How Does Student Loan Forgiveness Work?

Student loan forgiveness means that your debt is forgiven or removed. The federal government offers various programs that allow borrowers with eligible federal loans to earn forgiveness through specific employment or income-driven repayment plans. 

You no longer owe the debt once you complete the process—which usually takes five to 25 years. You might have to make payments while you earn forgiveness, but the remaining balance, or at least part, is forgiven afterward. 

The federal government has forgiven over $116 billion in federal student loans in the past few years. More than 3 million borrowers or soon-to-be are eligible for student loan forgiveness. Here’s how to use student loan forgiveness programs and determine eligibility. 

How does student loan forgiveness work?

There are two ways to earn student loan forgiveness: qualify for an income-driven repayment plan or work an eligible job. The programs are through the federal government, and because of that, only federal student loans are eligible for forgiveness. Private loans do not qualify.

Here’s a breakdown of the different options and the amount forgiven. We’ll discuss the eligibility details for each below.

Program	Amount forgiven
Teacher Loan Forgiveness	Up to $17,500
Public Service Loan Forgiveness (PSLF)	Remaining balance after 120 qualified monthly payments
Total and Permanent Disability Discharge	Your entire loan balance
Income-Driven Repayment Plan	Remaining balance after making required payments

Teacher Loan Forgiveness

Who’s eligible? Full-time teachers for five consecutive academic years in a low-income K-12 school or agency

Amount forgiven: Up to $17,500

How long does it take? 5 years 

Which loans qualify? Direct Loan or Federal Family Education Loan (FFEL) Program loan

How to apply: Apply for Teacher Loan Forgiveness after completing five consecutive years of teaching at a low-income school. Once you finish the years of teaching, submit the Teacher Loan Forgiveness Application to your loan servicer. 

Public Service Loan Forgiveness

Who’s eligible? Employees of federal, state, local, or tribal government, or qualifying not-for-profit organization

Amount forgiven: Remaining balance after making required payments

How long does it take? 120 qualified monthly payments

Which loans qualify? Direct Loan 

How to apply: You must submit the PSLF Certification and Application form each year you work toward Public Service Loan Forgiveness. After you complete 120 qualifying payments, submit the form for a final time to earn forgiveness. There are also loan forgiveness options for military members. 

Total and Permanent Disability Discharge

Who’s eligible? Totally and permanently disabled borrowers

Amount forgiven: Your entire loan balance

How long does it take? A few weeks or months for approval and  three-year post-discharge monitoring period

Which loans qualify? Direct Loan, Federal Family Education Loan (FFEL) Program loan, or Perkins Loan

How to apply: Send the Discharge Application to the Department of Education once complete. You must include documentation from the U.S. Department of Veterans Affairs, the Social Security Administration or a medical professional.  

Income-Driven Repayment Plan (IDR)

Who’s eligible? You must meet income requirements based on family size

Amount forgiven: Remaining balance after making required payments

How long does it take? 20 – 25 years

Which loans qualify? Direct loans, Direct PLUS Loans for graduate students, some Direct Consolidation Loans, some consolidated Parent PLUS loans, some FFEL loans

How to apply: There are four IDR plans, including Saving on a Valuable Education (SAVE), Pay as You Earn (PAYE), Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR). The good news is that there is one application regardless of the plan you want. You can use the loan estimator to determine which plan is the best fit. You can earn forgiveness once you enroll in a plan and make the necessary payments over multiple years. 

Ask the expert

Kyle Ryan

CFP®

To decide which forgiveness option is right for you, review the pros and cons of each option. How much is your loan starting balance, and what are the required minimum payments for each type of repayment plan? If you have a massive loan and a high income, and qualify for Public Service Loan Forgiveness (PSLF), that may be the best option. If you can’t afford to make qualifying payments for PSLF forgiveness, maybe IDR is the way to go.

Can you get private student loans forgiven?

Private student loans are not eligible for forgiveness, including federal loans you consolidated into private loans. The federal government manages the forgiveness programs and has the sole authority to forgive federal loan balances. If you have a private loan, contact your loan servicer about options for deferment. 

Even though private loan providers do not provide the same options for forgiveness, you might be able to pause payments for some time. Private students are also eligible for discharge through bankruptcy, which might be an option if they cannot repay the debt. 

Bankruptcy is often an intense process with a long-term impact on your credit score, so it’s important to talk with a financial professional or not-for-profit debt management company.

