All Ways to Forgive Student Loan
Considering the average student loan balance for Class 2018 is $ 29,800 , you’re probably looking for any help to pay off your debt. And if you meet certain requirements, you can get forgiven for part of your balance sheet.
Not everyone is eligible for forgiveness: for example, if you have private loans, you will have to pay back the full amount, and every forgiveness program has strict requirements. You don’t have to rely on forgiveness to get your debt under control, and you should never pay anyone who promises to forgive your debt – this is most likely a scam.
But for some with federal loans, there are options.
Government Service Loan Forgiveness
The government service loan forgiveness program is what most people think of when they think about loan forgiveness options. Government employees (federal, state or local) or 501 (c) (3) employees working full-time are eligible (note: those who work for a religious non-profit organization are not eligible).
The company you work for is the most important qualification aspect for PSLF – not necessarily your position. You can be an accountant or gardener if you work for a non-profit or government organization.
There are other fairly strict requirements for qualifications, including timely loan payments of 120 (or 10 years).
You must have direct loans that include:
- Direct subsidized and unsubsidized loans
- Direct loans PLUS
- Direct Consolidation Loans
And you have to repay your loans according to an income oriented repayment plan :
- Pay-as-you-go plan (PAYE plan)
- Revised pay-as-you-go plan (REPAYE plan)
- Income Based Repayment Plan (IBR Plan)
- Contingent income repayment plan (ICR plan)
Or a standard 10 year repayment plan. You have to make 120 payments. You can read about it here . You will need to file a Proof of Employment for Government Service Loan Forgiveness form every year (and whenever you change jobs) to make sure you qualify. After 120 payments, 100% of the loan balance is forgiven. (According to Student Aid , “Student loan amounts written off under PSLF are not considered income for tax purposes.”)
Forgiveness with Income Based Redemption (IBR)
Income based repayment plan is one of four types of income based repayment (IDR) plans that can lower your monthly student loan payments. It requires you to pay 10 to 15 percent of your discretionary income over 20 to 25 years, depending on several qualifying factors. If you are enrolled in an IBR plan, after this period, you may be forgiven for some of your loans.
“Any remaining loan balance is forgiven if your federal student loans are not fully paid off at the end of the repayment period,” notes FinancialAid.gov .
As I wrote earlier, “Given the length of your plans, you may not have a single debt left to forgive. How your income grows throughout your career will play a big role in this. ”
You can qualify for IBR if your payments are below the standard 10-year repayment plan (otherwise you will not benefit from registration) and you have one of the following loan types, according to StudentAid :
- Direct subsidized and unsubsidized loans
- Direct PLUS loans given to graduate students or professional students (not parents )
- Direct Consolidation Loans for which the PLUS Loans to Parents have not been repaid
- Subsidized and unsubsidized Federal Stafford loans (under the FFEL program)
- FFEL PLUS Loans Granted to Graduate Students or Undergraduate Students (Not Parents)
- FFEL Consolidation Loans that have not been repaid PLUS Parent Loans
- Perkins Federal Loans (if pooled)
This type of repayment plan is best for those who have a lot of debt but do not expect a high income throughout their careers.
Pay as you earn (PAYE) forgiveness
This is another type of income-driven repayment plan, similar to the IBR plan. With PAYE, your payments are limited to 10 percent of your discretionary income and you are eligible if your payments are less than your standard 10-year payments.
You are required to make standing payments for 20 years and you must be a new borrower from October 1, 2007. The same types of loans meet the IBR forgiveness criteria.
There are income earning requirements for IBR and PAYE. PAYE is preferred over Revised Pay As You Earn (REPAYE), which we will discuss below.
Revised Pay As You Received (Repayment)
REPAYE is similar to PAYE, except there is no income requirement. This means that you can pay a lot more with this plan than with a standard 10-year repayment plan. But if you make stable payments on time for 20 years (25 years for graduation loans), you can get your balance sheet forgiven. However, you’ll want to do the math to make sure it’s worth it.
Forgiveness with Notional Income (ICR)
This is the last of the four IDR plans. This plan requires you to pay the lesser of 20 percent of your discretionary income, or what you would pay for a fixed 12-year plan. This is the only IDR repayment program available to PLUS parent loan borrowers . You must make timely payments within 25 years, after which your balance will be forgiven.
You can apply for any of the IDR plans at StudentLoans.gov.
Doctors Loan Forgiveness
Doctors, pharmacists, and other healthcare professionals have several options for loan forgiveness programs, depending on where they work.
National Health Service (NHSC) Loan Repayment Program
The NHSC “provides full and part-time options for primary health care providers to work in an area of shortage of health professionals in an NHSC-approved location,” says Credible . You “can receive up to $ 50,000 in repayment of the loan in exchange for at least two years of commitment to provide services.” You can also stay for a third year.
You can apply here .
National Institute of Health Loan Repayment Programs (LRPs)
According to the NIH website, LRPs pay “up to $ 35,000 annually in qualified education researcher debt in exchange for a commitment to participate in research relevant to the NIH’s mission. “ See if you are eligible here and check out other loan forgiveness options for healthcare professionals (including military personnel) here .
Nurse Loan Forgiveness
There are several loan forgiveness programs available to nurses.
Nurse Loan Repayment Program
This program is offered to nurses who have been working in underserved communities for at least two years. You should be working in a “critical shortage facility” that is defined here , but it could be a clinic, hospital, or other facility that desperately needs nurses.
If accepted, the program will pay “60 percent of your outstanding nursing education debt over two years, renewable to a third year for an additional 25 percent of the original balance.” See the appendix here .
State and federal repayment programs
Many states offer loan forgiveness programs to nurses and nurse practitioners. You can view them here .
You can also qualify for PSLF, depending on where you work.
Teacher loan forgiveness
Teachers have several specific programs to help you manage your debt.
Teacher Loan Forgiveness Program
This federal program forgives up to $ 17,500 on your direct subsidized and unsubsidized loans and subsidized and unsubsidized Federal Stafford loans if you “teach full time for five full and consecutive academic years at a low-income school or agency for the provision of educational services “. More details here .
State programs for forgiveness
Find your staff and teacher loan forgiveness programs.
Loan forgiveness for lawyers
The first thing lawyers should do is consult with your state’s bar association and law school to see if they have options for forgiveness. Then google your state with lawyer forgiveness options and talk to your employer – they can point you in the right direction. Lawyers who have worked for the Department of Justice for three years are eligible for assistance in the amount of $ 60,000 .
Remember, you may qualify for PSLF, depending on where you work, and if you enroll in an IDR plan, you will be eligible to receive timely payments for 20-25 years.
There are a few other cases where your loans can be forgiven, but for most people, including anyone with a private loan, you will likely have to pay back the full amount you borrowed, plus accrued interest. It might be worth taking the time to explore all of the options for forgiveness, but don’t count on a silver bullet in student loan.
Revised: Feb 19, 2019 : We amended the above story to reflect that loans forgiven under the PSLF are not taxed as income.