How To Apply For Student Loan Forgiveness

What is student loan forgiveness?

A portion or all of your debt is erased when your student loans are forgiven, and you are released from paying that amount. If you have federal loans, the U. S. government offers multiple options for federal student loan forgiveness.

How student loan forgiveness works

Typically, in order to be eligible for federal student loan forgiveness, you must work in a particular field for a predetermined number of years. For example, those who work in public service or as teachers, health professionals, or attorneys may be eligible for student loan forgiveness through specific organizations and federal programs.

Certain government employees and U. S. military members could also be eligible for student loan forgiveness. USA TODAY Blueprint may earn a commission from this advertiser.

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Public Service Loan Forgiveness (PSLF) is available through the U. S. Department of Education for federal Direct Loan borrowers. If you have loans from the Federal Family Education Loan (FFEL) Program or Perkins Loans that have been consolidated into a Direct Consolidation Loan, you may also be eligible for this option.

Under this program, borrowers working for eligible employers can have the remainder of their federal student loans forgiven after making 120 qualifying monthly payments. Keep in mind that PSLF is employer-based, not role-based, so you don’t necessarily need to be a police officer, firefighter, teacher or similar to qualify. You can determine if you work for an eligible employer by using the Federal Student Aid’s employer eligibility tool.

Forgiveness amount: Varies based on amount borrowed and repaid.
Requirements: 120 qualifying loan payments, yearly employment certification, and full-time employment for a qualifying employer
Taxable/not taxable: Not taxable.

Teacher Loan Forgiveness Program

Teachers with Direct or FFEL program loans who have worked full time for five years in a row at an eligible school or organization serving low-income students are eligible for up to $17,500 in student loan forgiveness through the Teacher Loan Forgiveness (TLF) Program. Elementary and secondary schools as well as educational service organizations are eligible schools.

Forgiveness amount: Up to $17,500.
The following criteria must be met: five years of full-time teaching experience at a qualifying school; state certification as a teacher; a bachelor’s degree; and the ability to waive certain certification or licensure requirements. This is also known as being a “highly qualified teacher.”
Taxable/not taxable: Not taxable.

Health professional loan repayment

You may be eligible for student loan assistance from institutions such as the National Institutes of Health (NIH) or the National Health Service Corps (NHSC) if you hold a qualifying healthcare role. For qualified full-time healthcare professionals, the NHSC offers up to $120,000 in loan assistance; for qualified healthcare professionals conducting qualifying research, the NIH offers up to $50,000 annually in loan assistance. Those who meet the eligibility requirements may also be eligible for up to a $260,000 loan payback through the Nurse Corps loan repayment program in exchange for a two-year service commitment.

Repayment amount: Depending on the program, up to $120,000 or up to 100% of the loan amount
Qualifications: Licensed healthcare professionals working in qualifying roles.
Taxable or not taxable: Repayments from the Nurse Corps and the NIH are taxable, but NHSC payments are not.

Service member loan repayment

While members of the U. S. In addition to PSLF, there are a number of other student loan assistance programs available to members of the armed forces. For instance, the U. S. For eligible members, the Army offers a special program that will repay up to $65,000 in student loans, and the Coast Guard offers up to $60,000 in aid. Other branches also offer student loan repayment programs.

Repayment amount: Varies by program.
Qualifications: Varies by program.
Taxable/not taxable: Payments can be taxable, depending on the program.

The U. S. If you are not eligible for other forgiveness programs, the Department of Education offers four income-driven repayment (IDR) programs for qualifying borrowers of federal loans.

IDR plans can drastically lower your monthly payments because they base them on your income. Additionally, depending on the plan, after making qualifying payments for 20 or 25 years, your remaining balance may be forgiven.

Here are the four main IDR plans available:

Repayment amount: Depending on the plan, the amount left over after 20 or 25 years of payments
Qualifications: Varies by plan.
Taxable/not taxable: Taxable.

Student loan forgiveness vs. discharge

Although discharge and forgiveness of student loans can achieve the same objective, there are usually differences in the ways that they do so. Most of the time, you can apply for student loan forgiveness after working in a qualifying position for a number of years.

