Student loans forgiveness is a process that eradicates or diminishes the outstanding debt that students owe for their educational expenses. Often initiated by governments or in some cases, private lenders, this form of financial relief can be total or partial. The recipients of this relief are typically required to meet certain criteria, which can include working in specific industries, fulfilling a set period of service, or making a minimum number of payments. However, the topic of student loans forgiveness is a subject of ongoing political debate, particularly in the United States, with arguments about the level of relief provided and its economic implications.
In the United States, there are several federal student loans forgiveness programs, including:
- Public Service Loan Forgiveness (PSLF): This program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer, typically a government or not-for-profit organization.
- Teacher Loan Forgiveness: This program is for teachers who have been employed as a full-time teacher for five consecutive, complete academic years in certain elementary and secondary schools and educational service agencies that serve low-income families.
- Income-Driven Repayment Forgiveness: Under these plans, the remaining loan balance is forgiven after a certain period (typically 20-25 years), depending on the specific plan. The payment amounts are set based on the borrower’s income and family size.
- Military Service-Related Forgiveness: Various branches of the military offer student loan forgiveness programs.
- Perkins Loan Cancellation: For individuals who perform certain types of public service or certain types of occupations such as a teacher, a member of the armed forces, a nurse, or a medical technician.
The Public Service Loan Forgiveness (PSLF) program in the United States is a significant student loans forgiveness initiative designed to forgive the remaining balance on Direct Federal Loans after the borrower has made 120 qualifying monthly payments. This forgiveness is granted while the borrower is working full-time for a qualifying employer.
Qualifying employers generally include:
- Government organizations at any level (federal, state, local, or tribal)
- Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
- Other types of not-for-profit organizations that provide certain types of qualifying public services
Under the PSLF program, the borrower must be employed full-time by a qualifying employer when they apply for and receive loan forgiveness. Full-time is defined as working an average of at least 30 hours per week, or meeting your employer’s definition of full-time, whichever is greater.
The 120 qualifying payments must be made under a qualifying repayment plan. Generally, these are income-driven repayment plans, which set your monthly payment amount based on your income and family size. These payments do not need to be consecutive, but they must be made after October 1, 2007.
It’s also important to note that payments made while the loans are in deferment or forbearance periods do not count towards the 120 qualifying payments. In addition, loans that are in default, meaning payments have not been made for a certain period, are not eligible for PSLF.
One of the key benefits of the PSLF program is that the forgiven amount is not considered taxable income, unlike some other loan forgiveness programs.
However, applying for PSLF could be somewhat complex. It involves steps such as certifying employment, choosing the correct repayment plan, and submitting the PSLF application. Furthermore, acceptance rates for the program had historically been quite low, due to various factors including a lack of awareness, misunderstanding of the program’s requirements, and administrative challenges.
It is always recommended for individuals considering PSLF to consult with the U.S. Department of Education or a financial advisor to fully understand the requirements and process, and to ensure they are on track towards loan forgiveness.
The Teacher Loan Forgiveness Program in the United States is designed to encourage individuals to enter and continue in the teaching profession by forgiving a portion of their student loan debt.
Under this program, if you teach full-time for five complete and consecutive academic years in a low-income school or educational service agency, and meet other qualifications, you may be eligible for forgiveness of up to $17,500 on your Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Loans.
The eligibility requirements for the Teacher Loan Forgiveness Program are as follows:
- Loans: Only Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans are eligible for this program. If you have PLUS loans or loans from the Federal Perkins Loan Program, you are not eligible for this type of forgiveness. In addition, the loans must have been made before the end of your five academic years of qualifying teaching service.
- Teaching Service: You must have been employed as a full-time teacher for five complete and consecutive academic years, and at least one of those years must have been after the 1997–98 academic year.
- Low-Income School or Educational Service Agency: The school or educational service agency where you were employed must be listed in the Teacher Cancellation Low Income (TCLI) Directory for the years you taught there.
- Highly Qualified Teacher: You must be a highly qualified teacher, which is defined as having at least a bachelor’s degree and having full state certification. You should not have had certification or licensure requirements waived on an emergency, temporary, or provisional basis.
- Subject Area: To receive up to $17,500 in forgiveness, you should have been employed as a highly qualified mathematics or science teacher in an eligible secondary school, or as a highly qualified special education teacher. Other eligible teachers can receive up to $5,000 in loan forgiveness.
It’s important to note that if you qualify for both the Teacher Loan Forgiveness Program and the Public Service Loan Forgiveness (PSLF) Program, the five years of teaching that makes you eligible for the Teacher Loan Forgiveness cannot be counted towards PSLF.
Applying for Teacher Loan Forgiveness involves submitting a completed Teacher Loan Forgiveness Application to your loan servicer after you’ve completed the required five consecutive years of qualifying teaching.
Income-Driven Repayment (IDR) plans are a collection of federal student loan repayment programs in the United States that adjust your monthly loan payment based on your income and family size. There are four main types of IDR plans: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR).
