Student Loan Forgiveness & Discharge

Certain career choices – teachers, nurses, employees at any branch of local, state or federal government – make you eligible for loan forgiveness or discharge of Direct and Perkins federal loans. Find out if your job or personal situation qualifies and how to apply to have your loan forgiven or discharged.

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How To Get Your Student Loans Forgiven: Three Paths

There are three ways to have student loans forgiven and none of them are easily attainable. The first is based on the type of career you choose. The second is based on you how many years you make on-time payments while enrolled in a qualifying repayment plan. The last one requires a set of extraordinary circumstances that rarely come into play, but nonetheless could result in loan forgiveness. The first two are available for federal student loans only and the last one is achievable for federal or private student loans.

Be aware that there is an important difference between having a loan “discharged” and having one “forgiven.” Loan forgiveness typically is given to someone who performs works at a qualified job, such as teaching in a high-need area, for a specific length of time and has the amount left on their student loan forgiven. Loan discharge is rare, but can be granted to borrowers who can’t repay the loan for a variety of reasons such as death, disability, fraud, identity theft and in very scarce circumstances, bankruptcy.

Public Service Loan Forgiveness Program (PSLF)

Public Service Loan Forgiveness was created by the College Cost Reduction and Access Act of 2007 to lessen the burden of student loans for highly-qualified graduates and encourage them to pursue careers in the public service sector.

This forgiveness option is available for Direct Federal Student Loans; Direct Plus loans and Direct Consolidation loans. Private student loans are not eligible for Public Service Loan Forgiveness. To receive loan forgiveness under this program, you must be a full-time employee (at least 30 hours per week) in public service job and make 10 years of on-time monthly payments (120) after consolidating your federal loans in a qualified repayment program.

This forgiveness option applies solely to Direct Federal Student Loans. Private student loans are not eligible for Public Service Loan Forgiveness. To receive loan forgiveness under this program, you must be a full-time employee (at least 30 hours per week) in public service job and make 10 years of on-time monthly payments (120) after consolidating your federal loans in a qualified repayment program.

Public Service Jobs Qualifying for Public Service Loan Forgiveness:

  • Any job in a government organization at the federal, state, local or tribal level
  • Not-for-profit organizations that are designated tax-exempt under Section 501(c)(3)
  • Other not-for-profit organizations that are not tax-exempt but provide a qualifying public service
  • Full-time AmeriCorps and Peace Corps volunteers

The most common public service careers are in education, law enforcement, health, public law, and veterinary medicine.

Repayment Plans Qualifying for Public Service Loan Forgiveness

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

Note that the 10-year Standard Repayment Plan also is considered a qualifying plan, but because it is a 10-year plan, there won’t be any funds left to forgive. If you plan to enroll in a PSLF program, you need to enroll in a repayment plan that extends your loan term beyond 10 years.

To apply for PSLF, you must fill out a Employment Certification Form every year and make pay stubs, W-2 forms or other documentation available as requested.

The first wave of student loan borrowers eligible for loan forgiveness met their final required payment in October of 2017. News stories say that many of the people who thought they had qualified, were denied loan forgiveness because they didn’t meet the prescribed requirements.

According to a 2017 report from the Consumer Financial Protection Bureau, more than 550,000 borrowers are expecting to have their loans forgiven. If you are enrolled in the program, you should track your progress at least once-a-year to be certain you are meeting all requirements.

However, President Donald Trump has proposed eliminating the program to anyone who hasn’t enrolled by July 1, 2018. Congress hasn’t voted on that proposal as of the Spring of 2018. For more information on this path to loan forgiveness, visit Public Service Loan Forgiveness.

Teacher Loan Forgiveness Program

The Teacher Loan Forgiveness program was created in 1998 to encourage teachers to take jobs at elementary schools, secondary schools and educational service agencies that serve low-income families. The U.S. Department of Education publishes the list of low-income elementary schools and secondary schools each year.

You need to teach fulltime at a qualifying school for five full and consecutive years. Then you are eligible to have from $5,000 to up to $17,500 in loans forgiven.

Only Direct subsidized and unsubsidized loans qualify. PLUS loans do not qualify. There are 13 states that offer some form of loan forgiveness for teachers, with varying requirements. You can check to see if your state offers help through The Complete Guide to Student Loan Forgiveness for Teachers, or Loan Repayment Assistance Programs.

Apply to the program by completing the Teacher Loan Forgiveness Application and submitting it to your loan servicer.

Loan Forgiveness for Nurses

Registered nurses, nurse practitioners and members of nursing faculty, who work in high-need population areas or areas where there is a critical shortage could qualify to have up to 85% of their loans forgiven under the NURSE Corps Loan Repayment Program.

Qualified candidates can have 60% of their student loans forgiven for working two years in an underserved area. Another 25% could be forgiven for working three years. Some states also offer loan repayment assistance. Go to the Loan Forgiveness for Nurses website to see if yours is one of the 33 states that has one and what the eligibility requirements are.

