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    Student Loan Forgiveness Programs: Cancellation and Discharge

    Judy Miller

    Forgiveness Porgrames

    It’s no surprise that many students in the US opt to cover the costs of their college education with a loan.

    Although the economy has been recovering steadily, college tuition has also steadily increased. For most of us, paying student loans is a fact of life in our early post-university years, though it’ll eventually end.

    However, not everyone is that fortunate—accidents, unforeseen circumstances, family deaths, and other unexpected events can throw a wrench into the best-laid budgets.

    Even so, being in this position doesn’t have to be the end of the world.

    Read more about student loan forgiveness and see if you qualify

    What is Student Loan Forgiveness?

    Student loan forgiveness program offers borrowers the ability to erase their existing balance under certain conditions. In these cases, no further payments are expected, and balances are set to zero.

    In others, borrowers may qualify to have their loans cancelled or discharged. These student loan debt forgiveness policies are usually included with direct federal loans and are one of the biggest benefits over private loans. 

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    Do I Qualify for Student Loan Forgiveness?

    Generally, student loan forgiveness is reserved for individuals facing challenging circumstances. Moreover, many programs only  give you the opportunity to reduce your obligations significantly if you qualify.

    These forgiveness plans include options for:

    • Public servants
    • Teachers at public schools
    • Those with disabilities
    • Workers in specific industries.

    The programs available below are some of the most common forgiveness options available for federal and private student loan debt. 

    Public Service Student Loan Forgiveness (PSLF)

    The public service student loan programs (or PSLF) is for people who either work in a government office or who are employed at a non-profit organization with 501(c)(3) tax-exempt status. If you work at a local, state, or federal agency, entity, or organization, you can qualify for the program. 

    PSLF requires that you meet certain criteria and will only forgive your debt if you can comply.

    This includes:

    • Having made 120 payments (approximately 10 years) under a qualifying repayment plan 
    • Working full-time at a qualifying employer. If you do qualify, there are several different factors to consider. 

    How can I apply to a Student Loan Forgiveness Programs?

    To apply for the PSLF, make sure you meet the following requirements: 

    1. You must have already made 120 qualifying monthly payments when you submit your PSLF application. 
    2. If you are still working toward your PSLF, make sure to fill out the Employee Certification Form every year, or when you change jobs. 

    Eligible Federal Loans

    Usually, only direct federal student loans apply, so if you have one of the following, you may be eligible: 

    If you and your spouse are consolidating your existing loans into one, you must both meet the requirements. Otherwise, only the qualifying partner’s debt will be canceled. Additionally, Federal Family Education Loans are also not eligible for PSLF.

    Eligible Repayment Plans

    To qualify for PSLF, you need to have completed 120 qualified payments on your existing student loans. To be qualified, your payments must meet the following requirements:

    1. You were employed full-time at a qualified employer;
    2. Your payment was made after October 1st, 2007
    3. Your loan was not currently in deferment, default, or forbearance
    4. You made the payment in full (you paid the full installment within 15 days of the due date)
    5. It was made under a qualified repayment plan (including any income-driven repayment plans; other plans may qualify only if they had a repayment period of 10 years)

    These payments don’t need to be consecutive, and if you choose to consolidate your loans, the 120 payment clock restarts. 

    Eligible Public Service Employers 

    You can work in a government office or organization at any level (local to federal) or be employed at a non-profit organization that has been granted 501(c)(3) tax-exempt status.

    The nonprofit student loan forgiveness program excludes partisan political organizations, labor unions, and for-profit organizations.

    Income-Driven Student Loan Forgiveness 

    Income-driven student loan forgiveness programs help people whose loan repayments take up a large percentage of their annual income.

    These programs are capped at a certain portion of your income (usually between 10% and 20%) and can even reduce your payments to zero if your income is low enough. 

    See which of the options below may be best for you: 

    Income-Contingent Repayment (ICR)

    These plans peg your monthly repayment amount to your income, family size, and the total amount you borrowed.

