How to get student loan forgiveness

Understanding loan forgiveness, cancellation and discharge

The viability of each of these options depends on where you work and what your life is like.

Forgiveness erases part of a loan; cancellation can erase the whole thing.

• Forgiveness, generally speaking, is only for individuals who work in a certain industry or profession for a period of time. For example, working for an approved 501(c)(3) nonprofit can qualify you for the Public Service Student Loan Forgiveness (PSLF) Program. With student loan forgiveness, only a percentage of your loan is paid off, though this may be enough to wipe out your remaining balance.
• Cancellation is very similar to forgiveness in that it also applies to people in certain professions or industries. However, federal programs that use the term “cancellation” can erase up to 100% of your debt from a given loan.
• Discharges are applicable when other circumstances impact your requirements for paying back your loan. Most of the eligibility requirements are out of your control — these include permanent disability and the death of the student or borrower.

All three of these usually require applications, documentation and proving that you’re worthy of financial help. Some may require that you go to court to prove your point, while others may be pretty straightforward.

It’s also important to remember that nearly all student loan relief programs are only good for federal loans, not private loans. So, if you have a loan through a company like Sallie Mae, it's probably not eligible for forgiveness.

Student loan forgiveness programs

Your ability to apply for a student loan forgiveness program usually depends on your situation. For example, there are specific forgiveness programs for first responders or those who make under a certain amount of money.

Let’s talk about a few popular options for student loan forgiveness.

Income-driven repayment

Income-driven repayment plans are federal student loan forgiveness programs. These plans create a personalized repayment plan based on how much money you make and your family size. Usually, income-driven repayment plans are reserved for people who either have a high amount of student loan debt or are unemployed, though. Your payments are generally calculated based on your income and the poverty guidelines of your state.

There are a few types of these programs, including the:

• Revised Pay As You Earn Plan (REPAYE Plan)
• Pay As You Earn Plan (PAYE Plan)
• Income-Based Repayment Plan (IBR Plan)
• Income-Contingent Repayment Plan (ICR Plan)

It can be hard to know which one is right for you, so we recommend consulting your loan provider. Your provider can help you figure out which one makes sense for your situation. Most of the time, these plans charge you about 10% of your income (except for ICR, which is usually 20%).

Income-driven repayment plans are for students who have received a disbursement of a Direct Subsidized Loan, a Direct Unsubsidized Loan or a Direct PLUS Loan on or after Oct. 1, 2011, or applied for a Direct Consolidation Loan on or after Oct. 1, 2011. Each plan has its own specific requirements.

Public Service Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) Program is for employees of U.S. federal, state, local or tribal governments or not-for-profit organizations. A PSLF plan forgives your remaining Direct Loans balance after you make 120 qualifying monthly payments on time. You must work full-time for a qualifying employer for all 120 months (10 years). Any payments made during school or while in deferment do not count toward your 120 months.

You can move employers or locations during these 10 years, and you can even take a break from a PSLF company and then come back. However, this can get pretty complicated pretty quickly. Check to make sure that you’re still eligible for this repayment plan on a yearly basis and ensure there are no expensive surprises down the road.

Notify your loan servicer when switching employers to make sure you’re still eligible.

You’re still eligible if you work part time but maintain 30+ hours of eligible work per week. AmeriCorps or Peace Corps volunteers who serve full time are also eligible for this program. If you work in one of these situations, you may also be able to use your volunteer payments or Education Award to prepay a lump sum and expedite your 120 months.

PSLF waivers

As a result of the COVID-19 pandemic, the U.S. Department of Education has announced temporary changes to the Public Student Loan Forgiveness Program. These changes may allow you to receive credit for past payments that otherwise would not qualify for PSLF. Contact your loan servicer for assistance, and ask how many qualifying payments you have under the new PSLF waiver.

Programs for teachers

The Teacher Loan Forgiveness Program is for “highly qualified” teachers who work full time for five consecutive years in a low-income school or educational service agency. If you meet all the qualifications, you are eligible to receive forgiveness up to $17,500 for any Direct Subsidized Loans or Unsubsidized Loans.

