Student Loan Forgiveness
Helping You Navigate Student Loan Forgiveness Options
Student loans are a great help for those who wish to pursue further learning through colleges and trade schools. However, even after students have completed their schooling and gotten jobs in their chosen careers, it can be difficult to pay off the debts incurred by student loans. Luckily, student loans offer many valuable perks that normal loans don’t, including the ability to apply for student loan forgiveness.
There are several types of student loan forgiveness and discharge programs, but you must meet the requirements before applying for any. You can apply for student loan forgiveness programs on your own, or you can work with a financial counselor or consumer credit agency to find the best debt repayment and student loan forgiveness programs.
While credit card debt is a sort of revolving debt that can keep getting bigger, student loans are a fixed debt that must be paid off in installments. Even so, student loan debt has continued to grow, with the total amount of debt owed towards student loans in the US surpassing that of the total debt owed to credit card companies.
It seems hard to believe in a world where part or even all of your loans can be completely removed. However, this is exactly the case for many who have borrowed money through student loan programs.
Based on the age of your loans, the amount and timeliness of your payments, and even your job, you can be accepted for certain consolidation, forgiveness, and refinancing programs that help you get out from under your student loans that much faster.
What Types of Services are Available for Student Loan Debt?
Just as there are numerous student loans and grants that you can apply for to help pay your tuition, there are several student loan debt programs as well. However, you can’t apply for all student loan forgiveness programs, just as you wouldn’t be able to apply for every student loan available.
Student Loan Forgiveness
While there are several student loan forgiveness programs, the two most common are teacher loan forgiveness and loan forgiveness for nurses. Whether you have chosen to become a teacher or entered a career in nursing, you are an asset to your community. But even with a good paying job, you could still have trouble repaying your student loans.
For teachers, you can apply for public service loan forgiveness, Federal Perkins cancellation, Teacher Loan Forgiveness, or state specific loan repayment for teachers. If you have a Subsidized or Unsubsidized Direct Loan or Federal Stafford Loan and work in a qualifying school for a minimum of four years, you can apply to have part of your loan forgiven. This varies depending on the subject and grade that you teach. For instance, Elementary teachers may receive up to $5,000 whereas those teaching math, science, or special education through a secondary school can receive up to $17,500 towards their loans. Additionally, you can apply for repayment assistance programs. The benefits of these programs vary by state, but most require that you are licensed to teach in your state and commit to working for two years in a qualifying area.
If you have pursued a degree in nursing, you can apply for several Federal and state student loan forgiveness plans. These include the NURSE Corps Loan Repayment Program which can pay up to 60% of your loans over two years of employment. If you qualify for a third year, you can have an additional 25% of your debt forgiven. You must be serving in a critical shortage area with a high needs population to apply. Even if you don’t meet the requirements for the NURSE Corps program, you may still qualify for certain nursing loan repayment assistance programs. LARPs vary by state, although many will award qualifying nurses with up to $5,000 per year for four years.
Public Service loan forgiveness is another common assistance program for student loan repayment. This loan is available to anyone working in a public service job. Under this major student loan repayment plan, qualifying applicants can have 100% of their loans forgiven after 120 on time payments. If you work full time for a federal, state, or local organization, you can qualify for student loan forgiveness program.
Even if you don’t qualify for one of the more common loan forgiveness programs, you may still qualify for a lesser known student loan forgiveness or repayment assistance program. Some of these include forgiveness from an income driven plan, specialty assistance plans for lawyers, and student loan discharge under special circumstances.
Student Loan Forbearance
Even if you can’t have some or all your loans forgiven, in some cases you can temporarily reduce or stop your student loan payments. While you are not responsible for making payments during a forbearance, you are still responsible for paying the interest that accrues on your loans during this time. There are both general and mandatory student loan forbearance applications. For a general forbearance, also called a discretionary forbearance, it is up to your loan servicer whether your request is granted. You may apply for this type of student loan forgiveness if you can present a case of financial difficulties, medical expenses, a change in employment, or another reason that your loan provider finds acceptable. Under mandatory forbearance, your loan servicer is required to accept your application so long as you meet one of the requirements. These include:
- Serving a dental or medical internship, and you meet specific requirements
- Serving in the AmeriCorps
- Serving in a teaching capacity for which you could be granted student loan forgiveness for teachers
- If the total amount you owe for all your student loans combined is at least 20% of your of your total monthly gross income
- Qualifying for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program
- If you are a member of the National Guard and have been activated by a local governor. Additionally, you must not already qualify for military deferment.
