The numbers are mind-boggling. In mid-2018, American collectively carried $1.53 trillion in outstanding student loan debt, according to the Federal Reserve Bank of New York. Even worse, one million Americans default on their student loans every year, and 40% of borrowers are expected to default by 2023.
If you’re paying off student loans, you know full well what the reality behind these statistics feels like. Repaying student debt is more than just a drag — it can put you in long-term financial jeopardy if things don’t turn out like you’d hoped after graduation.
But, there is a beacon of hope in the darkness. It might be possible for you to have your student loan balance partially or even completely forgiven. These programs aren’t necessarily easy to find or qualify for, and they generally come with strings attached. But if you can complete a student loan forgiveness program, you just might be able to move on with your life and leave the student loans behind.
Whether you have private or federal student loan debt, there are various programs in place to help struggling borrowers ease their debt burden.
Part I: Student loan forgiveness options
When your student loan debt is forgiven, cancelled or discharged, you are off the hook for that amount. Some loan forgiveness programs actually do wipe away your debt like a fairy debt godmother with a magic wand (though you might need to pay taxes on the forgiven amount).
Other programs, such as Loan Repayment Assistance Programs (LRAPs) or Loan Repayment Programs (LRPs), will make additional payments toward your student loan for you, thereby reducing your balance over time.
There is no one-size-fits-all rulebook that dictates how student loan forgiveness programs work. In some cases, you may need to follow strict reporting protocols throughout the program until you become eligible, while other programs may require you to work in a certain industry or live in a certain state.
Because the different student loan forgiveness options vary so much, you need to do extensive research so you know exactly what the requirements are. Some programs may have a big impact on your life, and you need to be prepared for the consequences and opportunity costs. In this guide, we’ll discuss which student loan forgiveness plans are available and the main details of each program.
At a glance: Student loan forgiveness programs
|Forgiveness Type||Who is eligible?||Amount that can be forgiven||Which loans are eligible?||‘Time served’ Requirement||Tax implications|
|Public Service Loan Forgiveness*||People who make a commitment to a public service career.||No cap||Federal Direct loans and Federal Direct Consolidation loans. Only payments made after October 1, 2007 count toward the 120 payments needed for forgiveness.||Make 120 payments (i.e. 10 years) while working full time for any level of government or in a 501(c)(3) nonprofit.||Forgiven amount is not taxable|
|Teacher Loan Forgiveness||Full-time teachers working in low-income schools.||Up to $17,500 on your Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Loans||Federal Direct loans, Federal Direct Consolidation and Federal Stafford loans.||Must work full time for five years.||Forgiven amount is not taxable|
|Perkins Loan Cancellation||Teachers and some other professionals, AmeriCorps VISTA or Peace Corps volunteers.||Up to 100% of the loan balance||Federal Perkins loans.||Must work full time for four to seven years if applying based on your occupation.||Cancelled amount is not taxable.|
|Forgiveness for Income-Driven Plans||Graduates who are enrolled in one of the four income-driven plans: PAYE, REPAYE, IBR, and ICR.||No cap.||Federal Direct loans, Federal Direct Consolidation loans, and Federal Direct PLUS loans made to students.||Remaining loan balance is forgiven after 20-25 years.||Forgiven amount is taxable.|
|Loan Forgiveness for Nurses||Nurses who work in certain high-need areas.||Up to 85% of your student loan balance.||Federal Direct loans, Federal Direct Consolidation loans, Federal Stafford loans, and Federal Direct PLUS loans made to students.||Must work full time for three years in a Critical Shortage Facility to receive forgiveness on up to 85% of your loans.||Forgiven amount is taxable. However, the NURSE Corps will pay your federal taxes for you.|
|Loan Forgiveness for Doctors||Doctors who make a commitment to serving in a high-need area or in the military.||Varies by program.||Varies by program.||Varies by program.||Varies by program.|
|Loan Forgiveness for Lawyers||Lawyers who have made a commitment to certain positions (e.g., public defenders, DOJ employees, etc.).||Varies by program.||Varies by program.||Varies by program.||Varies by program.|
|Military student loan forgiveness||Members of the military who have taken out student loan debt before enlisting.||Up to 100% for Army service, up to $65,000 for Navy service, or up to $65,000 for Air Force JAG service.||Federal student loans.||Varies depending on which branch you enlist in.||Forgiven amount may be taxable — check with a tax professional.|
|Segal AmeriCorps Education Award||AmeriCorps volunteers||Up to $6,095||Federal loans and loans issued by state agencies.||Complete at least one term of service (this ranges from 10 months to one year).||Forgiven amount is taxable.|
*Note that the status of the PSLF program may change in the future.