A “highly qualified” teacher is considered to be someone who provides direct classroom teaching in or outside a classroom. So, principals or other education professionals who don’t teach aren’t included, but special education teachers are. “Highly qualified” teachers must also have a bachelor’s degree and state certification. Charter school teachers are able to receive this loan if the charter school considers them to be fully certified.

New teachers have a few more eligibility requirements, depending on the age that they teach. For example, new middle school teachers are required to either pass a rigorous state academic subject test in each subject they teach or complete extra certification or education in their area of expertise.

It’s worth noting that the maximum $17,500 of forgiveness is reserved for math or science teachers at the secondary level and special education teachers either at the elementary or secondary levels. All other teachers are only eligible for up to $5,000 of forgiveness.

If you qualify for the Teacher Loan Forgiveness Program, you may also qualify for the Public Service Loan Forgiveness Program. However, you can only participate in one forgiveness plan at a time. Check which plan is right for you before applying.

For example, if you owe less than $17,500, the Teacher Loan Forgiveness Program may be the best plan for you. If you owe significantly more, you may want to consider the Public Service Loan Forgiveness Program.

Programs for nurses

There are a few federal and state forgiveness programs for nurses. A few of the most popular are the Nurse Corps Loan Repayment Program (LRP) and the National Health Service Corps Loan Repayment Program (NHSC LRP) — remember, nurses are also eligible to receive repayment through PSLF.

The Nurse Corps Loan Repayment Program is specific to nurses who work in underserved communities at critical shortage facilities (CSF). Nurses must work full time (32+ hours per week) at a CSF facility for two years to be eligible for this program. After this, they’re eligible to receive 60% loan forgiveness. If they choose to work there for another year, they can receive an additional 25% of forgiveness.

The National Health Service Corps Loan Repayment Program is for nurse practitioners or midwives who work in designated Health Professional Shortage Areas (HPSA). This two-year program offers up to $50,000 of repayment for full-time workers and up to $25,000 for part-time workers.

Each state also has some of its own repayment programs. For example, Ohio nursing students may be eligible for up to 100% loan cancellation after five years of working full time as an Ohio nurse.

Military loan forgiveness and assistance

The military is known for its loan forgiveness options — and with good reason. There are programs for active-duty military members, qualifying Military Occupational Specialities (MOS) and veterans. Plus, each branch has its own programs, like $65,000 of forgiveness from the Navy and $50,000 from the National Guard.

This is probably one of the easiest types of forgiveness to qualify for because there’s little in terms of eligibility requirements beyond enlisting. Of course, it’s not a solution for everyone, and there are term requirements for each type of loan. For example, to qualify for repayment, you must enlist in the National Guard for six years, the Navy for three years or the Army for six years.

If you serve in an area that’s considered an immediate danger, you may be eligible to receive 100% forgiveness. This is also an option for those who have been discharged due to a disability. Military members are eligible to utilize the PSLF program as well.

Student loan cancellation programs

Whereas student loan forgiveness is usually partial, student loan cancellation can be comprehensive, akin to 100% forgiveness. There are not very many of these programs available, and they’re pretty hard to qualify for.

One of the most common student loan cancellation programs is Perkins Loan cancellation. This program is for people who have volunteered or worked for a certain period of time in an eligible field, including:

• Teachers who have served low-income families as a special education teacher or in a field with a shortage of professionals (like bilingual studies or mathematics)
• Firefighters
• Law enforcement
• Public defenders

Perkins Loan cancellations are also for people with certain types of financial issues, like bankruptcy or a service-connected disability. As you can tell, these are a pretty broad solution, which can seem like a good thing. However, it’s generally pretty complicated to get one of these, and it’s important that you understand all the requirements before you bank on 100% forgiveness as part of your financial planning.

Student loan discharge programs

You may also be able to receive a total payoff of your student loans through a student loan discharge program. These programs are reserved for individuals dealing with unique and difficult situations, like a disability or death.

Closed school

If your school closed before you could finish getting your degree, you may be eligible to get reimbursed through this program. However, you have to apply for this, meaning it’s important that you get all of your financial information from your school before it closes. This can obviously be pretty difficult, but it’s very important to your financial future. These discharges are also only for federal loans.

