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The eye-watering size of the student loan debt burden in the US never fails to make the news headlines. Almost 44 million Americans have federal student loan debt — that’s more than 1 in 12 people. No matter how smart you are about choosing a lucrative college major or hustling hard on the side while studying, there’s a good chance that attending college will leave you with significant debt. Thankfully, loan forgiveness programs may offer you a way out, and there are dozens of programs to choose between!
Understanding how loan forgiveness works and what you’re eligible for can be confusing. This article will cover the most popular forgiveness programs, other state-specific and career-specific initiatives, and alternatives for those with private loans.
How student loan forgiveness works
Student loan forgiveness cancels student loan debt partially or entirely. To join a program, you’ll have to meet specific criteria (such as working in a particular field) — you’ll need to remain eligible for its duration.
Your loan type is one of the most important factors in determining your eligibility. Most student loan forgiveness programs are only open to those with federal student loans, specifically direct loans. If you have another type of federal loan, such as a Stafford loan or Perkins loan, you may be able to consolidate your loans into a direct consolidation loan to gain access to the main programs.
Those with private loans aren’t so fortunate, but there are still ways you can reduce your debt burden, which we’ll cover later in this article.
Student loan forgiveness vs student loan discharge
In some cases, the government or a lender will cancel your loan due to extenuating circumstances. This is known as student loan discharge, and it’s slightly different from student loan forgiveness (although the terms are often used interchangeably).
Student loan discharge may be possible in the following situations:
- Fraud
- Bankruptcy
- Death
- Permanent disability
- School closure
But we don’t recommend permanently injuring yourself just to access some debt relief!
What to expect from a student loan forgiveness application
Once you’ve found a student loan forgiveness program you can apply for, you’ll usually need to fill in an application.
Getting this right is crucial. 98% of applicants to the Public Service Loan Forgiveness Program were rejected, and failing to fill in the application properly was a major cause.
The application process for loan forgiveness varies slightly between programs, and in some cases, everything is automatic; you won’t even need to submit an application at all.
Generally, you can expect to fill in an online form and send documents that prove your eligibility. You may need to provide:
- Social security number
- Date of birth
- Contact information
- Proof of income (adjusted gross income from the IRS or a pay stub)
- Certifications or qualifications
- Authorization from employment
- Proof of qualifying loan payments
Federal student loan forgiveness programs
If you have federal student loans, you’ve hit the jackpot when it comes to loan forgiveness programs. We’ve listed some of the most popular programs below.
Income-Driven Repayment (IDR) Plan
If your loan payments are disproportionate to your income, there’s a good chance you could be eligible for an income-driven repayment plan. This program won’t wipe out all your debt immediately, but it will bring your monthly payments down to a manageable amount and forgive the remaining balance after long enough.
In most cases, your loan payments will be reduced to 10-20% of your discretionary income. If you’re unemployed or earning barely above the poverty level, you may not have to pay anything.
There are four different variations of the program:
- Saving on a Valuable Education (SAVE)
- Income-Based Repayment (IBR)
- Pay As You Earn (PAYE)
- Income-Contingent Repayment (ICR)
Each one uses slightly different calculations to determine how much you need to pay each month, but you don’t need to worry about working it out yourself. Your loan servicer will help you choose the program that will result in the lowest monthly payments when you submit your application.
Public Service Loan Forgiveness (PLSF)
Public service loan forgiveness is one of the best-known loan forgiveness programs. It’s open to various government and nonprofit workers with federal student loans — it’s designed to encourage graduates to enter low-paid yet socially impactful work.
Eligible professions include:
- Teaching
- Nursing
- Religious work
- Firefighting
- Government
Those who enroll in the program will first join an income-driven repayment plan that limits how much of their income they need to pay toward loans. Then, after making 120 payments while working continuously in one of the eligible jobs, participants can obtain complete loan forgiveness.
Teacher Loan Forgiveness
Teachers may be eligible for the PSLF, but this isn’t the only way they can obtain loan forgiveness. The Teacher Loan Forgiveness Program is a dedicated program for teachers who work in a low-income elementary school, secondary school, or educational agency.
Unlike the PSLF, you only need five full years of service to be eligible. However, the maximum amount of forgiveness you can access is $17,500, and this is only available for teachers of specific subjects; other teachers will only receive up to $5,000.
Perkins Loan Cancelation
While most federal loan forgiveness programs are for those with direct loans, the Perkins Loan Cancelation program is a loan forgiveness plan tailored to those with Federal Perkins loans who work in certain professions. In some cases, it can lead to 100% of a loan’s value being canceled.