Federal student loan repayment programs
Public Service Loan Forgiveness (PSLF)
This is one of the most popular programs. Before you get too excited though, there are a lot of hoops to jump through to apply for PSLF. Additionally, the future for this program is murky: In 2017, Republicans introduced the PROSPER Act that would eliminate PSLF. Although this proposal was never passed, the outlook for PSLF remains uncertain.
Only loans issued under the Federal Direct Loan program qualify.
You have to be up to date with your Federal Direct student loan payments and make at least 120 consecutive on-time payments.
Must have been paying on loans while working full time for the government or a 501(c)(3) nonprofit or another qualified employer. If you take a hiatus with a private-sector employer and switch back, the payments you’ve already made while previously employed still count. You also need to be enrolled in some sort of repayment plan. Luckily, income-driven repayment plans such as Pay As You Earn count.
If you meet all those criteria and submit an annual employment certification form, you could be eligible to have your remaining student loan balance forgiven after 120 payments (i.e., 10 years). To get that, you’ll have to fill out yet another PSLF forgiveness application form.
This means that if you’re on the default 10-year repayment plan and are able to keep up with it, you won’t really be able to take advantage of this program because you’ll already have paid off your loans after 10 years anyway.
Federal income-driven repayment plans
Income-driven repayment programs offer more than just student loan forgiveness. They’ll make your student loans more affordable in the short term as well by capping your monthly payments at 10% to 20% of your discretionary income.
The details of how the monthly income-driven payments work vary. Here, we’ll give a brief overview of how these programs work before focusing specifically on how you can get your student loan balance forgiven with each of the four plans.
Warning: With each of these federal income-driven repayment plans, any forgiven balance is considered taxable income in the year it’s forgiven. You’ll need to plan ahead accordingly.
Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE)
The PAYE and REPAYE programs each limit your monthly payment amount to 10% of your discretionary income and require you to certify your income and family size every year. The nitty-gritty details of who is eligible and how the PAYE and REPAYE programs work from there vary.
Here’s how you can get your student loans forgiven if you’re enrolled in these programs:
If you’re in the PAYE program, your Federal Direct or Consolidation loans will be forgiven after 20 years.
If you’re in the REPAYE program, it works a bit differently: Your student loans will be forgiven after 20 years, but only if all of your loans are from undergraduate study. If you went to grad school and took out any student loans, your remaining balance would instead be forgiven after 25 years.
Income-Based Repayment (IBR)
If you’re enrolled in the IBR plan, your monthly payment amount will be limited to 10% or 15% of your discretionary income, depending on if you’re a new borrower or not on or after July 1, 2014. You’ll also have to recertify your income and family size each year.
If you do those things and still have a remaining balance at the end of 20 or 25 years (again, depending on whether you were a new borrower on or after July 1, 2014), regardless of what type of federal student loans you have, you will be forgiven. The lone exception are Federal PLUS loans made to parents, which need to be on the ICR plan listed below.
Income-Contingent Repayment (ICR) plan
If you’re enrolled in ICR, you’ll potentially have the highest monthly payments of all: either 20% of your discretionary income or whatever the payment would be on a 12-year repayment plan (whichever is less). You’ll also need to recertify your income and family size with this plan as well.
ICR also has one of the longest repayment periods. If you have anything left on your student loan balance after 25 years, it’ll be forgiven.
Federal Perkins Loan cancellation
The Perkins Loan program expired in 2017, but many graduates still carry this type of debt. It works a bit differently than most other federal loans — rather than being doled out through the William D. Ford Direct Loan program as with most federal student loans, each loan is made directly to you from the school itself. That means that when it comes time to apply for forgiveness, you’ll need to contact the school itself for an application.