Student Loan Deferment
Student loan deferment is very similar for student loan forbearance, with the exception that you are generally not required to pay the interest that accrues on your federal loans during the time that the deferment is in place. Just like student loan forbearance, there are several different qualifying factors that you must meet to be accepted into such a program. These qualifications can include unemployment, if you are already receiving state or federal assistance, enrolling in the Peace Corps, being an active member of the military, or if you are qualifying for Perkins Loan Cancellation. Be aware that if you have unsubsidized loans, you will still need to pay the built-up interest once your loan re-enters into a payment cycle. Because this means you will have more student loan debt to pay off than when you began your deferment, you should only defer unsubsidized loans if it is necessary.
Student Loan Consolidation
If you have multiple loans, you can apply to have these consolidated into one larger loan. When you apply for private student loan consolidation, you are applying for one major loan that will pay off the remainder of several smaller loans. Consolidation can also give you different repayment plans, which can help make your monthly loan payments more manageable. Loan consolidation is completely free to apply for, but expect the rate of interest that you pay on your new loan to increase. To apply for loan consolidation, you must no longer be in school, and your loans must not be in student loan default, or must have satisfactory payment arrangements if they are in default. You can also choose to reconsolidate future loans into your original consolidation loan. Alternate repayment plans under consolidation loans can include extended repayment, graduated repayment, and income contingent plans (if you have Direct loans).
Student Loan Refinance
Through student loan refinancing, you can obtain a new loan with a new interest rate. This is a relatively new industry that came into existence as more and more borrowers felt the pinch of high interest rates on their student loans. Much like student loan consolidation, refinancing your student loans means getting one big loan to pay off your smaller loans. But in the case of refinancing, you are applying for a new loan with a lower interest rate. Student loan refinancing is only available from private lenders, although some of these private lenders will refinance federal loans as well as private loans. If you choose to refinance student loans, you could have a lower monthly payment, be able to pay off your loans in a shorter amount of time, or simply save monthly thanks to a lower interest rate. While refinanced student loans can help you save money with a lower interest rate, it is important to remember that any Federal Loan benefits you may have qualified for will no longer apply to your consolidated loan. These include federal loan forgiveness and discharge plans.
Student Loan Discharge
If you meet certain conditions, you can even apply to have your student loans discharged, which means that you will be exempt from paying the remainder of your student loan debt. While student loan forgiveness is available for those that meet certain occupations qualifications, student loan discharge qualifications are much different. Both Direct loans and FFEL programs can be discharged in the event of student death, school closure, total and permanent disability, bankruptcy, or false certification. In the event of your death or a long-term disability that leaves you unable to work, your family will not be burdened with paying off your student loans. If you are a victim of identity theft and you are not at fault for your student loans, you can apply to have the unpaid balance removed. If you are filing for bankruptcy, it is important to know that the courts do not generally grant discharge for bankruptcy student loans unless the borrower can prove undue hardship that is being at least partially caused by the student loan.
Student Loan Bankruptcy
It may be very difficult to have your student loans discharged through bankruptcy, but it isn’t impossible. To do this, you must be able to show the court that repayment of your student loans would cause undue hardship to you and your dependents and that your financial situation is not likely to change any time soon. If you are thinking about applying for bankruptcy for student loans, you will most likely need to undergo the Brunner Test, in which you must answer the following:
- Are you unable to maintain a minimal standard of living for you and your dependents based on your income and expenses?
- Are there additional circumstances that indicate your situation will not improve for the foreseeable future?
- Have you made good faith efforts to repay your debts, such as asking about repayment plans and debt counseling?
Filing for bankruptcy will protect you from collections agencies, and if your case is approved the remainder of your student loans will be cancelled.
Frequently Asked Questions About Student Loan Forgiveness and Discharge
What is the difference between forgiveness and discharge?
During student loan forgiveness, the remainder of your student loan balance can be forgiven, generally for working in a qualifying occupation such as teaching or nursing, or a government job. Student loans can be discharged if you meet certain requirements, such as a permanent disability that prevents you from working or a bankruptcy filing. Occupation is not relevant for loan discharge.
What is Public Service Loan Forgiveness?
If you are working full time in a public service career such as nursing or teaching and have made 120 on time payments towards your loan, you can apply to have the remaining balance of your loan forgiven.
Do I qualify for PSLF?
Any non-defaulted loan through the Direct Loan Program qualifies for the public service loan forgiveness program, so long as you meet the occupational requirements.
