Available Student Loan Forgiveness Programs

Regardless of what you may have heard on the news, there are still some options to have federal student loans forgiven. These options include payment plans that result in debt being forgiven after 10 to 25 years, though taxes may ultimately be owed on forgiven amounts.

While a new Trump administration bill would change forgiveness and repayment plans in the future, this bill faces significant hurdles when it comes to passing in the Senate. Get an overview of current student loan forgiveness plans you can sign up for now, but keepin mind these options could be eliminated in the future.

What is student loan forgiveness?

Student loan forgiveness programs typically come from the government and offer borrowers a way to have their remaining student loan debt canceled. These programs are often designed for people working in specific public service sectors, such as health care, education or nonprofit work.

Rather than repaying the full amount of the loan, eligible borrowers may have part or all of their debt forgiven after meeting specific criteria, which often include making a certain number of qualifying payments or working in a designated field for a specified period.

Federal student loans are the most common type of loan eligible for forgiveness, while private loans are usually not covered by these programs. Student loan forgiveness can provide significant relief to borrowers who qualify, but it’s essential to understand the various requirements and timelines involved, as well as the potential tax implications.

Forgiveness is not the same as repayment

It’s important to note that student loan forgiveness is different from repayment, but many forgiveness plans require a repayment plan throughout the process. For example, many federal student loans offer income-driven repayment plans (IDRs).

IDRs calculate the amount you owe as 10 percent to 20 percent of your discretionary income, which is the remaining income you’re left with after paying your taxes and essential expenditures, such as housing and food. It’s important to note that discretionary income varies by state and family size, so major life events, such as getting married or having a baby, can impact your monthly payment. Your payment could even be $0 if your income is low enough.

In the end, remaining debts you have after completion of these programs can be forgiven. It’s important to note that some states will count your loan forgiveness as taxable income (Arkansas, Indiana, Mississippi, North Carolina, Wisconsin). Common IDR plans include:

Student loan forgiveness options

While the new Presidential administration wants to change the way student loans are taken out and repaid over time, student loan forgiveness is not over. It’s possible tweaks to federal student loans suggested by the Trump administration will not make it through Congress, and some programs will likely remain even if they do.

Here’s a rundown of some current student loan forgiveness options other than income-driven plans and how they work.

Public Service Loan Forgiveness

Public Service Loan Forgiveness (PSLF) is one of the most well-known student loan forgiveness programs. To qualify for PSLF, borrowers must make 120 qualifying monthly payments under a qualifying repayment plan while working full time for a qualifying employer.

Eligible employers under this plan include:

• U.S.-based government organizations at any level, including the military
• Nonprofit organizations that are tax-exempt under the 501(c)(3) IRS code
• Other nonprofit organizations that provide qualifying public services, such as emergency management, public safety, law enforcement or public service law

After making the required payments, the remaining loan balance is forgiven. It’s important to note that only Direct Loans are eligible for PSLF, and the borrower must be on an income-driven repayment plan.

Medical school loan forgiveness

Undergraduate school can be expensive enough, but If you add medical school loans to the list, your debt could be astronomical. If you’re a doctor or other healthcare provider facing this issue, you could find relief from the following programs:

To take advantage of these plans, you’ll need to commit to working in underserved regions and areas facing a shortage of healthcare providers. Doing so may be well worth it. In addition to using your skills to help others, you could knock off as much as $120,000 in medical school debt.

Nursing school loan forgiveness

The forgiveness programs for doctors can also help forgive student debt generated from nursing school.

The Nurse Corps Loan Repayment Program is available through the Health Resources and Services Administration website. Applications are accepted annually, and if you’re approved, it could pay up to 85 percent of your nursing school debt.

Teacher loan forgiveness

Designed specifically for educators, the Teacher Loan Forgiveness program provides up to $17,500 in forgiveness for teachers in certain fields, such as special education, math or science, who work full time in low-income schools for five consecutive years. Other teachers who qualify can get only up to $5,000, which is better than nothing, but might not be worth it in terms of return on investment (ROI).

To qualify, teachers must have Federal Direct or Stafford loans and be considered “highly qualified” in their subject area. This program is a great option for teachers looking for relief, though it does not typically offer full loan forgiveness like PSLF.

Just because you say you’re a teacher doesn’t mean the Department of Education (DOE) considers you one. The DOE defines a teacher as someone involved with direct classroom teaching or classroom-type teaching in a non-classroom setting.

