For many, student loans are a necessary element of receiving a college education. As of 2020, there was a reported $1.57 trillion owed to the government in outstanding student loans, with over 50 % of college students taking on student debt to complete their education. With these intimidating statistics in play, it’s no wonder why many are turning to loan forgiveness programs to find some relief in their repayment process. Due to COVID-19, the CARES ACT has caused student loan payments to cease occurring interest and require payment until September 2020. While this is a welcomed break for many, there is still valuable insight to be gained in learning about student loan debt forgiveness programs.
In this article, we will explore the nature of these student loan forgiveness programs, as well as the value in understanding your options as someone who may benefit from these lucrative programs. From eligibility factors to the nature of the application process, you’ll have a confident working knowledge of student loan forgiveness programs and if they may be an option for you.
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What is Student Loan Forgiveness?
Student loan debt forgiveness is the process of releasing a former student of partial or full financial obligation for the financial debt gained during their education. Student loans are notorious for incurring interest over time, which is why student loan debt forgiveness programs have become increasingly popular over time. While these programs have only increased in their demand, the requirements to become eligible for these student debt forgiveness programs are specific enough to lead to many former students not being able to reap their benefits.
Each forgiveness program will have unique eligibility requirements, and many require a certain level of time dedicated to public service. It’s also worth noting that private loans are not eligible for student loan forgiveness and that only federal loans are considered fair game for these programs. This is why an option that tends to be more easily pursued than student loan forgiveness programs is repayment plans that allow individuals to become eligible for partial forgiveness of their debt. These are income-based payment plans that allow former students to pay off their debt over a long period.
If you’re at all aware of the Student Loan Forgiveness Act, it’s important to understand that this was an appealing congressional bill proposed by the Obama administration in 2012 that unfortunately did not pass. While never leaving the committee floor, this was a government-sanctioned student loan forgiveness program that offered capped interest rates, forgiveness after ten years of payment, and government employees receiving forgiveness in five rather than ten. The Biden administration has recently rolled out numerous proposals for student loan forgiveness programs that can not only provide relief for those who have acquired student debt but also allow education to become more financially accessible overall.
How Does Student Loan Debt Forgiveness Work?
Student loan debt forgiveness can work in numerous ways depending on how the debt is forgiven. Student loan debt forgiveness is typically achieved in two common ways: with occupational relief or with a student loan forgiveness program. For example, many of those who become teachers, nurses, and lawyers may become eligible for loan relief with enough years within the field. On the other hand, student loan forgiveness programs are also common for those who are looking for ways to relieve their public student loans.
Student Loan Forgiveness Options
While there are numerous methods of going about attaining student loan forgiveness, there are also different options for how this relief can work and which student loan forgiveness programs make the most sense for a graduate’s circumstances. These programs will typically feature the option of forgiveness, cancellation, and discharge. While these have many similarities, some key differences are important to understand.
Forgiveness
Student loan forgiveness is the process of relieving someone or their student loan debt, whether partially, completely, or slowly over time. This can occur by entering an occupation that offers forgiveness after a duration of time or with the help of a student loan forgiveness program.
Cancellation
While student loan forgiveness and cancelation are often confused as the same as each other, student loan cancellation indicates that the sum of the balance still due on the graduates account is completely terminated.
Discharge
When a student loan is discharged, this is usually due to extraneous circumstances that prevent the loans from being paid off. This is usually in cases of an academic institution that is collecting the debt permanently closing, defrauding the student, or the recipient having a permanent disability that prevents the loan from being paid.
List of Student Loan Forgiveness Programs
Now that we have a stronger understanding of how student loan forgiveness programs work, let’s dive into some of the specific program options available and how to apply for each of them in a way that will set your future up for success. These popular repayment and forgiveness options are valuable paths for repayment and relief that can be the game changer a former student has been waiting for in their financial goals.
Income-Based Repayment (IBR)
How It Works:
As one of the most popular repayment plans, the Income-Based Repayment program allows individuals to have their payments capped at 10-15% of their discretionary income. Once they’ve made these payments for a long enough time (usually 20 to 25 years, but terms can vary based on when the funds were procured), the remaining balance can be forgiven.
Who Is Eligible:
Those with direct subsidized or unsubsidized loans, direct grad PLUS loans, FFEL PLUS loans, consolidated Federal Perkins loans, and direct consideration loans have qualifying loans for an IBR program. Consistency is crucial in this payment plan, borrowers need to make payments for 20 to 25 years and aware loan servicing personnel of income updates. Popular amongst those who have a large amount of debt but may still be working their way up the professional ladder, this is one of the most common forgiveness and repayment options.
How to Apply:
Applications for IBR are processed through StudentAid.gov and can be completed electronically or by receiving a printed application from a loan servicing company. Tax returns, income documentation, and accurate proof of income are all necessary to properly apply to this program.
Pay As You Earn Repayment Plan (PAYE)
How It Works:
The Pay As You Earn program varies slightly from an IBR program in that only loans borrowed from October 2007 and onward can qualify for this payment plan. In the same manner as IBR, a PAYE payment plan allows borrowers to become eligible for loan forgiveness after making payments for 20 years, with a capped monthly payment. Borrows are expected to pay 10% of their discretionary income, but after this time the remaining balance is eligible for forgiveness. Monthly payments are calculated based on family size and income.
