What Is Student Loan Forgiveness?
Student loan forgiveness releases borrowers from their obligation to repay part or all of their federal student loan debt. These borrowers have taken out loans to pay for their post-secondary education.
Forgiveness is available for some types of loans, but eligibility is limited to borrowers in certain public service, educational, or military professions, in addition to income-driven repayment (IDR) plans.
Key Points:
- Eligibility: Forgiveness applies primarily to federal direct loans, not private loans.
- Programs: Includes Public Service Loan Forgiveness (PSLF), income-driven repayment plans, borrower defense, and specialized programs.
- Comparison to Discharge: Forgiveness is different from discharge, which occurs due to death, disability, bankruptcy, or school fraud.
- Repayment Terms: Income-driven repayment plans offer forgiveness after 20 or 25 years of qualifying payments.
- Recent Updates: Recent adjustments by the Department of Education have facilitated quicker forgiveness for some borrowers under income-driven plans.
Table of Contents
How Student Loan Forgiveness Works
General Background
Loan forgiveness means a debt (or part of a debt) is eliminated or canceled—relieving the borrower of the obligation to repay it. Although any student loan can theoretically be forgiven, student loan forgiveness (also known as cancellation) generally applies to U.S. government-issued or government-backed loans.
In other words, forgiveness programs don’t apply to any privately issued loans, such as those from a commercial bank or lenders like Sallie Mae, even if those loans are earmarked for students.
For borrowers with eligible loans, forgiveness may be an option. Individuals who want their loans forgiven must apply and continue making payments until they meet the requirements of the forgiveness program.
The highly publicized collapse of several for-profit colleges and the pandemic-induced 2020 economic crisis intensified longstanding concerns about the mounting burden of student debt. Broad loan forgiveness for all borrowers, not just those who work in public service, participate in a repayment plan, or have been defrauded by their college, has become a widely debated political issue.
Who qualifies for loan forgiveness?
The Biden administration said there are three groups of borrowers who have been approved for forgiveness in the latest round.
- 66,900 borrowers will have $5.2 billion forgiven through the Public Service Loan Forgiveness program, which is designed to help public servants such as teachers, nurses and law enforcement officers get their debt canceled after 10 years of repayments.
- 54,300 borrowers will have $613 million forgiven through the SAVE plan.
- Another 39,200 borrowers will have $1.9 billion forgiven through adjustments to their income-driven repayment plans. These plans were sometimes mismanaged by loan servicers, which made it more difficult for some borrowers to achieve forgiveness.
Types of Student Loan Forgiveness
Only direct loans made by the federal government (currently known as the William D. Ford Federal Direct Loan Program) are eligible for student loan forgiveness. Non-federal loans (those issued by private lenders and loan companies) aren’t part of this program.
If you do not have a William D. Ford direct loan and, instead, borrowed through the FFEL Program or the now-defunct Perkins Loan Program, you are allowed to consolidate those debts into a direct consolidation loan. The new consolidated loan is then eligible for Public Service Loan Forgiveness (PSLF).
Bear in mind that your student loan servicer handles the repayment of your federal student loans, so work with the servicer to enroll in a repayment plan or change your current plan. You can usually do this online at the servicer’s website. You can also visit studentaid.gov to find assistance.
In addition, if you work for a federal agency, your employer may repay a portion of your loans (up to $10,000 of your loans per year, with a maximum of $60,000) through the federal student loan repayment program.
1. Public Service Loan Forgiveness (PSLF)
The PSLF Program is designed specifically for people who work in public service jobs for either the government or a not-for-profit organization. You may also be able to get all or part of your loan forgiven due to specified volunteer work, military service, or medical practice.
2. Repayment Plans With Loan Forgiveness
If you aren’t working in a public service position, you may still be able to get a portion of your student debt forgiven—but it will take longer. Federal IDR plans, designed to help graduates who would have trouble making payments within the standard 10-year time frame, also allow for some debt forgiveness after a certain period.
3. Borrower Defense
If your school misled you or engaged in other misconduct in violation of certain state laws, you may be eligible for a loan discharge, officially known as “borrower defense to repayment” forgiveness.
Applicable to any William D. Ford Direct Loan Program loan, borrower defense originally involved the cancellation of all your current federal student loan debt if you could demonstrate that you had been defrauded or substantially deceived by the college you attended. Originally implemented in 1994, borrower defense applies mainly to private, for-profit schools that engage in dubious practices.
4. Specialized Loan Forgiveness Programs
If you work or volunteer for certain organizations, you may be eligible for additional programs that will forgive or reduce your student debt. Here are some examples:
- AmeriCorps VISTA, AmeriCorps NCCC, or AmeriCorps State and National programs: Volunteers for these programs can receive up to the maximum Pell Grant award toward repaying qualified student loans (loans backed by the federal government) through the Segal AmeriCorps Education Award. For the 2023–2024 school year, this amounts to $7,395.
- Army National Guard: The Army National Guard’s Student Loan Repayment Program can help you earn up to $50,000 toward your loans.