There’s a dedicated Perkins Loan Teacher Cancelation program for teachers who meet certain requirements, and up to 100% of the loan can be canceled eventually. Generally, 15% of the loan is canceled in the first and second year, 20% in the third and fourth year, and 30% in the final year — by which time borrowers have their loan entirely forgiven. However, some programs last longer.
Teachers aren’t the only people who are eligible. Those in other careers can also obtain partial or complete Perkins Loan cancelation, including:
- Nurses
- Firefighters
- Military services
- Volunteer services
- Law enforcement officers
Other career-based loan forgiveness programs
We’ve already mentioned a couple of career-based loan forgiveness programs for those with federal student loans, but it wasn’t an exhaustive list. There are more than 80 different forgiveness programs, so don’t give up just because the initiatives above don’t work for you.
If you join the U.S. military, prospects are particularly strong. There are various programs, such as:
- Air Force College Loan Repayment Program
- Army College Loan Repayment Program
- National Guard Student Loan Repayment Program
- Navy Student Loan Repayment Program
- Army Active Duty Health Professions Student Loan Repayment Program
Your chances of getting onto a loan forgiveness program are also good if you work in healthcare, as there are many programs in addition to the main ones outlined earlier. These include:
- NURSE Corps Loan Program
- National Institutes of Health (NIH) Loan Forgiveness
- National Health Service Corps
- Indian Health Services Loan Repayment Program
- USDA Veterinary Medicine Loan Repayment Program
But don’t despair if you don’t fit into either category. Some other career-based loan forgiveness programs include:
- AmeriCorps Education Award for its volunteers
- SEMA Loan Forgiveness Program for the automotive industry
- John R. Justice Student Loan Repayment Program for state and federal public defenders and state prosecutors
- Attorney Student Loan Forgiveness Program for attorneys who work in the U.S. Department of Justice
- Faculty Loan Repayment Program for faculty members in healthcare departments
It’s always worth running a quick search for your field, job, and industry to see if there’s anything you could apply for.
State-specific loan forgiveness programs
Sometimes, the state you live or work in can be the key to loan forgiveness. Many of these programs are targeted at people who work in the public sector, especially in (you guessed it) healthcare — but there are some initiatives that are open to everyone.
Unfortunately, you’re out of luck if you live in North Dakota, as it’s the only state without any student loan forgiveness options. Meanwhile, Minnesota has the most of all states, with a grand total of fourteen programs ranging from the Minnesota Dentist Loan Forgiveness to the Minnesota Rural Mental Health Professional Loan Forgiveness.
Alternatives to forgiveness for private loans
If you took out a private loan, you won’t have the luxury of choosing between dozens of loan forgiveness programs.
However, there are still ways you can manage your student loan debt and keep your payments manageable.
If you’re struggling to make ends meet, the first thing you should do is contact your lender. You may be pleasantly surprised and learn they will support you by arranging a payment plan. If you’re in a really tough financial situation, you may even be able to get loan deferment or forbearance, which puts your payments on hold temporarily. Private lenders aren’t obliged to offer you these — and in the case of forbearance, you’ll still accrue interest. However, it’s better than racking up further debt.
Loan refinancing is another option. This involves moving your loan to a new lender (who then pays the previous loan), and it can be a way to access a better interest rate.
You may have heard that bankruptcy is a solution for loan forgiveness programs, and it’s technically true that your loans will be canceled if you go bankrupt. However, it comes with significant drawbacks, such as giving your credit score a hammering for many years. You’ll also need to prove that you’re genuinely suffering financial hardship, and in some cases, you may need to go to court or lose your assets.
What happened to Biden’s student loan forgiveness?
Mass student loan forgiveness as a government policy has been discussed for what feels like forever now. There seemed to be a breakthrough in 2022, when the Biden Administration approved a policy to cancel up to $20,000 per borrower. However, the Supreme Court ended up reversing the decision.
If you’re hanging on until the government cancels everyone’s loans to apply for one of the programs above, you may be waiting a while.
Time to hit apply
Navigating the landscape of student loan forgiveness programs has always been complex, and the yo-yoing of recent policy discussions has only made the situation worse. But if you have federal loans, there’s a good chance you’re eligible for some kind of help, especially if you work in the public sector.
For more tips on managing your finances as a student and graduate, make sure you stay up to date with Frugal Student. We send out a regular newsletter with our top tips, covering everything from budgeting to side hustles.