    The maximum repayment period on them is usually 25 years, and the payment caps are set at 20% of your discretionary income. They’re best if you have a parent PLUS loan or a consolidated loan. 

    Income-Based Repayment (IBR)

    IBR has less strict requirements than programs like PAYE and has a lower payment cap than ICR programs. IBR is similar to ICR, but it caps repayment at 10% of your discretionary income.

    The maximum term for forgiveness varies between 20 years if you took your loan out before July 1st, 2014, and 25 if you did so after that date. 

    Pay as You Earn (PAYE)

    PAYE plans are similar to IBR programs, with a cap at 10% of your discretionary income and forgiveness eligibility after 20 years (or 240 payments). The major difference is that the program is only available to those who received a disbursement of a loan on or after October 11th, 2011, and who had no existing balance of federal loans on October 1st, 2007. 

    Revised Pay as You Earn (REPAYE) 

    This program was introduced to revise the PAYE program in 2015. REPAYE works exactly the same way as PAYE, but without a restriction on the borrowing date. 

    >> More about repayment plans

    Student Loan Discharge

    Death Discharge 

    Federal student loans may be forgiven if the borrower passes away before their loans are repaid. The process, known as discharge due to death, will cancel the remainder of the borrower’s balance when their next of kin present acceptable documentation of death. 

    Student Loans in Cases of Disability 

    If you have become permanently disabled and unable to work, the government has built a program for forgiving these types of debt. This program is applicable for federal direct loans, FFEL loans, and federal Perkins loans. To qualify for a student loan discharge due to disability, you must prove your disability to the Department of Education. You must have a physical or mental impairment that keeps you from working, and that: 

    • Can be expected to result in your death 
    • Is expected to last for a continuous period of 60 or more months 
    • Has lasted for longer than 60 months already

    To learn more about how to apply, visit the official program website.  

    Closed School Loan Discharge 

    If your school closes while you’re enrolled, you can have your existing debt relief by the Department of Education. This program is only available for students who have not completed their coursework for graduation, and who were still attending the school at the time it closed, or within 120 days of the closure date. 

    The process is largely automated, and you’re likely to be approved without any complications if you complete your closed school loan discharge application form. 

    Perkins Loan Cancellation

    If you have a Perkins loan, there is a chance you can have some of it canceled based on your employment or volunteer service.

    This program is available for a variety of professions, including nursing, teaching, and more, and usually offers a percentage (up to 100%) of your debt canceled in exchange for a set time commitment to the organization you work with. 

    Student Loan Forgiveness for Your Profession

    There are several federal student loan forgiveness programs that help graduates in several fields rein in their student loan debt.

    Learn more below to see if you find an applicable student loan repayment option:

    Student Loan Forgiveness for Non-Profits

    If you work at a non-profit organization (NPO) with 501(c)(3) status, you also qualify for the PSLF program. This, fortunately, includes a broad range of organizations, and it is a good way to reduce your overall payments for federal student loans.

    Student Loan Forgiveness for Teachers

    For teachers who work in the public school system, the Teacher Loan Forgiveness program can remove a significant portion of your outstanding debt.

    To qualify, you’ll need to have a full-time teaching position for five complete and consecutive academic years in a low-income school or an educational service agency. Fortunately, this program can forgive up to $17,500 of your outstanding loan.

    To learn more about applying for student loan forgiveness for teachers, visit this site. 

    Student Loan Forgiveness for Lawyers

    There are multiple available forgiveness programs for lawyers. For those employed by the Department of Justice, its Attorney Student Loan Repayment Program (ASLRP) offers $6,000 in loan assistance for each year you work at the DoJ, with a lifetime maximum of $60,000. 

    Public defenders can apply for the John R. Justice (JRJ) student loan repayment program, which gives you up to $10,000 in assistance for a maximum of $60,000. This does require a three-year commitment to work as a public defender. You can also apply for a PSLF program if you work in a relevant field.