- Full-time teachers in low-income schools or educational service agencies: Through the Teacher Loan Forgiveness Program, teachers may be eligible for forgiveness of up to either $5,000 or $17,500 on their Federal Direct and FFEL Program loans after five consecutive years of service. The higher amount is for certain math, science, and special education teachers. The Education Department has further details on its website.
Student Loan Forgiveness vs. Student Loan Discharge
Loan Forgiveness
Although their end results are similar, student loan forgiveness isn’t quite the same as student loan discharge. Loan forgiveness usually occurs when you’re no longer required to make payments because you’re in a certain government or nonprofit job.
Loan Discharge
Loan discharge often occurs when the borrower declares bankruptcy, dies, or becomes permanently disabled. A discharge can also happen in cases of borrower defense where the educational institution is guilty of fraud or misleading a student in a meaningful way.
Income-driven repayment forgiveness
Most federal student loans are eligible for at least one income-driven repayment plan . Income-driven repayment (IDR) plans cap your monthly payments based on your income and family size. If your income is low enough, your payment could be as low as $0 per month.
Depending on the IDR plan, the remaining balance on your loans may be forgiven after 20 or 25 years of repayment.
One-time adjustment to fix IDR loan forgiveness
On April 19, 2022, Department of Education (ED) announced several changes and updates that will bring borrowers closer to forgiveness under IDR plans. ED will do a one-time adjustment to count any month spent in repayment, some deferment periods (prior to 2013), and some forbearance periods toward loan forgiveness. For some borrowers, these changes mean that they will receive additional years of credit toward loan forgiveness. If you have loans that have been in repayment for more than 20 or 25 years, those loans may immediately qualify for forgiveness.
Borrowers who have reached 20 or 25 years (240 or 300 months) worth of eligible payments for IDR forgiveness will see their loans forgiven as they reach these milestones. ED will continue to discharge loans as borrowers reach the required number of months for forgiveness. All other borrowers will see their loan accounts updated in 2024.
TIP: No student loan borrower will have to pay any fees to receive their credit toward forgiveness. If someone asks you to pay them to get you loan forgiveness, it’s a scam.
What counts towards the 20 or 25 years required for IDR forgiveness?
- Any months with time in repayment status (regardless of the payments made, loan type, or repayment plan).
- 12+ months of consecutive forbearance or 36+ months of cumulative forbearance.
- Months spent in economic hardship or military deferments after 2013.
- Months in deferment prior to 2013 (except in-school deferment).
- Any time in repayment prior to consolidation on consolidated loans.
Repayment periods for IDR plans
IDR plans have different repayment periods.
Plan | Repayment term and forgiveness |
---|---|
Saving on a Valuable Education (SAVE) Plan (formerly the REPAYE Plan) | The remaining balance will be forgiven at the end of your term. The repayment term is 10 years if you borrowed $12,000 or less. The repayment term increases for every $1,000 you borrowed above this amount until you reach the cap of 20 or 25 years.20 year repayment term cap if all loans you’re repaying under the plan were received for undergraduate study.25 year repayment term cap if any loans you’re repaying under the plan were received for graduate or professional study. |
Pay As You Earn (PAYE) | 20 years. The remaining balance after 20 years will be forgiven. |
Income-Based Repayment (IBR) | 20 years if you’re a new borrower on or after July 1, 2014. The remaining balance will be forgiven after 20 years.25 years if you’re not a new borrower on or after July 1, 2014. The remaining balance will be forgiven after 25 years. |
Income-Contingent Repayment (ICR) | 25 years. The remaining balance will be forgiven after 25 years. |
Frequently Asked Questions (FAQ) about Student Loan Forgiveness
1. What is student loan forgiveness?
- Student loan forgiveness is a program that allows borrowers to have part or all of their federal student loan debt canceled or forgiven under specific conditions.
2. Who qualifies for student loan forgiveness?
- Qualification depends on the type of loan and the forgiveness program. Eligibility criteria often include working in public service, participating in income-driven repayment plans, or being affected by school misconduct.
3. What types of loans are eligible for forgiveness?
- Only federal direct loans are eligible for forgiveness. Loans issued by private lenders or through the now-defunct FFEL or Perkins Loan programs may be consolidated into a direct consolidation loan to qualify.
4. How does Public Service Loan Forgiveness (PSLF) work?
- PSLF forgives federal student loans for borrowers who work full-time in qualifying public service jobs and make 120 qualifying monthly payments under an eligible repayment plan.
5. What are income-driven repayment (IDR) plans?
- IDR plans adjust monthly student loan payments based on income and family size. After a certain number of years (usually 20 or 25), any remaining balance may be forgiven.
Conclusion
Student loan forgiveness provides a crucial avenue for borrowers to manage and potentially reduce their federal student loan debt burdens. By participating in programs like Public Service Loan Forgiveness (PSLF), income-driven repayment plans, or through specific forgiveness initiatives, eligible borrowers can alleviate financial strain over time.
Understanding the eligibility criteria, repayment terms, and application processes for each forgiveness program is essential. Borrowers are encouraged to explore their options early, communicate with loan servicers, and seek professional guidance to navigate the complexities of student loan forgiveness effectively.