Student loan forgiveness might seem too good to be true, but there are legitimate ways to get it through free government programs.
The following options are available only to borrowers with federal student loans. Some programs have very specific requirements that make them difficult to qualify for, but income-driven repayment plans are open to most borrowers.
» MORE: How to get loan forgiveness through borrower defense to repayment
You’re not eligible for federal student loan forgiveness programs if you have private loans, but there are other strategies for managing private loan debt.
Student loan forgiveness programs
The federal government offers four main income-driven repayment plans, which allow you to cap your loan payments at a percentage of your monthly income. When enrolled in one of these plans, your remaining loan balance will be eligible for forgiveness after 20 or 25 years, depending on the plan. These plans are most beneficial for those with large loan balances relative to their income.
» MORE: Income-based repayment: Is it right for you?
Public Service Loan Forgiveness is available to government and qualifying nonprofit employees with federal student loans. Eligible borrowers can have their remaining loan balance forgiven tax-free after making 120 qualifying loan payments. In order to benefit from PSLF, you’ll need to make payments while enrolled in an income-driven repayment plan. Otherwise, on a standard repayment plan, the loan would be paid off before you’re eligible to benefit from forgiveness.
» MORE: How to get Public Service Loan Forgiveness.
Teachers employed full time in low-income public elementary or secondary schools may be eligible for forgiveness after working for five consecutive years. They can have up to $17,500 in federal direct or Stafford loans forgiven. To qualify, teachers must have taken out loans after Oct. 1, 1998.
» MORE: How teachers can get student loan forgiveness
Nurses shouldering student debt have several options for student loan forgiveness: Public Service Loan Forgiveness, Perkins loan cancellation, and the NURSE Corps Loan Repayment Program, which pays up to 85% of qualified nurses’ unpaid college debt. Public Service Loan Forgiveness may be the mostly likely option for most nurses — few borrowers have Perkins loans, and the NURSE Corps program is highly competitive.
» MORE: 3 student loan forgiveness options for nurses
There’s no such thing as “Obama student loan forgiveness.” However, some student “debt relief” companies use it as a catch-all term for free federal programs — which they charge to enroll borrowers in. If you encounter a company offering “Obama student loan forgiveness,” consider it a red flag. Enrolling in federal programs like income-based repayment and federal student loan consolidation is free to do on your own through the Department of Education.
» MORE: Steer clear of ‘Obama student loan forgiveness’
There are a few additional niche student loan forgiveness or payment assistance programs you may qualify for through federal or state programs. Eligibility in these programs depends on your profession and where you work.
- State-sponsored repayment assistance programs: Licensed teachers, nurses, doctors and lawyers in certain states may be able to take advantage of programs to assist with repaying debt. For example, the Mississippi Teacher Loan Repayment Program will pay up to $3,000 per year for a maximum of four years on undergraduate educational loans to teachers with a specific teaching license for each year of teaching full time in a particular geographical or subject area. Contact your state’s higher education department to find out if you qualify for a program.
- Military student loan forgiveness and assistance: Military personnel in the Army, Navy, Air Force, National Guard and Coast Guard may qualify for their own loan forgiveness programs. In the National Guard, for example, qualifying soldiers and officers could receive up to $50,000 to pay off federal student loans through the Student Loan Repayment Program.
- Additional student loan repayment assistance programs (LRAPs): There may be other national or organizational student loan repayment assistance programs offered for public service professions. The National Institutes of Health, for example, offers up to $35,000 in debt assistance annually to health professionals who are appointed by the institutes to conduct research.
Equal Justice Works, a nonprofit that supports public interest lawyers, has a list of LRAPs provided by schools, employers, states and the federal government.
Student loan cancellation programs
Borrowers with federal Perkins loans can have up to 100% of their loans canceled if they work in a public service job for five years. In many cases, approved borrowers will see a percentage of their loans discharged incrementally for each year worked. The Perkins loan teacher benefit is for teachers who work full time in a low-income public school or who teach qualifying subjects, such as special education, math, science or a foreign language.
» MORE: How to get your Perkins loan canceled
Student loan discharge programs
You may qualify for loan discharge if your school closes. At the time of closure, you must have been enrolled or have left within 120 days, without receiving a degree. If you qualify, contact your loan servicer to start the application process. You’ll need to continue making payments on your loan while your application is being processed. If you’re approved, you will no longer have to make loan payments and you may be refunded some or all of the past payments you made on the loan.
» MORE: What happens to student loans if your school closes?
If you cannot work due to being totally and permanently disabled, physically or mentally, you may qualify to have your remaining student loan debt canceled. To be eligible, you’ll need to provide documentation proving your disability. Once your loans are discharged, the government may monitor your finances and disability for three years. If you don’t meet requirements during the monitoring period, your loans may be reinstated.
Details on the application process are available at disabilitydischarge.com.
Starting in April 2018, veterans who may qualify for the program will receive a letter from the Department of Education and/or the Department of Veterans Affairs explaining their eligibility and including a copy of the application.
If you die, your federal loans will be discharged once a death certificate is submitted to your loan servicer. Your parent’s PLUS loans used to pay for your schooling will be discharged if the parent who holds the loan or you die.
Legitimate federal forgiveness, cancellation and discharge programs are free through the Department of Education, but there are other costs to consider.
- Forgiven loans may be taxable. Generally, forgiven, canceled or discharged student debt is taxed as income unless you were required to work for a certain type of employer or in a certain profession to qualify for the forgiveness. For instance, loans discharged through Public Service Loan Forgiveness are not taxable, but debt forgiven through income-driven repayment plans is taxable. Loans discharged upon a borrower’s death or permanent disability were previously taxed as income, but the latest tax code changed that. Loans discharged for this reason after Dec. 31, 2017, are not taxable.
- Beware of scams. So-called debt relief companies claim to get rid of debt but rarely deliver after charging already-struggling borrowers high upfront fees. The only way to get debt discharged is through the legitimate government programs above, and it costs nothing to apply to them.
- Forgiveness isn’t an option for defaulted loans. You’ll need to use consolidation or rehabilitation to get defaulted federal student loans in good standing before they’re eligible for forgiveness programs. If your loans won’t qualify for forgiveness, student loan settlement or bankruptcy may reduce your debt in severe cases. Defaulted federal loans are eligible for discharge programs.