One of the major benefits of these plans is that they provide for loan forgiveness after a certain period of time. The length of this period depends on the specific plan and potentially other factors, such as when you took out your loans:
- Income-Based Repayment (IBR): For those who borrowed on or after July 1, 2014, the remaining loan balance is forgiven after 20 years of qualifying payments. For those who borrowed before July 1, 2014, forgiveness occurs after 25 years.
- Pay As You Earn (PAYE): The remaining balance is forgiven after 20 years of qualifying payments.
- Revised Pay As You Earn (REPAYE): For undergraduate loans, the remaining balance is forgiven after 20 years of qualifying payments. For graduate or professional loans, forgiveness occurs after 25 years.
- Income-Contingent Repayment (ICR): The remaining balance is forgiven after 25 years of qualifying payments.
To qualify for an IDR plan, you need to recertify your income and family size annually, even if they haven’t changed. If you don’t recertify on time, your payments could increase significantly, and unpaid interest could be capitalized, or added to your principal balance.
Another important consideration is that, under current law as of my last update in September 2021, the amount forgiven under an IDR plan is considered taxable income. This means that you could face a significant tax bill in the year your remaining balance is forgiven.
It’s also important to note that not all loans are eligible for all IDR plans. For example, only Direct Loans are eligible for the PAYE and REPAYE plans, while the IBR and ICR plans are also open to FFEL Program loans and, in the case of ICR, Direct PLUS Loans made to parents.
As always, for the most accurate and current information, please consult the U.S. Department of Education’s official resources or a financial advisor.
The United States offers various student loans forgiveness programs for its military service members. These programs are designed to relieve the burden of student loan debt for those who have served in the U.S. armed forces. Here are some key programs:
- Servicemembers Civil Relief Act (SCRA) Interest Rate Cap: While not a forgiveness program per se, the SCRA caps the interest rate at 6% for student loans taken out prior to military service for all active-duty military members. This relief applies to both federal and private loans.
- Military Service Loan Forgiveness under PSLF: The Public Service Loan Forgiveness (PSLF) program forgives the remaining balance on Direct Loans after the borrower has made 120 qualifying monthly payments while working full-time for a qualifying employer. Full-time active duty military service qualifies for PSLF.
- National Defense Student Loan Discharge (NDSLD): If you served in an area of hostilities or an area of imminent danger that qualifies for special pay, you may be eligible for the discharge of up to 50% of your Perkins Loans for service prior to August 14, 2008, and up to 100% for service on or after that date.
- Veterans Total and Permanent Disability (TPD) Discharge: Veterans who have been determined by the Department of Veterans Affairs (VA) to be unemployable due to a service-connected disability are eligible for this discharge. It provides forgiveness for all outstanding balances on federal student loans.
- Loan Repayment Programs by Specific Branches: Individual branches of the military (like Army, Navy, Air Force, National Guard, etc.) often have their own student loan repayment assistance programs. These programs typically provide a certain dollar amount of repayment assistance for each year of service.
It’s important to note that each of these programs has specific requirements and processes for obtaining loan forgiveness or other benefits. It’s also important to note that the forgiveness might be considered taxable income, depending on the specific program.
The Federal Perkins Loan Program was a school-based loan program for undergraduates and graduate students with exceptional financial need. Although this program was discontinued in 2017 and no new loans have been disbursed since then, many borrowers are still repaying Perkins Loans.
One key feature of the Perkins Loan Program was the possibility of loan cancellation for borrowers who work in certain occupations or meet other criteria. This cancellation effectively forgives the loan, reducing the borrower’s debt. Depending on the borrower’s job or circumstances, a certain percentage of the loan could be cancelled for each year of service.
Here are some of the key categories of Perkins Loan cancellations:
- Teachers: Borrowers who teach full-time in a public or nonprofit elementary or secondary school serving students from low-income families, special education teachers, and teachers in the fields of mathematics, science, foreign languages, or bilingual education may qualify for cancellation of up to 100% of a Perkins Loan.
- Public Service: Borrowers who serve full-time in public or non-profit child or family services agencies, or in public or non-profit law enforcement or corrections agencies may qualify for cancellation of up to 100% of a Perkins Loan.
- Healthcare Providers: Nurses, medical technicians, and some other healthcare providers may qualify for cancellation of up to 100% of a Perkins Loan.
- Military Service: Members of the U.S. armed forces serving in an area of hostilities may qualify for cancellation of up to 100% of a Perkins Loan.
- Volunteer Service: Peace Corps or AmeriCorps VISTA volunteers may also qualify for cancellation of up to 70% of a Perkins Loan.
- Bankruptcy or Total and Permanent Disability: In certain cases, borrowers may have their Perkins Loan cancelled due to bankruptcy or total and permanent disability.
It’s important to note that the specifics of Perkins Loan cancellation can depend on when the loan was issued, the borrower’s specific job or circumstance, and other factors. Also, the cancellation usually occurs over a period of years, with a certain percentage of the loan cancelled for each year of service in the qualifying job or circumstance.
Furthermore, borrowers must apply for Perkins Loan cancellation through the school that made the loan or the school’s loan servicer. If the application is approved, the borrower may also receive a refund of some or all payments made on the loan, depending on the type of cancellation.