Loan Forgiveness for Doctors

The healthcare professions, especially physicians, dentists, pharmacists and mental healthcare workers, have several options, both national and local, to receive loan forgiveness.

The requirements and the amount forgiven vary dramatically, depending upon which program you enter. For example, the Navy Financial Assistance Program offers up to $275,000 in loan forgiveness in return for an eight-year commitment for active and reserve duty. The National Health Service Corps offers up to $50,000 in loan repayment for two years of work at an approved site.

Check out the links to see the amount of loan forgiveness available and requirements for Army doctors; Indian Health Services, National Institute of Health, as well as state-by-state programs.

Loan Forgiveness for Lawyers

Like most professions, there is a financial incentive for lawyers to spend a few years practicing in public service or government offices in order to have some portion of their law school loan forgiven. For example, the Department of Justice provides up to $60,000 in loan forgiveness for lawyers who work there for at least three years. The Air Force Judge Advocate program offers up to $65,000 in loan forgiveness.

The best place to start looking might be your own law school, since several colleges forgive some or all of the student loans for students who make less than $60,000 a year. That amount varies, so check with your school to get actual requirements and amount forgiven. If you can't qualify for a forgiveness program, look into refinancing your law school debt.

Loan Forgiveness for Military

Each branch of the military has programs that help qualified members pay off their student loans, but the loan amounts forgiven and the requirements that must be met vary dramatically.

The best to find out all that is involved in military loan forgiveness is to visit the Complete Guide to Military Student Loan Forgiveness and Repayment and find the program that best suits your situation and branch of the military.

Federal Perkins Loan Cancellation

Federal Perkins Loans have a separate forgiveness program because your school is the lender, not the federal government. To apply, contact the financial aid office at the school that administered your Perkins Loan and request the application forms. You need to be a full-time employee in a qualified career.

Qualifying Perkins Loan Forgiveness Jobs:

  • Soldier in hostile fire or imminent danger pay areas
  • Firefighter
  • Law enforcement or corrections officer
  • Nurse or medical technician
  • VISTA or Peace Corps volunteer
  • Librarian with a master’s degree (employed by Title 1 eligible schools or public libraries that serve those schools)
  • Attorney employed in a federal public or community defender organization
  • Employee for public or nonprofit organization that serves high-risk children and their families from low-income communities
  • Staff member for educational component of the Head Start program
  • Staff member for a state-licensed or regulated pre-kindergarten or child care program
  • Professional provider of early intervention services for the disabled
  • Speech pathologist with a master’s degree (employed by Title 1 eligible schools)
  • Special education teacher for children with disabilities in public, other nonprofit schools or educational service agency
  • Teacher in a field designated by the state as teacher shortage areas (math, science, foreign language, bilingual education etc.)
  • Teacher in a designated educational service agency that serves students from low-income families
  • Faculty member at a tribal college or university

You can have up to 100% of your Perkins Loans cancelled or broken down over five years.

  • 15% per year for the first and second year
  • 20% for the third and fourth years
  • 30% for the fifth year

Loan Forgiveness for Income-Based Repayment Plans after 20 or 25 Years of On-Time Payments

The second type of loan forgiveness is based on how long you make on-time payments, under a qualifying repayment plan. You do not need to be working in a specific career field to qualify for loan forgiveness based on your repayment history.

Generally, you will make on-time payments for 20 or 25 years, depending on the repayment plan. The remaining loan balance is forgiven after that period of time. Be aware the amount forgiven is considered taxable income.

The Pay As You Earn Repayment Plan qualifies you for loan forgiveness after 20 years of on-time payments. This repayment plan will generally offer you the lowest monthly payment. To enroll in this repayment plan, you must demonstrate a financial hardship. You may remain in the program, however, after the hardship has resolved.

The Revised Pay As You Earn repayment plan is similar to the PAYE plan, only you don’t need to demonstrate financial hardship to qualify for the program.

The Income-Contingent, or Income-Based Repayment Plans qualify you for loan forgiveness after 25 years of on-time payments.

Information for applications for Income-Based Repayment can be found at StudentLoans.gov. You will need documentation on personal and financial information. Your loan servicer also can provide an application.

Forgiveness based on 20 or 25 years of on-time payments is only available to Federal Student loans. Private student loans do not qualify.

Student Loan Discharge

There's one additional way to achieve student loan forgiveness which is called discharge. It is generally awarded by a judge and can apply to both Federal and private student loans. Discharge is granted under extremely rare circumstances.

Circumstances for Student Loan Discharge:

  • Permanent disability or death
  • Victim of identity theft
  • Unauthorized signature of the loan by the school without your knowledge
  • False certification of student eligibility

Discharging student loans through bankruptcy is extremely rare. It is technically not impossible, but demonstrating undue hardship is very difficult. Read more about the differences between forgiveness and discharge.

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Author

Bill Fay
Staff Writer

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at bfay@debt.org.

Sources

  1. Lockert, M. (2017, July 16) The Complete List of Student Loan Forgiveness Programs and Options. Retrieved from https://studentloanhero.com/featured/the-complete-list-of-student-loan-forgiveness-programs/
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