Student Loan Forgiveness Programs

If you have significant student loan debt, you may be overwhelmed and looking for resources to help you pay it off. Depending on your situation, you might qualify for student loan forgiveness to reduce your financial burden and improve your finances.  

Let’s take a closer look at student loan forgiveness programs and how they work so you can determine whether they’re worth pursuing. 

How does student loan forgiveness work? 

While finding student loan forgiveness for private loans can be difficult, many federal student loan forgiveness programs are available. If you took out federal student loans, you may qualify based on where you work and the type of loans you took out.

As you explore federal student loan forgiveness programs, you’ll notice that each one has unique criteria. Public Service Loan Forgiveness, for example, is designed for borrowers who work in public service jobs. If you work full-time for a nonprofit or government employer and meet other requirements, your loans could be forgiven tax-free. 

The Perkins Loan Forgiveness program is another federal program that can offer ongoing forgiveness for every year you work in a qualifying public service position. 

In addition to federal student loan forgiveness options, you may find state-based programs geared toward borrowers in certain states. Most require you to work in a specific career, typically in the public sector. Private employers may also offer profession-specific forgiveness programs to attract quality employees. 

What are the types of student loan forgiveness? 

Here’s an overview of the three main types of student loan forgiveness options.

Type of forgiveness	What to know
Federal	Most readily available and widely used; can eliminate some or all of your federal student loan debt as long as you meet certain criteria, which vary by program
State	Assist residents who borrowed money for their higher education and work in a qualifying profession; aka loan repayment assistance programs (LRAPs); usually provide funds to pay off student loan debt
Profession-specific	Help those who have chosen a specific career, such as teaching, nursing, healthcare, pharmacy, or law; typically distributed by employers and may motivate you to work for a certain company or organization

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Can Parent Student Loans Be Forgiven?

Student loan forgiveness programs 

As we mentioned, federal student loan forgiveness programs are more common than other forgiveness options. Let’s examine four of them:

• Public Service Loan Forgiveness (PSLF)
• Student loan forgiveness from an income-driven repayment (IDR) plan
• Teacher Loan Forgiveness (TLF)
• Perkins Loan Forgiveness

PSLF

Introduced as part of the College Cost Reduction and Access Act of 2007, PSLF is for borrowers who work in public service for a federal, state, or tribal government or a nonprofit organization. If you qualify, you may be able to get a portion of your student loan debt forgiven.

How to qualify:

To take advantage of PSLF, you must work full-time for a qualifying organization and make 120 on-time loan payments under an approved repayment plan. PSLF is only an option if you have federal direct loans, including Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans. The Federal Student Aid employer eligibility tool can tell you whether you work for an eligible employer.

Student loan forgiveness from an IDR plan

IDR plans are administered by the U.S. Department of Education and base your student loan payments on your income. An IDR plan can lower your monthly loan payments and even result in a $0 monthly payment amount. In addition, your remaining balance may be forgiven after you make qualifying payments for 20 or 25 years.

How to qualify:

Here’s an overview of the four IDR programs and their terms. 

IDR plan	Payments & term
Pay As You Earn (PAYE)	10% of discretionary income for 20 years
Saving on a Valuable Education (SAVE)	10% of discretionary income for 20 (undergrad) – 25 years (grad or professional loans)
Income-Based Repayment (IBR)	10% of discretionary income for loans taken out on or after July 1, 2014, for 20 years; 15% of discretionary income for loans taken out before July 1, 2014, for 25 years
Income-Contingent Repayment (ICR)	20% of discretionary income or the amount you’d pay on a fixed 12-year repayment plan for up to 25 years

TLF

The TLF program is a government-sponsored program that offers up to $17,500 in student loan forgiveness. You might be a candidate if you work at an eligible school or agency for low-income students. 

How to qualify:

To reap the benefits of TLF, you must have federal Direct Subsidized or Direct Unsubsidized Loans and teach full-time for five consecutive years at an eligible elementary school, secondary school, or educational service organization that serves low-income students. Minimum education requirements include a bachelor’s degree and a full state teacher certification. You can go to the Federal Student Aid Teacher Cancellation Low Income Directory to find out whether your workplace qualifies. 

