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Ultimate Guide on Student Loan Forgiveness Programs

Caryn Anderson

Student loan debt is a hot-button issue among plenty of people these days, which isn’t surprising given the $1.25 trillion Americans currently owe in student loan debt. When you hear about student loan forgiveness programs, it might be easy to brush these off as just another scam, but hold on.

There’s some good news. Student loan forgiveness does exist, and it includes several different types of programs, including specialty programs for certain professionals, military members and people who work in public service sectors. Read on to learn more about student loan forgiveness and whether it could be an option for you.

What Is Student Loan Forgiveness?

Student loan forgiveness is an umbrella term that describes several specialized programs that cancel your student loan debt and discharge you of all responsibility for the repaying the loan. To be eligible for a student loan forgiveness program, you must meet all the criteria of the specific program to which you’re applying. Some examples include:

  • Public Service Loan Forgiveness, a student loan forgiveness program offered to full-time employees of nonprofit 501(c)(3) organizations or governmental agencies
  • Teacher Loan Forgiveness, offered to teachers who work in low-income schools
  • Obama Student Loan Forgiveness, which includes a student loan forgiveness act as part of the Direct Loan reforms made in 2010

Student Loan Forgiveness Scams

You can’t believe every advertisement that you see pop up on your social media pages or on the internet. Student loan forgiveness scams make big promises but fail to deliver. Knowing what to look out for can help you quickly differentiate student loan forgiveness scams from legitimate programs. Three things to watch for include:

  • Having to pay an upfront fee
  • Private companies that include official-sounding words such as “Federal” in their names
  • Companies that promise immediate relief or the ability to settle your debt even if your loan is in default

Obama Student Loan Forgiveness

The “Obama Student Loan Forgiveness Program” is simply a nickname for the Federal Direct Student Loan Program and the federal student loan forgiveness options that were created when President Obama reformed the program in 2010 to reduce the amount of time for new borrowers to be eligible for forgiveness from 25 years to 20 years. The program offers five payment plans, including:

  • Standard Repayment, in which you pay a fixed amount every month
  • Graduated repayment, which allows you to start making lower payments that gradually increase every few years
  • Income Contingent Repayment (ICR), which allows you to make payments based on your income, family size, interest rate and loan balance
  • Income Based Repayment (IBR), which allows you to make payments equal to 15% of your discretionary income
  • Pay as You Earn (PAYE), which is similar to the Income Based Repayment plan, but uses 10% of your discretionary income as the basis instead of 15%

In addition to these payment terms, the Obama Student Loan Forgiveness Program forgives the balances of loans enrolled in the PAYE, IBR and ICR programs at the end of the loan terms.

Student Loan Forgiveness for Teachers

Teachers can take advantage of two different loan forgiveness programs, including Teacher Loan Forgiveness for Direct Loans (subsidized and unsubsidized) and Federal Stafford Loans, along with Teacher Cancellation for Federal Perkins Loans. To be eligible, teachers must:

  • Not be in default on their loans
  • Be employed as full-time teachers for at least 5 consecutive years, with at least 1 year occurring after 1997-98
  • Be employed in a qualifying school district listed in the Annual Directory of Designated Low-Income Schools for Teacher Cancellation Benefits

Like teachers, some healthcare professionals also have options for student loan forgiveness for nurses if they meet specific criteria. For example, nurses who are registered, employed full-time and have loans discharged over a 5-year period can qualify for Federal Perkins Loan Cancellation.

The NURSE Corps Loan Repayment Program is open to registered nurses who work in underserved communities at qualifying facilities for 32 hours or more per week. Nurses who work in the public sector may qualify for Public Service Loan Forgiveness if they work for 30 hours or more per week at a public health agency and have direct loans in good standing.

Military Student Loan Forgiveness

Although the GI Bill provides educational assistance for active-duty members of the military, members of the reserve and National Guardsmen serving for 90 days or more, it doesn’t cover existing student loans. Military members who already have student loans when they enlist have several options for debt relief, including Public Service Loan Forgiveness. This student loan forgiveness program is open to active-duty service members who serve full time. It cancels the balance of direct loans after the military member makes 120 full monthly payments on time.

Private Student Loan Forgiveness

Student loan forgiveness programs only cancel the debt of federal loans. Private student loan forgiveness doesn’t really exist. If you’re struggling with your private student loans, start by talking to your lender about your options. Many private lenders offer flexible repayment options, deferment options or temporarily lowered payments for borrowers struggling to make their payments. Another option is to refinance your loans, which can give you a lower interest rate and lower monthly payments that may work better within your budget.

How to Get Student Loan Forgiveness

To apply for student loan forgiveness, review the conditions and requirements of the specific program to which you want to apply. For most programs, you must make 10 years of on-time monthly payments.

Contact your loan servicer to request information about the application process. While your servicer reviews your application, continue making payments to avoid having your loan go into default. Once the application is approved, your loan obligation is then fulfilled and you can halt making payments.

If the servicer denies your application, you remain responsible for making your loan payments. Talk to your loan servicer about other repayment options, including income-based programs, deferments and forbearances that can provide some relief depending on your circumstances.

You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved.
Published August 11, 2016
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