On the other hand, you usually don’t need to work in a specific role for a predetermined number of years in order to be eligible for student loan discharge. Note that this doesn’t apply to Perkins Loan cancellation.

5 federal student loan discharge programs

Federal Perkins Loans are no longer issued. However, your Perkins Loan may be eligible for cancellation if it was disbursed prior to June 30, 2018. You could receive up to 10% of your Perkins Loan canceled if you have worked full-time in a qualifying profession or served in the military in an area where there was an imminent danger of fire or hostile situation. Most of these programs require five years of service.

Cancellation amount: up to 10% of the total (up to 20%5050% for military personnel whose active duty service ended prior to August) 14, 2008).
Qualifications: Varies by profession.
Taxable/not taxable: Not taxable.

Should your school close while you are re-attending or shortly after graduation, you may be eligible for a federal student loan discharge of up to 10% of your total income. Direct loans, FFEL Program loans, and Perkins loans are examples of qualifying loans.

Cancellation amount: Up to 100%.
Requirements: Enroll in a school that closes shortly after you withdraw or while you are still enrolled.
Taxable/not taxable: Not taxable.

Borrower defense loan discharge

Borrower defense loan discharge may be available to students who were defrauded by their schools. This program allows borrowers to be eligible for a federal loan discharge of up to 10% of their total debt.

Cancellation amount: Up to 100%.
Requirements: Be enrolled in or continue to attend a school because of false information provided by the institution or other wrongdoing that has harmed you.
Taxable/not taxable: Not taxable.

Discharge due to permanent disability or death

Federal student loans may be discharged if the borrower dies or becomes permanently disabled. Similarly, loans taken out by a parent on behalf of a deceased borrower may also be discharged.

Cancellation amount: 100%.
Qualifications: Become totally and permanently disabled or die.
Taxable/not taxable: Not taxable if received between Jan. 1, 2018, and Dec. 31, 2025 (could be taxable afterward).

Discharge due to bankruptcy

Even though it’s not always possible, there are situations where you can get your federal student loans discharged in bankruptcy. Prior to filing for bankruptcy, borrowers had to demonstrate to an adversary that repaying their student loans would cause them serious and prolonged financial hardship. However, new guidelines were released in November 2022 by the Department of Education and the Department of Justice to make the process of filing for student loan discharge more equitable and user-friendly for borrowers.

These new guidelines have allowed borrowers to qualify for federal student loan discharge based on their individual circumstances and without having to go through the full process of an adversary proceeding. As of Nov. 16, 2023, 99% of borrowers pursuing student loan discharge through bankruptcy received a full or partial discharge under the new guidance, according to the Department of Justice.

Cancellation amount: up to 10% of the total (you might also need to repay your loan on different terms)
Requirements: Prove in bankruptcy court that repaying the loan would result in an undue hardship (or provide evidence of extenuating circumstances that indicate an undue hardship without the need for an adversary proceeding).
Taxable/not taxable: Not taxable.

Do private student loans qualify for forgiveness?

Regretfully, there are very few circumstances in which private student loans can be canceled, such as when the primary borrower passes away and the lender permits it.

Federal forgiveness programs do not apply to private student loans, according to Leslie Tayne, a financial attorney and the founder of the debt relief company Tayne Law Group. Furthermore, private lenders hardly ever, if ever, forgive their borrowers’ outstanding student loan debt. ”.

Having said that, your lender might be open to temporarily pausing or changing your payments if you are unable to make your private loan payments.

Watch out for student loan forgiveness scams

Be cautious if a company contacts you and says it can help you cancel your student loan debt for a fee. Federal Student Aid cautions that, while this isn’t always the case, scams are frequently connected to current affairs, such as Biden’s student loan forgiveness plan that was overturned by the Supreme Court.

Scammers might ask for money upfront, claiming that they can help you discharge your student loans. This is a major red flag, and if you get a call, email or text message from a company that’s aggressively advertising this service for a fee, submit a complaint to the Federal Student Aid Office.

Alternatives to student loan forgiveness

Your federal student loans may be eligible for deferment or forbearance if you are experiencing financial hardship. Both allow you to temporarily suspend loan payments, but there is a significant distinction between the two: interest will accrue on any loan in forbearance, but not on direct-subsidized loans or direct-subsidized consolidation loans while you are in deferment.

