The idea of having your student loans forgiven is incredibly appealing. But when a report came out in 2019 that 99% of borrowers who applied for student loan forgiveness were rejected, it begs the question:
Is student loan forgiveness real?
Fortunately, yes — student loan forgiveness is a very real option for many with student loan debt.
It’s possible to receive forgiveness for your student loans as long as you’re eligible and meet the requirements for a specific forgiveness program.
Here’s what you need to know about student loan forgiveness programs and how to qualify.
How does student loan forgiveness work?
If you have federal student loans, there are a few ways you can receive forgiveness for some or all of what you owe.
But how does student loan forgiveness work, and who can qualify for student loan forgiveness?
Here’s a summary of each of the main programs that can help.
Public Service Loan Forgiveness
Called PSLF for short, the Public Service Loan Forgiveness program is designed for people who choose a career with a federal, state, local, or tribal government agency or for an eligible not-for-profit organization.
PSLF is the program referred to in the report where only 1% of borrowers were approved. Based on the report, the vast majority of people who were rejected didn’t meet the program’s requirements, and another large portion was denied because their employment certification forms had missing or incomplete information.
If you do qualify, you’ll receive forgiveness for your entire remaining balance after you’ve made 120 qualifying monthly payments. Other requirements include:
- You work full-time for an eligible government agency or not-for-profit organization.
- You have Direct Loans or have consolidated your federal loans with the Direct Loan program.
- You’re on an income-driven repayment plan.
There’s no cap on how much can be forgiven, and unlike some other forgiveness programs, the discharged amount is not considered taxable income by the IRS.
Forgiveness under an income-driven repayment plan
The U.S. Department of Education offers four different income-driven repayment plans, all of which extend your repayment term up to 25 years and reduce your monthly payment to a percentage of your discretionary income. The plans are:
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
These programs can be great if you’re struggling to make your payment on a standard repayment plan. They also come with the benefit of forgiveness of any balance that remains after your plan’s repayment term ends.
While some plans do require that you show financial need, that’s not the case with all of them.
As with PSLF, there’s no limit to how much you can benefit from forgiveness on one of these plans, though after 20 or 25 years, you may have already paid a significant portion of your original balance.
It’s also important to keep in mind that your discharged balance may be considered taxable income by the IRS, which may result in a large tax bill.
Perkins Loan cancellation
The federal government no longer offers Perkins Loans. But if you’ve received one in the past, you may be eligible to have 100% of your eligible loans canceled.
To qualify, you need to work full-time in a public or non-profit elementary or secondary school as one of the following:
- A teacher in a school that serves students from low-income families.
- A special education teacher.
- A teacher in the fields of mathematics, science, foreign languages, or bilingual education, or in any other field of expertise determined by a state education agency to have a shortage of qualified teachers in that state.
For every full academic year you qualify, you’ll have a portion of your Perkins Loans discharged. Any amount that’s canceled is not considered taxable income.
Teacher loan forgiveness
If you’re a teacher working in a low-income school or educational service agency, you may be able to qualify for up to $17,500 in forgiveness for your federal loans.
To qualify, you must work full-time for an eligible school or agency for five complete and consecutive academic years. However, there are some exceptions for teachers who are unable to teach an entire academic year.
The maximum forgiveness you can receive is either $5,000 or $17,500, depending on the subject area you teach. The higher limit is reserved for highly qualified math and science teachers who teach at the secondary school level and highly skilled special education teachers who meet certain requirements.
Teacher loan forgiveness is not a taxable benefit.
Alternatives if you don’t qualify for forgiveness
Yes, student loan forgiveness is real — but that doesn’t mean everyone can qualify.
Student loan forgiveness programs have very specific eligibility requirements, and if you don’t work in a certain field or for a specific type of employer, you’ll need to look for other ways to pay off your debt.
Luckily, there are some smart solutions available to make repaying student loans much more manageable.
Student loan repayment assistance programs
Similar to student loan forgiveness programs, these ones can also help you pay down your student loan debt. The difference is that it’s a government agency or employer that’s providing the assistance, instead of the Department of Education forgiving your balance.
There are several government agencies, including branches of the armed forces and individual states, that offer loan repayment assistance, as well as several private employers.
Depending on your career path — there are programs for nurses and other health professionals, attorneys, and more — research your options to find out if you can get some help eliminating your student debt.
Student loan consolidation
If you have federal student loans, consolidating them won’t necessarily save you money. That’s because the Department of Education takes the weighted-average interest rate from all your loans, then rounds it up to the nearest one-eighth of a percent.
That said, consolidation can help you by simplifying your debt repayment, replacing several monthly payments with just one. Depending on your situation, it may be just what you need to focus your efforts on paying down your debt faster.
Also, if you don’t qualify for income-driven repayment plans with your current loans, consolidating them may make you eligible to apply for one.
Student loan refinancing
Refinancing student loans can not only help you get a lower monthly payment and interest rate, but it can also give you more flexibility over your repayment term.
Student loan refinancing is best suited for people with good credit and a solid income.
If you qualify, you may be able to get a lower interest rate than what you’re currently paying — allowing you to save significant money while paying off your loans.
Also, while the federal government has a minimum repayment term of 10 years, private lenders can go as low as five years, allowing you to become debt-free in half the time — assuming you can afford the monthly payments with the shorter term.
You can also choose the option of extending your repayment term — giving you lower, easier to manage monthly payments if you’re tight on cash.
If you’re considering refinancing, it’s essential to compare rates and terms to ensure you’re getting the best option. To save time and make the process simple, use Purefy’s Compare Rates tool to see interest rate offers from multiple lenders in one place, with no credit check required.
From there, you can easily pick your lowest rate and save the most money.
The bottom line
Student loan forgiveness is possible, but each program has a set of requirements you need to meet to qualify, and some programs take several years to get the promised benefit.
If you’re not sure that you can commit to a specific career path for that long, consider other ways to simplify and accelerate your student loan repayment. They may not provide complete cancellation of your loans, but they can help you achieve your goal of becoming debt-free.
