Understanding Student Loan Forgiveness Programs
December 18, 2019
Various programs allow students to eliminate or pause their federal or private student loan payments. Find out who's eligible to get help reducing their debt.
According to U.S. News & World Report data, the average amount of student debt in the United States in 2013 was $27,670.
With numbers as high as this — and with the cost of higher education climbing — many graduates are looking to reduce the burden of their student debt. Luckily, there are some avenues that allow them to do so.
What Is Debt Forgiveness?
Debt forgiveness programs are initiatives offered by the government and by nonprofits to help graduates reduce their debt. According to the U.S. Department of Education, if a loan is forgiven, then a student is no longer expected to repay all or part of the principal or interest of the debt. Debt forgiveness is sometimes called cancellation or discharge.
Some programs won’t forgive, or eliminate, a loan; however, they may allow students to defer their loans, or to go into what’s known as forbearance. The U.S. Department of Education defines deferment as postponement of a loan payment without interest accruing, and forbearance as postponement or reduction of a loan’s principal while interest continues accruing.
Who Is Eligible for Forgiveness, and Where Is Forgiveness Offered?
Working for the public sector or volunteering for a government-backed nonprofit provides a student’s best chance of having her debt reduced. The the Public Service Loan Forgiveness (PSLF) program, Teacher Loan Forgiveness Program, and, for students who work for the federal government, the Student Loan Repayment Program all enable graduates to quell some of their debt. The government also rewards volunteers in AmeriCorps, Volunteers in Service to America (VISTA), and the Peace Corps with education stipends and the potential to have Student Loan Repayment Program (SLRP) loans forgiven.
Students pursuing a career in law or in medicine also have opportunities to cut their debt. The American Bar Association (ABA), the U.S. National Institutes of Health (NIH), the U.S. Department of Health and Human Services, the American Association of Medical Colleges (AAMC), and the U.S. Department of Agriculture all have loan repayment programs with their own terms and conditions.
What About Private Loans?
Currently, there are no loan forgiveness programs for private loans. That said, there are avenues by which private loan payments can be reduced. The Income-Based Repayment (IBR) Plan, the Pay As You Earn (PAYE) Repayment Plan, and the Income-Contingent Repayment (ICR) Plan all offer opportunities for graduates to pay back their loans in increments based on your discretionary income, as well as the type and date of the loans taken. The downside to this type of repayment plan is that you may end up paying more in interest over time, since the repayment period ends up being prolonged.
Interested in one of these programs? Use the Department of Education's online calculator to figure out how much you would pay.
How Do I Qualify, and How do I Apply?
Every loan forgiveness program has its own terms, limitations, and application process — and these can sometimes be tricky. For instance, eligibility for the Teacher Loan Forgiveness Program is limited to teachers who are new borrowers (i.e., those who did not have a previous outstanding balance) and who have had a full-time position at a low-income school for at least five consecutive years. The U.S. Department of Education releases a list of low-income schools each year. Even if a student meets these requirements, the loans must be Direct Subsidized and Unsubsidized Loans, Subsidized and Unsubsidized Federal Stafford Loans, or Perkins Loans. PLUS loans are ineligible for forgiveness.
The application process, too, varies depending on the forgiveness program — and this can also be time-consuming. For instance, graduates who are interested in the Public Service Loan Forgiveness (PSLF) Program need to follow a seven-step process to keep track of their eligibility. Graduates on the path to becoming veterinarians who are seeking loan forgiveness through the Veterinary Medicine Loan Repayment Program need to fill out eight forms to apply.
Where Can I Find More Information?
While there are many avenues for reducing student debt, the process can be daunting and overwhelming. Check out the individual websites of each program, and carefully read the terms to see if you qualify. For more information, visit the following websites:
American Bar Association — Loan Repayment Assistance Programs
U.S. Department of Agriculture — Veterinary Medicine Loan Repayment Program (VMLRP)
U.S. Department of Health and Human Services — Nurse Corps Loan Repayment Program
U.S. National Institutes of Health (NIH) — Loan Repayment Programs
Forgiveness, Cancellation, Discharge. Retrieved from U.S. Department of Education
Student Loan Repayment Program. Retrieved from the National Guard