Student Loan Forgiveness | Programs & Requirements for 2021
Ever had that dream where a magic fairy visits your house and cleans all the dishes? Or issues you a huge raise? Or pays off your student loans?
You may be surprised to learn student loan debt relief isn’t always a fantasy.
The most happy-tear-inducing programs will grant loan forgiveness immediately. Only a tiny percentage of borrowers can catch that kind of magic.
Many other programs can help alleviate your student debt load as well. Income-based or occupation-specific programs can help if you have the patience to apply and follow through.
How To Get Student Loan Forgiveness
For this post, I’m assuming your student loans are issued by the federal government because forgiveness programs for private student debt are few and far between.
While some state and local programs may allow for the forgiveness of private student loans, the vast majority of the federal programs listed below require the Department of Education to issue your student loans.
Depending on your situation, you may qualify for one of several student loan debt relief programs based on either your income, your occupation, or the professional needs of your community.
Student Loan Forgiveness, Discharge, and Cancellation
Student debt relief can happen through loan forgiveness, student loan discharge, or loan cancellation.
If you’re getting help from overwhelming student debt, you probably won’t care much whether your loans have been forgiven, canceled, or discharged.
But these terms can make a difference as you apply for student loan relief:
Student Loan Forgiveness:
Designed to encourage students to enter specific professions such as teaching or other public service sectors. The federal government also can eventually forgive debt after 20 or 25 years of making payments based on your income. In many cases, forgiven debt is considered taxable income by the IRS.
Student Loan Discharge:
More likely to happen if your university closes or defrauds you or if you become disabled.
Student Loan Cancellation:
Your debt is gradually reduced each year you work in a specific profession such as teaching, most likely when you have Perkins loans, which stopped being issued in 2017.
Student Loan Repayment:
This is similar to forgiveness. Your employer or the organization providing the debt relief will pay on your loan balance for you or provide you with money specifically to pay down your debt.
Do I Qualify for Student Loan Forgiveness?
Before getting into the long and ever-growing list of student loan relief programs, let’s start with a general overview of the reasons you may qualify for help.
You’ll have an easier time qualifying for student debt relief if:
Your School Closes
You can seek student loan forgiveness if your school closes while you’re a student. It doesn’t matter if you’re on a leave of absence or not as long as it was previously approved. You can even qualify for Closed School Discharge if you withdrew from school in the past 120 days.
It’s sad when a school closes. It’s even worse if your school has defrauded you — whether they closed afterward or not.
If your school lied to you about your academic program or violated state laws while processing your student loans, you may qualify for Borrower Defense. This is a forgiveness program even though you’ll often see it without the word “forgiveness” in the title.
The remaining two programs which can erase your student debt due to actions by your school are False Certification Discharge and Unpaid Refund Discharge. You’re eligible for False Certification Discharge when your school lied about your eligibility for student loans. You’re eligible for Unpaid Refund Discharge when you withdraw from school, but your school never refunds the money to the federal government.
You Use Your Degree to Better Communities
You can gain student loan forgiveness by using your degree to serve your community in any number of ways.
Perhaps the most well-known program is Public Service Loan Forgiveness (PSLF). To qualify for PSLF, you must serve in a government position or work with a nonprofit for ten years. During those ten years, you must make 120 payments on your Direct Loans via an income-driven repayment plan (IDR). We will review those programs below.
PSLF also allows Americorps and Peace Corps members to count their time in service towards the PSLF service requirement, as long as they use their education award to retroactively fulfill their payments that were due during their time of service, were it not for forbearance.
If you work full-time in education, there are a couple of programs available to you. If you borrowed while Federal Perkins Loans were available, you might be eligible for the Federal Perkins Loans Cancellation program.
Every year you work in a low-income district with students who are disabled or in another high-need subject area as defined by your state, you may be eligible to have a portion of your loans canceled.
In the first two years you utilize the program, 15 percent of your loans will be canceled each year. In the third and fourth year, 20 percent will be canceled. The last year, the remaining 30 percent of your balance will be canceled.