Perkins Loan Forgiveness

Although Perkins loans are no longer issued, you may be eligible for forgiveness if you work in public service and took them out to cover your education. Depending on your position, you could get up to 100% of your loans forgiven within a five-year period.

How to qualify:

Perkins Loan Forgiveness can help you out if you have federal Perkins loans and a qualifying profession, such as teaching, nursing, or speech pathology. While eligibility criteria vary by profession, you’ll likely need to work in a low-income or high-need community. If you’re interested in this program, contact the college or university that issued your loans for the next steps.

Are there downsides to student loan forgiveness? 

Before you apply for a student loan forgiveness program, it’s important to consider the downsides, including:

• Rigorous eligibility requirements: In most cases, you’ll need to meet certain requirements to qualify for student loan forgiveness. Depending on the program, this may mean you must have a certain profession and employment status. Also, not all types of loans are eligible for every program.
• Most student loan forgiveness programs only apply to federal student loans. This means finding relevant forgiveness options may be more challenging if you only have private student loans or a combination.
• Changing criteria and programs: It’s not uncommon for student loan forgiveness programs to change due to new government policies and regulations. Some programs may also be eliminated in time. 
• Minimal job mobility: Since student loan forgiveness is often reserved for borrowers who work in the public sector, you may miss out on more lucrative positions in the private sector. You might also feel obligated to stay in a career you don’t enjoy.
• Tax ramifications: PSLF is an exception, but student loan forgiveness could increase your tax bill. The IRS will often consider your forgiven balance as taxable income. 

Our expert’s advice

Eric Kirste

CFP®

A common pitfall is that borrowers who refinance their federal student loans through a private loan program risk forever walking away from the programs and benefits associated with the federal loan system, including federal student loan forgiveness programs. You can’t convert private student loans back into federal loans. To be eligible for student loan forgiveness credit under PSLF, borrowers and their employers must complete an employment certification form (ECF) each year. Your ECF could be rejected if you make mistakes. To remain eligible for income-driven payments, you must recertify each year. If you don’t recertify in time, your interest will accrue, and your loan payment will increase. You shouldn’t miss loan payments at all, but it’s especially important if you’re working toward PSLF. Your payment won’t qualify if it’s more than 15 days late. Also, you must make full payments. Don’t split them up, or they won’t count.

Is student loan forgiveness right for you? 

Student loan forgiveness is not right for every borrower. However, if any of these scenarios apply to you, it’s worth exploring and pursuing. 

• You took out federal student loans: If all or most of your loans came from the federal government, you should consider student loan forgiveness. Most of the programs are geared toward federal loan borrowers, so you’ll have more opportunities than someone with private student loans.
• Your debt is high relative to your income: A forgiveness program such as income-driven repayment can make the debt payoff process more manageable. It will modify your monthly payments based on your income. There’s also a chance your remaining balance will be forgiven after a set number of payments. 
• You qualify for PSLF: Because PSLF is one of the most generous student loan forgiveness options, take advantage of it if you’re eligible. Your loans might be forgiven in just 10 years.
• You work in the public sector: If you have a career in the public sector as a teacher, lawyer, volunteer, or healthcare worker, for example, you’re more likely to get approved for a forgiveness program. Student loan forgiveness could save you thousands of dollars in repayment.
• You know you’ll save money: Contrary to popular belief, a student loan forgiveness program won’t always save you money. If you enroll in an IDR plan, your lower payments may cost you more in the long run. This might be true even if your debt is forgiven after a certain number of payments. Do the math to make sure forgiveness makes financial sense. 
• You believe your income will stay the same: If you think your income will grow significantly, a student loan forgiveness program, such as IDR or PAYE, might lead to higher payments than you’d be required to make with the standard 10-year repayment plan. 
• You’d like to pursue a career at a nonprofit organization: Many forgiveness options are tailored toward nonprofit employees. It can be wise to seek forgiveness if you have or hope to land a job at a nonprofit, such as the Peace Corps. 
• Your employer offers forgiveness: You might pursue a career at a company with a student loan forgiveness program. In this case, consider leveraging it to improve your financial situation.