Depending on where you live and what you work for a living, there may also be state-based student loan assistance programs available. If they work in certain roles that are eligible under these programs, some employees may be eligible for financial assistance.

You may also be eligible for loan assistance from your present or potential employer. Companies are starting to provide this benefit more frequently in an attempt to draw in fresh graduates. Plus, employer loan assistance might not be taxable.

Employers may contribute up to $5,250 annually toward employee student loans under the CARES Act until 2025, and employee repayments are not included in the employee’s taxable income.

Refinancing your student loans is an additional option, but if you have federal student loans, you must carefully consider the benefits and drawbacks. Both private and federal loans can be refinanced with private lenders; however, refinancing federal loans through a private lender results in the loss of federal protections and benefits, such as loan forgiveness programs and IDR plans.

However, if refinancing results in a noticeably lower interest rate or monthly payment, it might make sense. Consequently, this may lower your overall interest expenses during the course of your loan and facilitate easier management of your payments. Remember that in order to get the best rates on refinanced loans, you usually need good to excellent credit.

To avoid losing your federal benefits, you might also think about combining your federal loans into a single new Direct Consolidation Loan. Unlike private refinancing, federal consolidation doesn’t change your interest rate. Rather, your interest rate will simply be the weighted average of the interest rates on the consolidated loans, rounded up to the nearest one-eighth of 1%.

But with consolidation, you can extend your repayment period to 30 years, which could result in a large monthly payment reduction. Just keep in mind that paying more in interest over time is the result of a longer term.

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Since 2009, Jess has been producing content for the internet as a personal finance writer. Jess worked on the editorial teams of Investopedia and The Balance prior to going full-time freelance. Her writing has appeared on Investopedia, HuffPost, FinanceBuzz, The Balance, and other websites.

Megan Horner is editorial director at USA TODAY Blueprint. Her experience in online publishing spans more than a decade, with a primary emphasis on credit cards and banking. Previously, she was the head of publishing at Finder. com, where she oversaw the publication of personal finance articles about credit cards, banking, loans, mortgages, and other topics. Prior to that, she was an editor at Credit Karma. Megan has been featured in CreditCards. com, American Banker, Lifehacker and news broadcasts across the country. She has a bachelor’s degree in English and editing.

Ashley has been employed in the online finance industry since 2017 and is a deputy editor for USA TODAY Blueprint loans and mortgages. She is passionate about producing informative content that simplifies difficult financial concepts. She was previously employed by Student Loan Hero, Credible, LendingTree, and Forbes Advisor. Her work has appeared on Fox Business and Yahoo. Ashley is a talented artist and a die-hard horror fan. The NoSleep Podcast produced her short story “The Box.” She enjoys drawing, playing video games, scaring herself with scary stories, and chasing her black cat, Salem.

FAQ

Can you currently apply for student loan forgiveness?

Student Loan Debt Relief: We are unable to proceed with our one-time student loan relief plan due to a ruling from the Supreme Court. Visit StudentAid. gov/debtrelief to find out how this decision affects you and to discover more about the steps President Biden announced in response to the announcement.

How do I claim loan forgiveness on student loans?

After you’ve made 120 qualifying payments on your Direct Loans, you may be eligible for forgiveness of the whole balance if you work full-time for the government or a nonprofit organization. e. , 10 years of payments. You must repay your federal student loans under an IDR plan in order to be eligible for PSLF benefits.

Is there a form I need to fill out for student loan forgiveness?

As you move closer to PSLF, you should fill out and submit the PSLF form annually in order to receive benefits from PSLF. We will use the data you supply on the form to verify whether you are making qualifying PSLF payments and to let you know if your employment qualifies.

Is it too late to apply for student loan forgiveness?

Student Loan Forgiveness Considerations As Student Loan Payments Resume. The Education Department states that borrowers must use the federal Direct consolidation program to combine their loans in order to be eligible for student loan forgiveness under the IDR Account Adjustment by December 31, 2023.

Read More :

https://studentaid.gov/manage-loans/forgiveness-cancellation
https://www.usatoday.com/money/blueprint/student-loans/student-loan-forgiveness-programs/