Tip

You might have federal or private student loans or a combination. If you’re unsure what type of loan you have, start by looking at your credit report. Private student loans will appear there, and it’s typically the quickest way to figure out which company services your loan. You can view your credit report for free at AnnualCreditReport.com. 

Am I eligible for student loan forgiveness? 

As you determine whether student loan forgiveness is the right option for you, consider the following questions. Different ways to qualify for student loan forgiveness exist, including state-specific programs. Not every option will apply, but some will.

Do you have federal student loans?

Federal student loans are the only ones eligible for forgiveness, and only some types of federal loans qualify for specific programs. Log in to your StudentAid.gov account to review the kind of loans you have. Make a list of your loans, and then check if the forgiveness programs include the loans you have. 

For example, some forgiveness programs exclude Parent PLUS loans or require you to consolidate the loan first. Ensure you understand the program’s eligibility criteria and how it impacts your taxes. 

Do you have eligible employment? 

Public Service Loan Forgiveness (PSLF) through qualified employment is one of the most common ways to earn student loan forgiveness. You must work at an eligible job for a specific time, usually between five and ten years. 

Confirm with your federal loan servicer that your employer qualifies. If it does, submit the paperwork and application as instructed. For example, you must submit paperwork for PSLF annually or whenever you switch jobs. 

But you only need to provide Teacher Loan Forgiveness paperwork after completing five years of eligible employment. 

Can you qualify for an income-driven repayment plan?

Income-driven repayment plans are another popular way to earn student loan forgiveness. You must qualify for the program based on your income and family size. 

If you don’t qualify, you are not eligible for forgiveness. You can apply for the program or call the Federal Student Aid Information Center at 1-800-433-3243 to check eligibility.

Do you understand how the application works? 

The type of loan forgiveness you want will determine which application to complete. It’s essential to follow the directions, submit necessary documentation, and ask questions if you need help. 

If you don’t, you will not qualify for forgiveness, which can disrupt your finances if you were banking on it. The U.S. The Department of Education manages all forgiveness programs, and you can find your loan servicer on the site. 

Do you have a permanent disability? 

You might be able to qualify for Total and Permanent Disability Discharge if you have a disability. But you must provide documentation from the U.S. Department of Veterans Affairs, the Social Security Administration, or a medical professional. 

If you do not have documentation, you must get it before you apply. Without documentation, the U.S. The Department of Education will deny your application. 

Are you willing to wait for five to 25 years? 

Nearly all forgiveness programs take time, usually between five and 25 years. It’s a substantial time commitment, and you must be comfortable waiting. If you want to get rid of your debt faster, a forgiveness program might not be the best fit. 

Consult a financial advisor with experience working with loan forgiveness or an expert in student loan lending. Going on your own may cost you thousands of dollars in interest if incorrect decisions are made.

Kyle Ryan

CFP®

What happens if my application for loan forgiveness is denied? 

You must repay the loan according to the terms of your original agreement if your application for loan forgiveness is denied. Continue paying the loan to ensure your account stays in good standing. While you make payments, you request an additional review of your application. 

If your loan is currently in default, that might be the reason for the rejection. If that’s the case, make payments to get your loan out of default and review your options for getting help. 

Ask the expert

Kyle Ryan

CFP®

If you are denied student loan forgiveness but are struggling to make payments, it may be worthwhile to explore income-driven repayment options. If that number is too high, you may need to consider cutting down on other expenses.

FAQ 

If I refinanced my federal student loans with a private lender, can I still get student loan forgiveness?

No; once you refinance your federal student loans with a private lender, it becomes a private loan. Therefore, it won’t qualify for federal loan forgiveness programs. Before making decisions, consider the benefits you could lose. Always weigh the pros and cons of refinancing.

Does student loan forgiveness affect your credit score?

Student loan forgiveness does not have a direct effect on your credit score. Credit scores are affected by your payment history and credit utilization. Even if your loans are forgiven, the history of payments remains on the credit report. Making your loan payments on time is vital.

Are forgiven loans considered taxable income?

Yes, in most cases. When your student loans are forgiven, the IRS often considers it taxable income. This means you may have to pay income taxes on the forgiven amount. 

However, exceptions include the Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness programs. Both are tax-free.

Can I qualify for loan forgiveness if I’m on an income-driven repayment plan?

Yes. Enrolling in an income-driven repayment plan is one way to qualify for student loan forgiveness. Such plans cap your monthly loan payments at a certain percentage of your income. 

Any remaining loan balance may be forgiven after making these income-driven repayments for a specified period (often 20 to 25 years). Rules might vary, so review the details of your specific repayment plan.