,000 per year; capped at $60,000 total3 years of qualified military service, including National Guard Service
Veterans Total and Permanent Disability DischargeAny amountService-related discharge from the military
VISTAUp to $4,7251,200 hours of qualified full-time volunteer service
Peace Corps70% Perkins loan cancellation2 years of service
AmeriCorpsUp to $4,72512 months of service
National Defense Education ActUp to $75,000 of remaining balances on Stafford/PLUS graduate loansMust be a full-time teacher at school that serves low-income families
School closure dischargeAny amountEnrolled within 120 days of school closure

How student loan forgiveness works

Each program has a different set of rules that apply and rules on how it works. In most cases, you receive funds to pay off your loan AFTER you take out the loans and finish school. That’s why it’s called forgiveness because you incurred a debt that you need to eliminate.

How Public Service Loan Forgiveness works

  1. First, you must enroll in a hardship-based federal repayment plan. The following programs count:
    1. Income-based repayment
    2. Income-contingent repayment
    3. Pay as You Earn
    4. Revised Pay as You Earn
  2. You must work in a qualified public service profession. You can certify your position through
  3. Then you make 120 qualifying payments on your repayment plan.
  4. You must remain in that position or another qualified position during the repayment period.
  5. Make sure to recertify your employment anytime you switch jobs.
  6. After 10 years, you qualify for student loan forgiveness on all remaining balances.

It’s worth noting that the federal government does not forgive your loans directly. For that matter, you do not owe the federal government directly 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 loan servicer.

How the Federal Student Loan Repayment Program works

This program can apply to more government agencies than just the military. However, the Department of Defense is the largest agency that uses it. It’s designed to help government agencies recruit and retain top candidates for employment.

  1. You must sign a service agreement with the government agency you work for.
  2. The agreement states you will work for the agency for at least three years.
  3. Each agency sets the rules for when and how you get the funds to forgive your existing balances.
  4. You can receive up to $10,000 per calendar year, but you can’t receive more than $60,000 in total
  5. If you leave the position early, you must pay back any money that was already disbursed to cover the cost of your educational services.

How Federal Perkins Loan Cancellation Works

Federal Perkins Loans have a different set of rules than other federal loans. If you work in a qualifying career field and company, you could have all of your Perkins Loans forgiven. While Public Service Loan Forgiveness only happens after 120 qualifying loan payments, Perkins Loan cancellation starts when you begin working.

Each year at a qualifying career takes a certain percentage off of your loans. Usually, that ends up looking like this:

  • Year 1: 15%
  • Year 2: 15%
  • Year 3: 20%
  • Year 4: 20%
  • Year 5: 30%

Following this schedule, you could have 100% of your Federal Perkins Loans canceled.

Learn more on the Federal Student Aid website.

Student loan forgiveness for school closures and false certifications

In addition to the above options, there is another way to qualify for school loan forgiveness, called the borrower defense. It’s used for school closures and false certifications from unaccredited institutions. This specifically relates to 2-year for-profit organizations and trade schools. If your school closes before you can 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 out the loans.

This also applies to institutes that provide false certification. If you graduate and find out that your certification is not legitimate, you may qualify for discharge. Closed school discharge has made headlines in the past few years, after school closures for institutes like ITT and Corinthian.

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 forgiveness cancellation and discharge if you were enrolled during the school closure or if you withdrew within 120 days of when the school closed.

Want to know for sure if you qualify for a student loan forgiveness program? Talk to a student loan resolution specialist today for a free evaluation

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More resources for Public Service Loan Forgiveness programs

5 Facts about PSLF that You Can’t Afford to Miss

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.

Forgiveness for Firefighters

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.

Forgiveness for Nurses

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.

Forgiveness for Police Officers

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.

Forgiveness for Teachers

The last main group of professionals that usually qualify for student loan forgiveness is 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.

Forgiveness for Military

Members of the United States Military have multiple paths to student loan forgiveness. Each branch has different rules and requirements, so take a look at the programs and decide which one fits your situation best.

Common questions about student loan forgiveness

Is student loan forgiveness real?

Yes. All the programs we describe above offer legitimate student loan forgiveness. However, that’s not to say that qualifying for student loan forgiveness is easy. Most programs have specific eligibility requirements, and if you miss one 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.

Do all federal loans qualify for student loan forgiveness?

No. Not all federal loans qualify for a student loan forgiveness program. PLUS loans to parents almost never qualify for federal relief. For Public Service Loan Forgiveness, you must consolidate Perkins Loans to make them eligible. If you have at least one Direct Loan, you can use Direct Consolidation Loans. 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

Stafford loans

PLUS for graduates

Perkins loans
Note that forgiveness applies to both subsidized and unsubsidized student loan debt.

Do you have to pay taxes on student loan forgiveness?

Any time a lender forgives a debt, you must generally pay taxes on the amount that’s forgiven, canceled, or discharged.
However, student loan debt that’s forgiven between 2021 and 2025 will not be taxed on federal income taxes.

There are seven states where recipients of student loan forgiveness will be subjected to state income tax:
North Carolina
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 go through bankruptcy, qualifying for student loan forgiveness doesn’t always mean you’re struggling.

Any loan forgiven through government student loan forgiveness plans is not considered taxable income. However, loan amounts forgiven through other methods may be taxable. Closed school and false certification cancellation require 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, if you’re a Veteran, you don’t need to apply for the exemption with the IRS to avoid taxes on your forgiven debt.

What about private student loan forgiveness?

Private student loans do not qualify for forgiveness under any of the programs described above. In general, you can’t use a government program to forgive debt issued by a private loan servicer. These programs only forgive debts that you take on through FAFSA.

What is Obama student loan forgiveness?

For the record, former President Obama did not create any student loan forgiveness program. Most programs, including PSLF, were created under the Bush administration. However, Obama did make significant changes to the Public Service Loan Forgiveness program such as removing the cap on how much debt can be forgiven through PSLF. Former President Obama also expanded the qualified public service professions to include lawyers and doctors.

The criticism now is that high-income earners abuse 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 the main reason why fiscal conservatives want to revise the program again.

What is Trump student loan forgiveness?

Former President Trump and his Department of Education proposed sweeping changes. They wanted to eliminate most of the hardship-based repayment plans; instead, there would only be income-driven repayment plans. They proposed capping the amount of student loan debt that can be forgiven.

Betsy DeVos asked the Deporting of Education to adjust qualified professions for PSLF. As a result of the change, some higher education borrowers (particularly graduate students like lawyers) received letters that their employers no longer qualified. If you fall into that type of situation, contact a student loan debt specialist immediately! The Trump administration also discussed getting rid of PSLF entirely and replacing it with something else.

What is the Student Loan Forgiveness Act?

This law was proposed in 2012 and 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 is a game changer for 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.

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