Military loan forgiveness

Members of the U.S. military may be eligible for several loan forgiveness programs. The Public Service Loan Forgiveness program is available to military members, and additional benefits are offered through programs like the Servicemembers Civil Relief Act (SCRA) and the military’s repayment assistance program, which can help service members manage their student loan debt during and after active duty.

State-based forgiveness programs

Many states offer their own loan forgiveness programs to attract workers to specific high-need professions, such as health care, teaching and public service. Each state’s program has its own criteria and benefits, so it’s worth researching whether your state offers student loan forgiveness.

4 Additional discharge options

If you don’t qualify for traditional student loan forgiveness programs, there are other ways to have your federal student loans discharged under specific circumstances.

• Total and Permanent Disability (TPD) discharge
  

  Borrowers who are unable to work due to a total and permanent disability may qualify for a discharge of their federal student loans through the Total and Permanent Disability Discharge program. To qualify, you must provide documentation of your disability from a doctor, the Social Security Administration or the Department of Veterans Affairs.

• Closed School Discharge
  

  If your school closes while you’re enrolled or shortly after you withdraw, you may be eligible for a Closed School Discharge. This program forgives the federal loans you took out to attend that school, provided that you were unable to complete your degree due to the closure.

• Borrower Defense Discharge
  

  The Borrower Defense Discharge is a program that forgives federal student loans if the borrower can prove that their school misled them or engaged in fraudulent practices. This program has been in the spotlight in recent years due to high-profile cases involving for-profit schools accused of predatory practices.

• Bankruptcy Discharge
  

  While it is notoriously difficult to have student loans discharged in bankruptcy, it may be possible under certain circumstances. Borrowers must prove that repaying their student loans would cause “undue hardship,” a legal standard that can vary by court. Bankruptcy discharge of student loans is rare but can be pursued as a last resort for those in severe financial distress.

5 Options when you don’t qualify for forgiveness

The above loan forgiveness methods pertain to government-backed student loan programs like Direct Loans. But what happens if you don’t qualify for any of the above? Your best bet is to discharge your student debt faster through the following methods.

• Refinance your loans
  

  Refinancing your student loans can help you secure a lower interest rate, which can reduce your monthly payments and help you pay off your loans more quickly. A refinance could also help you consolidate multiple student loans.

  Refinancing is available through private lenders and is often best for borrowers with good credit and stable income. However, be aware that refinancing federal loans with a private lender will cause you to lose access to federal loan benefits like income-driven repayment plans and loan forgiveness programs.

• Make extra payments
  

  If you’re able to, making additional payments toward your loan principal can shorten your repayment timeline. Even small extra payments can have a significant impact over time, reducing the amount of interest you pay and allowing you to become debt-free faster.

  Be sure to specify to your service provider that you want these extra payments applied to the principal, and if you have more than one loan, specify which one so the lender won’t “credit” the payment toward future payments instead of to your specific loan balance. This is more common with federal loans.

  If you’re comfortable with it, set up automatic payments or schedule biweekly payments to help stay on track.

• Consider an income-driven repayment plan
  

  While these plans may extend your loan term, they can reduce your monthly payments to a manageable amount, preventing default and keeping your loans in good standing. These plans base your payment on your income, which can help you make consistent payments if you’re facing financial difficulties.

• Look for employer assistance
  

  Some employers offer student loan repayment assistance as part of their benefits package. Check with your employer to see if they provide any help with student loan repayment, and take advantage of this benefit if it’s available.

• Create a detailed budget
  

  Mapping out your monthly expenses and income can help you identify areas where you can cut back and allocate more money toward your student loan payments. A detailed budget is essential for staying on top of your finances and ensuring your loan payments are a priority.

Bottom line

Student loan forgiveness can offer significant relief for borrowers who qualify, potentially erasing thousands of dollars in debt. Programs such as Public Service Loan Forgiveness are excellent options for borrowers in public service, education or lower-income jobs. Even if you don’t qualify for forgiveness, there are other discharge options available for specific circumstances, such as disability or school closure.

For those who don’t meet the criteria for forgiveness, taking actionable steps to pay off your student loans faster – such as refinancing, making extra payments or exploring employer repayment assistance – can help you reduce your debt burden and achieve financial freedom.