How you qualify for Federal Perkins loan cancellation and how much you’re eligible to have cancelled depends on your profession and time served in your position.
Teachers, nurses, medical technicians, firefighters, tribal college faculty, law enforcement officers and attorneys working in public positions may be eligible to have up to 100% of their remaining Perkins loans waived after five years of service.
Certain early childhood education professionals may be eligible for Perkins loan cancellation after seven years. If you were in the military and served in a dangerous location, you may be eligible to have your remaining Perkins loan balance waived after five to 10 years, depending on when your service ended.
Finally, if you are an AmeriCorps VISTA or Peace Corps volunteer, you might be able to have 70% of the remaining balance on your Perkins loans cancelled after four years.
At a glance: Student loan cancellation or discharge programs
|Forgiveness Type||Who is eligible?||Which loans are eligible?||Tax implications|
|Closed school discharge||People whose school closed while enrolled, or within 120 days of withdrawing from class.||Federal Direct loans, FFEL loans and Federal Perkins loans.||Forgiven amount may be taxable — check with a tax professional.|
|Total and permanent disability discharge||People who become “totally and permanently disabled.”||Federal Direct loans, FFEL loans and Federal Perkins loans.||Forgiven amount is usually taxable.|
|Discharge due to death||People who die, and students whose deceased parents have taken out Federal Parent PLUS loans.||Federal Direct loans, FFEL loans, Federal Perkins loans and Federal PLUS loan (including those taken out by parents).||Forgiven amount is not taxable, unless a parent with a Federal Parent PLUS loan is claiming discharge for a deceased child.|
|False Certification of Student Eligibility or Unauthorized Payment Discharge||People whose school falsely certified their eligibility for loans (this also includes victims of identity theft).||Federal Direct loans or FFEL loans.||Forgiven amount may be taxable — check with a tax professional.|
|Unpaid Refund Discharge||Students who withdrew from school and whose schools did not issue a refund back to the lender.||Federal Direct loans or FFEL loans.||Forgiven amount may be taxable — check with a tax professional.|
|Borrower Defense to Repayment Discharge||Students whose schools “misled them or engaged in other misconduct.”||All Federal student loans.||Forgiven amount may be taxable — check with a tax professional.|
Part II: Loan forgiveness programs by profession
Teacher loan forgiveness
Teachers have a lot of options for student loan forgiveness. Aside from the Perkins Loan cancellation discussed above, you may be eligible for teacher loan forgiveness for your Federal Direct/Federal Stafford loans.
Unfortunately, this loan program won’t cancel the full remainder of your balance. After spending five years teaching full-time in a low-income school, most teachers will only have $5,000 of their remaining loan balance forgiven.
If you’re a math, science or special education teacher, the deal is sweetened: You’ll have up to $17,500 of your student loan balance forgiven.
Teacher loan forgiveness might not fully cancel out your loans, but you may have another option: public service loan forgiveness. As a teacher, you’re also eligible for this program.
Sadly, you can’t use the same period of service to qualify for both programs simultaneously. That means you’ll need to teach for five years in a low-income school to qualify for the teacher loan forgiveness program, and then restart the clock for another 10 years to qualify for PSLF (though for the latter, it doesn’t have to be at a low-income school).
You may also be eligible for other student loan forgiveness or assistance programs depending on where you live. To find out more, check out the American Federation of Teachers online loan forgiveness database.
Loan forgiveness for nurses
One of the most well-established student loan forgiveness programs for nurses is the NURSE Corps Loan Repayment Program. If you agree to work in a facility with a critical nurse shortage, you can have up to 85% of your student loan balance paid off for you after three years.
Even better, the program will pay your federal taxes automatically for you so you don’t have to worry about the dreaded student loan forgiveness tax bombs (although you may be on the hook for state taxes). To earn these student loan payments, you first need to apply and be accepted into the program.
There are also many state loan repayment programs for nurses. To see if your state has one, simply do a Google search for “your state + nurse student loan forgiveness.” Or check out the full guide to nurse loan forgiveness programs here.