You Have a Disability
Get your disability certified by your physician, the Department of Veterans Affairs, or the Social Security Administration, and you could potentially get 100 percent of your student loans discharged under the Total and Permanent Disability program.
This program can also release you from your service obligation if you have a TEACH grant.
You Are Experiencing Financial Hardship
The programs available for those experiencing hardship are limited. For example, if you declare bankruptcy, you technically can get your student loans discharged. You should try, but you should also know that forgiveness is very rarely granted in this circumstance.
The other hardship program — Discharge Due to Death — helps your family by discharging the debt from your estate after they provide legal documentation of your passing.
Geography Can Lead to Student Debt Relief
As our urban centers swell, there are large geographic swaths of our country that have lost the vast majority of their professional workforce. This means that sometimes, even covering basic services is a challenge.
To help alleviate this issue, federal, state, and municipal programs will use forgiveness programs to attract professionals to underserved areas. This means your eligibility will be determined by profession and where professionals in your field are needed.
State-Run Forgiveness Programs
Most states run forgiveness programs for specific professions. Some states with the most prolific programs include Texas, Minnesota, and Maine.
Kansas’s Rural Opportunity Zones (ROZs)
Kansas has more than 80 Rural Opportunity Zones in which the state can waive your state taxes and forgive up to $15,000 of your student loans over the course of five years.
You can qualify if you have an associate’s degree or higher.
Occupation-Based Student Loan Forgiveness Programs
The complete list of programs is massive, but here are some of the leading occupation-based loan forgiveness programs:
Public Service Loan Forgiveness (PSLF)
If you work for any level of the government — local, state, or federal — or if you work for a non-profit organization, you can get some help from the Public Service Loan Forgiveness (PSLF) program. The program can forgive your loan balance after you make ten years of payments. Any public sector job can qualify for PSLF, but you must work full-time (30 hours or more a week) to qualify.
Faculty Loan Repayment Program
The federal Health Resources and Service Administration runs this program to encourage health professionals to teach future generations of health care workers. You could get up to $40,000 in loan forgiveness if you qualify. You could even get additional help to pay the income taxes on your forgiven loan balance.
Federal Employee Loan Repayment Program
That’s right: The federal government has its own student loan forgiveness program for federal employees. Federal agencies can pay their employees an extra $10,000 a year for up to six years to pay down student debt. Employees must agree to work at least three years before they can qualify for this program, and employees must also enroll in this program when hired. Current employees cannot enroll.
Indian Health Service (IHS) Loan Repayment Program (LRP)
When you sign up for a two-year service contract at an Indian Health Service program site, you can be rewarded with up to $40,000. You must work in an eligible healthcare profession, and more money may be available to you if you are willing to work at facilities where the need is highest.
John R. Justice Program for Public Attorneys
Public defenders and prosecutors — both state and local — can receive up to $10,000 a year in debt repayment through the John R. Justice Loan Repayment Program. Just like federal employees, these public attorneys must agree to stay on the job three years to enroll. The program maxes out at six years ($60,000).
National Health Service Corps Repayment
Physicians, physician’s assistants, certified nurse midwives, dentists, and some nurse practitioners can get student loan relief through the National Health Service Corps. This organization awards loan repayment assistance to health professionals who work in high-needs areas for at least two years. The Corps prioritizes certain geographic areas by targeting more debt relief to health professionals who agree to work in these areas. Relief usually maxes out at $50,000. You can learn more or apply here.
National Institutes of Health Loan Repayment
The National Institute of Health awards some healthcare researchers with loan forgiveness, up to $50,000 a year with a two-year commitment to work in specific fields of research. Biomedical and biobehavioral health researchers can often qualify. Read more here.
Nurse Corps Loan Repayment Program
If you are an RN, APRN, or a nurse faculty member with debt related to nursing school, you may qualify for the Nurse Corps Loan Repayment Program. To qualify, RNs and APRNs must serve at a Critical Need Facility where nurses are in scarce supply.