Should I consolidate my loans?
Consolidating your loans should be carefully considered. While you may face a higher monthly interest rate or a longer repayment time, you could also receive a single loan payment instead of multiple monthly payments and access to alternative payment plans for your student loan debt.
What is an income based repayment plan?
Through an income based repayment plan, you can put a cap on your monthly loan payment amount based on your income and family size. This is designed to make your loan payments more affordable for your income level.
What if I can’t afford to repay my loans?
If you are unemployed or otherwise unable to pay your loans after your grace period, speak with your loan servicer. You may be able to request a forbearance, which will freeze payment on your loan for six months, or a deferment.
What if I am unable to pay my loans for an extended period?
If you miss payments on your loans, your loans may go into delinquency or default. If you enter into student loan default, this will be reflected on your credit score and will affect your future borrowing options. Additionally, loans in default are subject to wage garnishment and withholding of tax refunds by the Department of Education.
Student Loan Debt Terms and Definitions
| Term | Definition |
|---|---|
| Student Loan Forgiveness | Under certain requirements, you can have the remaining balance of your student loans forgiven so that you no longer need to pay them. This is generally based on occupation and service area. |
| Student Loan Consolidation | The process of applying for one major loan that will be used to pay off the balances of your multiple student loans. |
| Student Loan Refinancing | If you are in a better financial standing than when you first applied for student loans, you can apply to have your loans refinanced through a private lender. This will consolidate your loans into one larger loan and may give you better interest rates. |
| Public Service Loan Forgiveness | If you are working full time as a teacher, nurse, or government employee of any level, you can apply to have your loan debts forgiven through Public Service Loan forgiveness. |
| Refinance Student Loans | Having your student loans consolidated into a single loan with one monthly payment, generally with lower interest rates. |
| Student Loan Debt | The amount of money borrowed to attend secondary education which must be repaid following graduation. |
| Student Loan Forgiveness Program | A repayment plan or loan dismissal program for which you must be specific requirements. These requirements vary depending on the type of forgiveness program and the state in which you are applying. |
| Student Loan Default | Not paying on your student loans for an extended period will put them in default, at which time you may begin receiving contact from collections agencies, experiencing wag garnering, and seeing a negative impact to your credit score. |
| Student Loan Deferment | Allows you to reduce the amount that you pay per month, or pause payments on your student loans. |
| Student Loan Forgiveness for Teachers | One of the more common types of loan forgiveness programs, loan forgiveness for teachers varies depending on the area in which you teach and the subject in most states. |
| Private Student Loan Consolidation | Through private lenders, you can apply to have both your federal and private loans combined into a single loan that is easier to pay. However, you will lose the ability to apply for any forgiveness programs. |
| Student Loan Repayment | The act of repaying the debts incurred from borrowing money to attend a secondary school. |
| Student Loan Forbearance | Allows you to lower or completely stop your monthly loan payments for a specified period. |
| Bankruptcy Student Loans | Filing for bankruptcy for student loans affords you the opportunity to go before a bankruptcy court and contest that continued payment of your loans will cause undue hardship. |
| Loan Rehabilitation | If you default on your student loans, you can apply for a one-time chance to regain your eligibility for federal student aid. |
| Financial Hardship | Extreme difficulty or inability to meet a minimum standard of living based on your income to expenses ratio. |
| Forbearance | The act of refraining from a legal right, such as enforcing the payment of a debt |
| Discharge | Release from a financial obligation, such as paying student loans. |
| Adversary Proceeding | This is a lawsuit related to but filed separately from a bankruptcy case for a significant dispute. |
| Direct Student Loan Consolidation | The act of combining multiple federal loans into a single loan. |
| Pay as You Earn Repayment Plan | A student loan repayment plan based on income, which caps your monthly payment at 10% based on your income and expenses. |
| Graduated Repayment Plan | This type of repayment plan for student loans allows you to pay off your debt in 10 years by gradually increasing your payments every two years. |
| Income Based Repayment | Specific loan repayment plans for student loans that cap your monthly payment at 10-15% of your income to make them affordable. |
| Income | The amount of money you bring in on a regular basis for work or through investment opportunities. |
Relevant National Student Loan Program Laws, Rules or Regulations
There are several regulations affecting student loans and student loan debt, many of which were recently added under the Obama Administration. Not all of these acts apply to student loans and debts, however. Some actions both proposed and passed are regarding how secondary schools are using financial aid and their ability to benefit students when it comes to teaching and preparing them for their chosen careers.