Loan forgiveness for doctors
There are numerous state-specific student loan repayment plans for doctors. The Association of American Medical Colleges maintains an excellent database of federal and state-run programs. Here are some others to consider:
IHS: If you agree to work in an IHS (Indian Health Service) facility for at least two years, this agency will agree to pay $40,000 toward your student loans. You can also agree to extend your employment beyond the two-year mark to earn even more student loan repayments, with no maximum cap. In other words, you could have your entire student loan balance paid off with this program if you stick around long enough. Another nice benefit of this program is that the IHS will pay 20% of the income taxes that result from their payments (but you’re still on the hook for the other 80%, and any other income tax).
Military doctors: There are several military-specific programs for doctors and dentists in particular. The Navy’s Health Professions Loan Repayment Program will pay up to $40,000 per year (minus about 25% for taxes) toward your student loans if you agree to enlist in a certain skill shortage area. The Army offers a smattering of student loan repayment programs offering up to $250,000 for a wide range of doctor specialties and higher-level medical personnel.
National Health Service Corps: Doctors and dentists who haven’t yet completed their final year of school may be eligible for the National Health Service Corps Students to Service Loan Repayment Program. In exchange for agreeing to provide health care in an NHSC-approved facility in need for at least three years, the NHSC will pay off up to $120,000 of your federal and private student loans. Even better, the award is not considered taxable income.
Repayment assistance for other health professionals
In addition to doctors and nurses, many other licensed professionals such as social workers, counselors and midwives may be eligible for up to $50,000 in student loan forgiveness under the National Health Service Corps (NHSC) Loan Repayment Program.
To qualify, you need to submit an application to be accepted into the program and agree to work at least two years in an NHSC-approved medically underserved location. This program is also tax-free.
The NHSC also grants money to certain states to run their own health care student loan repayment program. To see if your state participates and how the program works, visit their website.
If you are involved in medical or veterinary research, you may also qualify for up to $35,000 per year in student loan forgiveness through the National Institute of Health (NIH) Loan Repayment Program. There are currently eight different repayment programs available (the details of which vary), and you will have to enroll in an LRAP in advance.
Loan forgiveness for lawyers
Student loan forgiveness programs for lawyers are equally piecemeal. One of the most popular programs is run by the Department of Justice for its employees.
If you’re able to commit to a three-year term and have at least $10,000 in federal student loan debt, you can apply to this program. Applications are only accepted once per year by a certain due date. Once accepted into the program, the DOJ will match your student loan payments of up $6,000 per year toward your student loans, for a maximum of $60,000. This is also considered taxable income, although the DOJ will withhold a part of the money to pay your extra income taxes for you.
If you’re a public defender or a state prosecutor, you may also be eligible for the John R. Justice Student Loan Repayment Program. If you agree to remain in your position for at least three years, this program will help you pay back $10,000 in federal student loans per year, up to a maximum of $60,000. This program is run through state agencies. To learn more, you can find your state’s agency here.
There are also numerous student loan assistance programs for lawyers run by state agencies. To find these programs, simply Google “your state + lawyer student loan assistance program.” Your school may also offer a loan repayment program, so check with your financial aid office to find out.
Military student loan forgiveness
In addition to the student loan forgiveness programs available to military members and veterans under other umbrellas (such as the Perkins Loan cancellation or PSLF), several branches of the military offer their own loan repayment programs (LRPs) as enlistment incentives.
Army: The Army offers LRPs for regular Army, Army Reserve, and Army National Guard soldiers. The details of these programs vary depending on your current job status, but in general, these programs all require a few common things to earn payment toward your federal loans. First, you need to get your LRP guaranteed in writing in your enlistment contract (very important!), decline G.I. Bill benefits, be a high school graduate with a minimum 50 score on your ASVAB test and agree to enlist in a critical military occupational specialty for a certain period of time. If you meet these qualifications, you could have up to 100% of your federal student loan balance forgiven.
Navy: If you’re drawn to a life at sea, the Navy offers a single LRP for incoming sailors. If eligible for this program, the Navy will pay up to $65,000 toward your student loans and your income tax liability. This program is currently only offered to sailors with certain eligibility ratings as they are going through the enrollment process.