Nurse faculty members must be working at an accredited school. You sign up for a mandatory two-year service contract in exchange for the Health Resources & Services Administration (HRSA) paying off 60 percent of your loans. If they offer you an additional year of service, you may be eligible for an additional 25 percent forgiveness.
Teacher Student Loan Forgiveness
Available to those who work in a low-income school district or with an educational agency serving a low-income population. After you’ve completed five years of service, you may be eligible for up to $17,500 in forgiveness.
Just when you thought loan forgiveness happened only for health care workers, attorneys, or teachers, SEMA came along to help automotive workers. To qualify, you must work for a member of the Special Equipment Market Association, which includes a wide variety of manufacturers, parts makers, distributors, and even parts retailers. SEMA will mail $2,000 a year in debt relief to your lender if you qualify.
State Bar Associations
At least 24 states’ bar associations have loan forgiveness programs. The American Bar Association is a good place to find specifics for your state or the state you’re considering for your legal practice.
USDA Veterinary Medicine Repayment
Practicing veterinary medicine in a high-needs area can net you $25,000 a year in student debt relief through the federal Department of Agriculture. You’ll have to commit to at least three years to qualify for this repayment program.
Student Loan Repayment Plans Based On Your Income
Income-driven repayment plans allow you to pay based on your income instead of paying a fixed monthly payment throughout the life of your loan term.
At the end of your income-driven repayment term, any remaining balance on your loan will be forgiven.
There are several different plans to choose from:
Pay as You Earn (PAYE)
Pay as You Earn (PAYE) is available to borrowers with a high debt-to-income ratio. You will pay 10 percent of your discretionary income every month for 20 years. Your monthly payments will never be more than what you would pay under the standard, 10-year repayment plan, and at the end of 20 years, any remaining balance will be forgiven. To qualify, you cannot hold federal student loans issued before October 1, 2007. You also have to have at least one of your student loan disbursements occur on or after October 1, 2011.
Income-Based Repayment Plan (IBR)
Another repayment plan available to those with high debt-to-income ratios is Income-Based Repayment (IBR). On IBR, you will pay 15 percent of your discretionary income if you borrowed before July 1, 2014. If you borrowed on or after this date, you would only have to pay 10 percent of your discretionary income every month.
If the 10 percent or 15 percent exceeds what you would pay under a Standard Plan, your monthly payment will be capped. Those in the 10 percent group will only have to pay for 20 years, while those in the 15 percent group will have to pay over a longer, 25-year period. Then the remainder of the loan balance will be forgiven.
Revised Pay as You Earn (RePAYE)
Revised Pay as You Earn (RePAYE) is available to both undergraduate and graduate students. Borrowers on this repayment plan will pay 10 percent of their discretionary income. Undergrad students will pay for 20 years, and graduate students will pay for 25. At that point, the remainder of your balance will be forgiven, though you are likely to have paid more overall than you would have on a Standard Plan.
Income-Contingent Repayment (ICR)
Income-Contingent Repayment (ICR) is another plan where you may end up paying more over the course of repayment than if you had stuck with a Standard Plan. This is because you will be repaid with 20 percent of your discretionary income over 25 years. If your monthly payment would exceed what you’d pay on a fixed-payment, 12-year repayment plan, it will be capped. At the end of the 25-year repayment period, any remainder on your balance will be forgiven.
Military Student Loan Forgiveness
Our nation’s military needs highly trained and educated workers. If you have student debt and you’re considering a career in the military, be sure to ask about student debt relief programs such as:
Air Force JAG Loan Repayment
The Air Force offers student loan repayment programs only for its Judge Advocate General (JAG) officers. You could get up to $65,000 in debt relief through this program.