Even if you weren’t an active student, you’re still eligible to receive a discharge if you were on a leave of absence when your school closed or if it closed within 180 days after you withdrew. If you transferred credits from a now-closed school within this time frame, you could also receive a discharge for those credits.

Borrower defense to repayment

This is a pretty specific case, but if you think your school misled you or unfairly charged you, you can apply for borrower defense. This is also applicable if you think the school engaged in misconduct or violated state law. You will need documentation to defend your position, and you will have to fill out a pretty lengthy application.

Disability discharge

If you become permanently disabled, you can apply for a total and permanent disability (TPD) discharge. You will have to show documentation from either the Department of Veterans Affairs, the Social Security Administration or a physician, though.

Sometimes, the government may reach out to you directly if they find that you’re eligible for this discharge from either the VA or the SSA. From there, you can choose whether or not you want to apply for this discharge.

Discharge due to death

These debt discharges are for the families of those with student loans. If a student or graduate passes away, the family can apply for a discharge due to death. This means that the student loan amount won’t pass on to someone else.

This also applies to Parent PLUS Loans, which are loans that parents can take out. If a parent dies before the amount is paid off, a graduate can apply for these to be discharged as well.

You will need proof of death for either of these options.

Discharge due to bankruptcy

While rare, there are times when student loans can be discharged due to bankruptcy. Unfortunately, these are pretty hard to qualify for.

In order to get your loans discharged after bankruptcy, you’ll need to prove that your student loan “will impose an undue hardship on you and your dependents.” A court will decide if your proof warrants a total discharge of your loans. In court, your creditors are also allowed to appear in order to challenge your statements.

Most federal courts have adopted the Brunner test to see if you meet the undue hardship standard. This test has three requirements:

1. You can’t maintain a minimum standard of living while paying back your loan.
2. Your financial situation is unlikely to improve.
3. You’ve made a good-faith attempt to pay back your loans.

This standard may change as judges reevaluate the validity of the Brunner test, but for now, it’s still a likely hurdle when discharging your student loans through bankruptcy.

How to apply for student loan forgiveness

As mentioned above, you almost always have to apply for student loan forgiveness programs, and it usually takes a good amount of upfront work to apply. Here’s how to do it:

Figure out what you’re eligible for

In many ways, this is the hardest step. Because there are so many options, it can be overwhelming to find the right one for you. Contact your loan provider to figure out what options may be available to you.

Make sure you have your ducks in a row

There are tons of eligibility requirements to meet even once you decide that a program is a good option for you. Read through the rules and regulations to make sure everything is ready to go and that you won’t be deemed ineligible for missing a deadline or a payment.

Complete an online application

Pretty much all of these programs have you fill out an application online. If you need to have documentation in order to apply, like your job history or disability waivers, make sure you have everything ready to go.

Continue to pay your loans

You need to continue to make your required student loan payments during the application process. Missing a deadline might deem you ineligible for forgiveness, so it’s critical not to lose focus late in the game.

Save money

Angela Howze, a certified student loan professional (CSLP) that reviewed this article, also recommends that you allocate $150 to $250 per month to save up for the taxes you may owe if you receive forgiveness. Canceled debt generally counts as income (unless it was discharged due to death or disability), so you may want to consult a tax professional and fill out IRS forms 982 and 1099-C.

CARES Act 2020

The Coronavirus Aid, Relief and Economic Security Act temporarily deferred student loan payments on federal loans, and as of publishing, this pause has been extended through May 1, 2022. This means students who have federal loans through the U.S. Department of Education do not have to repay their loans during this time and will not accrue any interest.

However, the CARES Act does not lower debt amounts in any capacity. It simply delays when students have to pay them off. Private student loans and federal loans not owned by the Department of Education are not covered by the CARES Act.

Bottom line: Am I eligible for student loan forgiveness?

Applying for student loan forgiveness is complicated, but it can be very rewarding both personally and financially. Most loan providers are able to help you navigate this process and figure out what makes the most sense for your situation. It’s always worth exploring your options, but make sure you understand all of the details because these can make the difference between $100,000 of relief and having to pay back your entire loan.