    Military Student Loan Forgiveness and Loan Assistance Programs

    If you’ve served in the military, you still qualify for the Forever GI Bill and can get up to $65,000 in forgiveness through the Military College Repayment Program (CLRP) if you join the military or renew your existing service contract. You also qualify for PSLF programs.

    Student Loan Forgiveness for Nurses

    Student loan forgiveness for nurses includes the PSLF, which nurses usually qualify for due to the nature of their work.

    Additionally, you can apply for the NURSE Corps Loan Repayment Program (LRP), which is available for those who work in critical shortage facilities in high-need areas or at an accredited nursing school for two full years.

    In exchange, NURSE Corps will cover 60% of your unpaid loans over the same period.

    You can also apply for Perkins Loans cancellations, which remove up to 30% of your total loan after 5 years of service. 

    Student Loan Bankruptcy

    Although the process requires a few extra steps, you can have your student loans forgiven in your bankruptcy if you can prove it would cause you undue hardship to continue paying them. To do so, you’ll have to file an extra lawsuit and answer additional questions about how payments would affect you. It’s still recommended to avoid this unless you’ve exhausted all other options.

    Borrower Defense Against Repayment

    In cases where you’ve been misled by your university, or it has engaged in misconduct or violation of certain laws, you may be eligible for loan forgiveness. This process, known as Borrower defense against repayment, is available for federally backed student loans, and you can apply for it even if your school hasn’t closed.

    Student Loan Forgiveness for Doctors

    Student loan forgiveness programs for doctors include the National Health Service Corps program, which gives you up to $50,000 for a two-year commitment to the organization, and the PSLF program. Additionally, service in the military gives you several options based on your branch, as does working for the National Institutes of Health.

    Obama Student Loan Forgiveness

    The Obama Student Loan Forgiveness program’s concept is simple – keep student loan repayments affordable and write off the remaining balance when certain requirements are met. This is a great student debt relief program that says your student loan payments shouldn’t be more than 10% of your discretionary income. Additionally, any remaining balance of your loan will be waived off after 20 years of payment under the Obama PAYE program, but you will have to pay income tax on the amount waived.

    Trump Student Loan Forgiveness

    This program is an upgrade of Obama’s student loan forgiveness program. The Trump Administration introduced some new laws and some proposals, and one such law is the Tax Cuts & Jobs Act. Per the program, student loan discharges by total and permanent disability (TPD) won’t be added to your gross income and are no longer taxable. With this new change interested borrowers can access debt relief, allowing them to apply for a discharge and not stick to income-driven repayment plans.

    When Forgiveness Options Fail

    Even when you fully intend to meet your forgiveness program’s requirements, you may trip up. Many programs have stringent conditions and lapsing on even one can result in having to pay your full loan.

    Moreover, applying for the wrong program can complicate the process even further. In these cases, you may be left with fewer options than before, but you can still work with lenders to find a repayment plan that helps you at least manage the financial costs.

    In the worst of cases, you can apply for bankruptcy to forgive your existing debt, but you should always avoid this option until the very end.

    On the other hand, you can attempt to apply for a consolidation loan to help stabilize your payments or opt for an income-driven option that doesn’t forgive your payment but might make it more manageable.

    >> More info on alternatives to student loan forgiveness 

    What I Think about Student Loan Forgiveness Programs

    Student loans are no longer an option for many aspiring college students, and we must find ways to responsibly pay for our accrued debts. Even so, you should always take advantage of every option possible to manage your student loans as well as you can.

    This includes taking care from the very start, either by starting your payments early or signing up for a plan that gives you some time to find your footing before having to pay.

    If your loan payments become too much to handle, it’s important to find ways to make them more manageable. Consolidation loans may help in reducing both your payments and your overall interest rates, and income-driven repayment can also help you find a way out of your debt hole responsibly. In the worst of cases, you shouldn’t look at forgiveness as a bad thing.

    Sometimes your inability to pay stems from unpredictable life events outside your control and not your irresponsibility. Forgiveness is a way to get the help you need without having to sacrifice your financial future with a nuclear option like bankruptcy.