As student loan debt grows, more borrowers are looking for a way to get rid of it. Enter student loan “debt relief” companies.
Some say they’ll give you access to “Obama student loan forgiveness” programs. In reality, they charge fees to enroll borrowers in free government loan programs. Here’s the truth about so-called Obama student loan forgiveness:
No ‘Obama student loan forgiveness’
Some of the free federal programs that “debt relief” companies tout were implemented under the Obama Administration, but there’s no program called “Obama student loan forgiveness.”
Third-party companies may be referring to any of the following programs when advertising “Obama student loan forgiveness” or any other type of student loan help.
- Income-driven repayment
- Public Service Loan Forgiveness
- Teacher loan forgiveness
- Federal student loan consolidation
You don’t need to pay anyone to access theses programs; you can apply directly through the Department of Education or via your federal student loan servicer.
It’s not inherently wrong for companies to charge for student loan help. Proponents of the student debt relief industry compare it to hiring a tax preparer. However, it’s illegal for companies to collect fees over the phone upfront. If the company asks you to pay before they provide services, it’s a red flag that it could be a student loan scam.
Free, legitimate forgiveness options
There are four ways for federal loan borrowers to get loan forgiveness through the government. These programs are only available to borrowers with federal student loans; private loan borrowers aren’t eligible. If your federal loans aren’t part of the government’s Direct Loan program, you may need to consolidate your loans first to be eligible. Federal loan consolidation is free if you do it yourself through the government.
Compare the different options below and click on the program links to learn more.
|Program||Years to forgiveness||Amount of forgiveness||How to qualify|
|Income-driven repayment plans||20 or 25.||100% of the remaining loan balance after 20 or 25 years of payments.||It depends on the plan, but most borrowers qualify for at least one income-driven plan.|
|Public Service Loan Forgiveness||Must make 120 full, qualifying monthly payments, which takes at least 10 years.||100% of the remaining loan balance after you make 120 qualifying monthly payments.||Work full time for the government or a nonprofit, and make 120 full monthly payments on Direct Loans.|
|Teacher Loan Forgiveness||Five consecutive academic years.||Up to $17,500 for teachers of special education and secondary math and science. Up to $5,000 for other qualifying teachers.||Teach full time in an elementary or secondary school serving low-income students.|
|Perkins Loan Cancellation||A percentage of the loan can be canceled each year for five years.||Up to 100% of your Perkins Loans.||Must have Perkins Loans and work full time in a qualifying public service job.|
[Back to top]
How to apply for federal student loan forgiveness
You can apply to the above programs for free by following the instructions below for each program. By applying on your own instead of paying a third-party company to do it for you, you’ll save hundreds or even thousands of dollars.
- Income-driven repayment plans: First, use the government’s Repayment Estimator to compare the four income-driven plans. Then apply on studentloans.gov.
- Public Service Loan Forgiveness: Complete a PSLF Employment Certification Form for each of your employers. Mail or fax the documents to FedLoan Servicing, the company that the Department of Education hires to manage the PSLF program. If FedLoan Servicing is your federal loan servicer, you can complete the form on their website.
U.S. Department of Education
P.O. Box 69184
Harrisburg, PA 17106-9184
If your employer qualifies, your loans will be transferred to FedLoan Servicing if that’s not already your federal loan servicer.
You can’t apply for PSLF until you complete the required 120 full, monthly on-time payments. The application will be available through the Department of Education in September 2017.
- Teacher Loan Forgiveness: Fill out the Teacher Loan Forgiveness Application. Submit the forms to your federal loan servicer after you’ve completed your five qualifying teaching years. The chief administrative officer from the schools you taught at during those five years will need to complete the certification portion of the application.
How to stop paying for help
If you feel you’ve been victimized by a company you paid for help, whether it marketed “Obama student loan forgiveness” or another service, there are a few important actions to take.
- Cancel the service if you’re unsatisfied, and inform your federal loan servicer that you paid a company for help. If you gave the company access to your loan accounts, revoke that access in writing to the third-party company and your loan servicer.
- Submit complaints to the Consumer Financial Protection Bureau, Federal Trade Commission and your state attorney general’s office. Those federal and state agencies have cracked down on dozens of “debt relief” companies for misleading consumers and charging illegal upfront fees. In some cases, companies have been forced to refund the consumers they harmed.
- Learn about the legitimate, free loan options described above. For more information about income-driven repayment plans, government loan forgiveness programs and federal loan consolidation, visit studentloans.gov. You can also call the Department of Education’s Student Loan Support Center at 1-800-557-7394, or email or live chat with an agent.
More on Student Loans From NerdWallet
- Student loan relief companies cash in on confusion
- 5 ways to spot a student loan scam
- Cheated by student loan ‘debt relief’ firm? What to do
Updated July 27, 2017.