Air Force: The Air Force also offers an LRP, but it’s much less comprehensive than the Army and the Navy’s LRP and only applies to those with a legal bent. You can apply for up to $65,000 in student loan repayment assistance by joining the Air Force’s JAG Corps. You become eligible for this award after serving for at least one year as a JAG officer.
Student loan forgiveness for volunteers
AmeriCorps volunteers are eligible for the Segal AmeriCorps Education Award after they’ve completed at least one term of service. The amount of the award is pegged to the value of the Federal Pell Grant each year (currently $6,095 for 2019), and volunteers can’t earn more than two full-time awards (even if they serve more than two full-time terms).
The forgiven amount is also considered taxable income, so plan accordingly.
Part III: Learn more
It can be tough to sort out the requirements for a student loan forgiveness program, assuming that you qualify for one. You may even have to commit to making a life-changing decision by accepting a job in a location you otherwise wouldn’t have chosen, or by taking a lower salary while in public service, for example.
Which student loan forgiveness program is right for you?
Making a decision based on these factors isn’t easy. You will have to do a lot of research and reading of the fine print to understand whether a particular student loan forgiveness program will work for you or not.
If you need help, look for a fee-only Certified Financial Planner who specializes in student loan forgiveness. Believe it or not, CFPs do not receive student loan training as part of the requirements to pass the CFP exam, so you should really interview several planners beforehand to test their knowledge.
Then there’s the uncertainty of whether these programs will even be around in the future, given the current political environment. Mark Kantrowitz, a nationally-recognized student loan expert, believes it’s very likely that the popular Public Service Loan Forgiveness program will eventually be phased out, for example.
But if you’re currently deciding whether or not to take a job based on being eligible for a federal student loan forgiveness program, take heart — applying now could get you in the door permanently.
“In general, when there is a change in federal law, existing borrowers tend to be grandfathered in,” said Kantrowitz. There are no promises, of course, but you may be a bit safer if you start a student loan forgiveness program now rather than waiting.
Pitfalls of student loan forgiveness
One of the biggest disadvantages of student loan forgiveness programs is that in many cases, the forgiven amount is considered taxable income. This means you could owe taxes on the forgiven amount just as if you’d been cut a check.
For example, if you have $25,000 worth of student loan debt forgiven and you’re in the 22% tax bracket (earning between $39,475 and $84,200 for a single person in 2019), that means you’ll get a whopping tax bill at the end of the year for $5,500.
“You’re substituting a tax debt for education debt,” said Kantrowitz, even if the tax debt is lower.
If you absolutely cannot pay the tax bill, however, Kantrowitz says all hope is not lost. “The IRS, in many cases, is actually quite reasonable. They realize that you can’t squeeze blood from a stone.”
You may be able to negotiate a lower lump-sum payment, or may even have the debt discharged if you’re financially insolvent (which the IRS defines as having a net worth of $0 or less).
Becoming financially insolvent as a way to escape your tax bill is never a good idea, so you need to plan ahead for the outrageous tax bill. Again, this is another good time to consult with a fee-only Certified Financial Planner.
Alternatives to student loan forgiveness
If you don’t qualify for one of these student loan forgiveness programs, there may be two last cards you can play.
1. Your employer
“About four percent of employers now offer student loan repayment assistance, or LRAP programs, for their employees,” said Kantrowitz. PricewaterhouseCoopers and Fidelity Investments have established programs, for example.
Finding a private-sector employer who offers an LRAP may be your best bet if you don’t qualify for forgiveness under another program.
2. Speed up your repayment
How? Simply make extra payments toward your student loans on your own.
This is especially important to consider when evaluating job offers. Let’s say one company pays less but offers an LRAP. The other company pays way more, but maybe doesn’t offer an LRAP. Tally up the value of the program: You very might well be able to get out of debt faster with the higher-earning job by making extra payments yourself, rather than relying on a potential employer’s LRAP.
Student loan forgiveness and repayment programs can help unshackle you from a mountain of debt. But you don’t have to wait for the ability or permission from someone else to start paying your loans off early yourself.
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