student loan forgiveness options
Posted : May 27, 2015
Last Updated : May 27, 2015
As the cost of college continues to rise, students are finding themselves in more and more student loan debt. Repaying that debt can be an overwhelming burden for many borrowers, but forgiveness programs may be available to help borrowers tackle their federal student loan debt.
Student loan forgiveness is a process in which all or part of a borrower's federal student loans can be canceled. In order to qualify for forgiveness programs, a borrower must meet very specific eligibility requirements. Here are the most common ways to obtain student loan forgiveness.
Student Loan Repayment Plans
Federal student loan borrowers may be able to have some of their loans forgiven if they choose certain repayment plans:
Pay As You Earn Repayment Plan (PAYE). This repayment plan is for borrowers facing a partial financial hardship. Monthly payments are based on income, family size, and state of residency, and are capped at 10 percent of discretionary income. If borrowers repay under the PAYE plan for 20 years and meet other requirements, any remaining balance will be forgiven.
Income-Based Repayment Plan (IBR). This repayment plan is for borrowers with a high debt-to-income ratio. It calculates monthly payments based on income and family size. If borrowers repay under the IBR plan for 25 years (or 20 years for new borrowers on or after July 1, 2014) and meet other requirements, any remaining balance will be forgiven.
Income-Contingent Repayment Plan (ICR). This repayment plan is also for borrowers with a high debt-to-income ratio and calculates monthly payments based on income and family size. If borrowers repay under the ICR plan for 25 years and meet other requirements, any remaining balance will be forgiven.
Note: Borrowers making payments under an income-driven repayment plan (listed above) and are seeking forgiveness under the Public Service Loan Forgiveness Program (discussed below) may qualify for forgiveness of any remaining loan balance after 10 years of qualifying payments, instead of 20 or 25 years.
Public Service Loan Forgiveness Program
People who work full-time public service jobs may be eligible for the Public Service Loan Forgiveness (PSLF) program. This program grants forgiveness of the remaining balance of a borrower's eligible loans after the borrower has made 120 qualifying payments on those loans. The borrower must be employed full time (in any position) by a public service organization or must be serving in a full-time AmeriCorps or Peace Corps position. Organizations that meet the definition of "public service organization" for purposes of the PSLF program are:
A government organization (including a federal, state, local, or tribal organization, agency, or entity; a public child or family service agency; or a tribal college or university).
A not-for-profit, tax-exempt organization under section 501(c)(3) of the Internal Revenue Code.
A private, not-for-profit organization (that is not a labor union or a partisan political organization) that provides one or more of the following public services – emergency management, military service, public safety, law enforcement, public interest law services, early childhood education, public service for individuals with disabilities and the elderly, public health, public education, public library services, school library or other school-based services.
For more specific information regarding the Public Service Loan Forgiveness program, check out studentaid.ed.gov.
In addition to the Public Service Loan Forgiveness program, several other loan forgiveness or loan repayment programs exist that are restricted to borrowers who are pursuing particular occupations. Many of these occupations are also eligible for public service loan forgiveness:
Special programs for getting out of student debt are available to military personnel. In addition to the PSLF program, military personnel may qualify for the military's loan repayment programs. While qualifications and benefits vary among the different branches, these programs may offer service members up to $65,000 in debt forgiveness. For more information on these programs, visit military.com.
Health Care Service
Several options for student loan forgiveness are available for those in health care services. The U.S. Department of Health and Human Services offers loan forgiveness programs to encourage health professionals to work in health care shortage areas:
National Health Service Corps Loan Repayment Program. In exchange for a two-year commitment to work in a shortage area, primary care physicians, dentists, and behavioral/mental health professionals may receive up to $50,000 to repay their qualified student loans.
Nurse Corps Loan Repayment Program. In exchange for a two-year commitment to work in a shortage area, registered nurses, nurse practitioners, and other advanced practice nurses may receive loan repayment assistance for up to 60 percent of the original balance on their qualified student loans.
The National Institute of Food and Agriculture at the U.S. Department of Agriculture offers:
Veterinary Medicine Loan Repayment Program. In exchange for a three-year commitment to serve in veterinary shortage areas, veterinarians may receive up to $75,000 in loan repayment assistance for qualified student loans.
Two types of loan forgiveness programs are available for teachers:
Teacher Loan Forgiveness. Teachers who work full-time for five complete and consecutive academic years in certain elementary or secondary schools or educational service agencies that serve low-income families and meet other qualifications may be eligible for forgiveness of up to a combined total of $17,500 on Direct Subsidized and Unsubsidized loans and Subsidized and Unsubsidized Federal Stafford loans.
Teacher Cancellation. Borrowers from the Federal Perkins Loan Program may be eligible for loan cancellation for full-time teaching at a low-income school or for teaching in certain subject areas.
For more specific information about loan forgiveness programs for teachers, visit studentaid.ed.gov.
Many programs exist that help borrowers pay off student loans in return for volunteer work. The most common volunteer organizations that offer this option are:
AmeriCorps. The Segal AmeriCorps Education Award is a post-service benefit received by participants who complete a term of national service in an approved AmeriCorps program. It may be used to pay educational costs at eligible post-secondary educational institutions and repay qualified student loans. Because the dollar amount of a full-time award is tied to the maximum amount of the U.S. Department of Education's Pell Grant, the award amount can vary from year to year.
Peace Corps. Peace Corps volunteers may receive a Segal national education award for each year of volunteer service or partial cancellation of their Federal Perkins loans.
Due to the extent of this article, these are only some of the options available for student loan forgiveness. For more information, be sure to review the forgiveness, cancellation, and discharge summary charts for the Direct Loan and FFEL Program and for the Federal Perkins Loan Program. In addition, many schools and states may offer their own forgiveness programs so be sure to check with your school or your state's student loan authority department for additional information.