Army College Loan Repayment
The Army’s loan repayment program can give you up to $65,000 in student debt relief when you enlist in a critical military occupational specialty. This can be an attractive incentive for new enlistees, but it’s only available at the time of your enlistment, so be sure to ask during your recruitment process. And, if you plan to return to college on the GI Bill later, don’t enroll in this debt relief program because it will disqualify you for GI Bill benefits. Find more details here.
Army / Navy Health Professionals Repayment Program
The Army and the Navy will help forgive student loans for medical professionals who practice while in the service.
- Army Medical Professionals: The Army will pay up to $120,000 in student loan forgiveness for dentists and physicians over three years.
- Navy Medical Professionals: The Navy will pay up to $40,000 a year for physicians who practice while enlisted in the Navy.
National Guard Repayment Program
National Guard members who serve at least six years can claim up to $50,000 in debt relief from the Guard. Learn more here.
Navy Repayment Program for New Enlistees
The Navy will pay up to $65,000 in federal student loan relief over your first three years of service. You must claim this benefit when you enlist. Current sailors won’t qualify.
As you can already tell, student loan forgiveness is remarkably complex. In many cases, qualifications seem to contradict each other.
Here are some frequently asked questions about student debt forgiveness.
Do Student Loans Get Forgiven After 10 Years?
Yes, some student loans are forgiven after ten years.
The most notable program is PSLF, though the Department of Education has only approved 62 percent of applicants with a government employer, 38 percent of applicants with a nonprofit 501(c)(3) employer, and 0 percent of applicants from other nonprofit employers according to the latest data.
State, municipal, and other loan forgiveness programs may have a 10-year term — research your program for specifics.
Are Student Loans Forgiven after 20 years?
More student loans are forgiven after 20 years. If you’re on any of these repayment plans, your remaining student loan balance will be forgiven after 20 years of monthly payments:
- RePAYE, but only if you’re repaying undergraduate debt.
- IBR, if your student loans were issued on or after July 1, 2014.
Do You Pay Taxes on Forgiven Debt?
In many cases, the IRS considers forgiven student debt a form of income and will tax you accordingly.
The forgiven balance will impact the tax year in which the debt is forgiven, so you wouldn’t have to alter previous tax returns.
Some professional-based forgiveness — including teaching, public service, and health care repayment programs — will not be taxed. Income-based forgiveness will be taxed.
Where Do I Apply for Forgiveness?
Because such a wide variety of programs exist, there is no centralized location for all loan forgiveness programs.
A post like this one will provide one of the best resources. For income-based repayment plans, you can apply at studentaid.gov.
What if I Have Private Loans?
Private loans follow their own set of rules, and you’ll have a much harder time finding debt relief.
You may want to look into consolidation instead if you’re looking for alternatives to your high payments and/or high interest.
How is Consolidation Different from Forgiveness?
Student debt consolidation can save you money by lowering your interest rate or changing the duration of your loan. However, your amount of debt will not immediately change.
Student loan forgiveness — or repayment, or cancellation, or discharging — will lower the amount you owe.
Can You Forgive a Consolidated Loan?
If you’ve already consolidated your public student loans into a private loan, you can no longer qualify for most loan forgiveness programs, including income-based repayment/forgiveness plans.
Can You Forgive Defaulted Student Loans?
Defaulting on your loans typically disqualifies you from forgiveness and income-based repayment programs.
Try to keep your loans current while applying for relief programs.
What is a Perkins Loan?
The Perkins public loan program stopped issuing loans in 2017. The program served lower income borrowers.
Many Perkins borrowers can qualify for gradual loan cancellation.
Will My Student Loans Ever Be Forgiven?
For many, yes. However, the PSLF numbers tell us something. While this program is particularly complicated with the employer qualifications, loan-type qualifications, and repayment plan qualifications, an alarmingly small number of applicants qualified.
Go over your program with a fine-toothed comb before and during your loan’s duration up until the day of forgiveness. One small slip up and your payoff strategy could be thwarted.
But if you play things right, forgiveness can be a huge economic benefit depending on your circumstances.