Who Is Eligible:
The biggest requirement for a PAYE program is that the total for the monthly payments needs to be lower than the standard payment for a traditional 10-year repayment plan. Qualifying loans for this program are direct subsidized or unsubsidized loans, direct grad PLUS loans, FFEL PLUS loans, consolidated subsidized or unsubsidized FFEL Stafford loans, consolidated Federal Perkins loans, and direct consideration loans.
How to Apply:
Find an application to apply for the PAYE program through StudentAid.gov, and can be completed electronically or by receiving a printed application from a loan servicing company. Tax returns, income documentation, and accurate proof of income are all necessary to properly apply to this program.
Revised Pay As You Earn (RePAYE)
How Does It Work:
Revised Pay As You Earn is very similar to the original PAY program. While with PAYE and IBR programs borrowers need to be making a lower payment than their quoted 10-year monthly rate, the RePAYE program ditches this idea and can apply if they have eligible loans. This means that applicants can end up making a higher payment than an IBR or PAYE payment but can still be possibly eligible for loan forgiveness after two years of these payments. However, since this program is still based on 10% of discretionary income this means that if the borrower’s income raises significantly, they may end up with abruptly higher monthly payments.
Who Is Eligible:
The major requirement for interested applicants is having made consistent monthly payments over 20 years, with graduate school students making these payments for 25 years. A few of the qualifying loans for the RePAYE plan include direct subsidized and unsubsidized loans, Direct grad PLUS loans, consolidated FFEL Stafford loans, consolidated FFEL PLUS Loans made to grad students, consolidated Federal Perkins loans, and direct consolidation loans.
How to Apply:
Find an application to apply for the RePAYE program through StudentAid.gov. Tax returns, income documentation, and accurate proof of income are all necessary to properly apply to this program.
Income-Contingent Repayment (ICR)
How Does It Work:
Exactly as it would seem, the Income-Contingent Repayment program is also based around an individual’s income, with the borrower either paying 20% of their discretionary income or what they would pay on a fixed 12-year plan. Whichever of these monthly rates is lower is what the applicant would need to pay every month, which tends to be a higher payment than some of the other repayment options we’ve explored. After 25 years of consistent payments, the rest of the balance is forgiven.
Who Is Eligible:
One of the most attractive features of the ICR loan forgiveness program is that borrowers with consolidated parent PLUS loans are eligible to be approved. Other federal loans that are eligible for this repayment plan include direct subsidized and unsubsidized loans, direct PLUS loans made to grad students, direct consolidation loans, consolidated FFEL Stafford loans, consolidated FFEL loans, and consolidated Federal Perkins loans.
How to Apply:
Find an application to apply for the ICR program through StudentAid.gov. Tax returns, income documentation, and accurate proof of income are all necessary to properly apply to this program.
Public Service Loan Forgiveness (PSLF)
How Does It Work:
The Public Service Loan Forgiveness program allows those working in public service jobs with federal, state, or local government agencies to become eligible for student loan forgiveness. After making 120 payments, these employees may receive complete forgiveness of their remaining loans pending qualification. This program varies from the others a bit due to the payment not needing to be monthly installments, but there does need to be an established repayment plan obeyed such as the ones we have already detailed above.
Who Is Eligible:
The most crucial element of eligibility is seeking a position within an organization that offers a PSLF program and becoming a full-time employee of said location. Numerous careers allow someone to become qualified for a PSLF program, from government language interpreters to administrative assistance working within a religious-based organization. Loans eligible for a PSLF program include direct subsidized and unsubsidized loans, direct plus loans, direct consolidation loans, and consolidated Federal Perkins loans and FFEL loans once consolidated into a direct consolidation loan.
How to Apply:
After consolidating the necessary loans and choosing an income-driven repayment plan, borrowers may determine their eligibility by submitting an Employment Certification for Public Service Loan Forgiveness form. It’s helpful to submit this form annually to keep payments accurate.
Teacher Loan Forgiveness
How Does It Work:
Luckily, teachers and educators are some of the most simple career paths for access student loan forgiveness and repayment assistance. From federal Perkins cancellation to public service loan forgiveness, this simply scratches the surface in regards to options available for teachers with student loan debt. While teacher loan forgiveness can be applied for on a federal level, numerous local state programs can provide further relief for interested teachers.
Who Is Eligible:
Besides being an educator, teachers must teach full time at a qualifying school for five years, with forgiveness varying based on the level of education the teacher is responsible for teaching. Secondary school math, science, and special education teachers can receive up to $17,500 in relief, which most elementary teachers typically receive a maximum of $5,000. Loans may not predate October of 1998, may not be defaulted,
How to Apply:
Once a teacher has taught for five years they may apply for this program with the Teacher Loan Forgiveness application at Studentaid.gov and return it to their loan service to determine eligibility.
Federal Employee Student Loan Repayment Program
How Does It Work
Federal student loan repayment programs allow federal agencies to repay government loans. This is a popular option amongst agencies looking to recruit qualified professionals and assist with the repayment of their current teams. Agencies may make a maximum of $10,000 in payments to the loan service, with a cap at $60,000 per federal employee. Unless the borrower wishes to reimburse the agency for these benefits, they must sign a service agreement that they will remain within their position for at least three years at a satisfactory level of performance to maintain these repayment options.
Who Is Eligible:
Eligibility for federal employee student loan repayment programs will need to earn a position within a federal agency. While the type of loan tends to be more irrelevant within this repayment option, the most crucial element is looking for a federal agency that offers this type of program to its employees. This could be any position within the Department of Education, Energy, Transportation, Homeland Security, and many more.
How to Apply:
Applications for federal employee student loan repayment programs need to be completed upon the time of hiring and are unable to be issued after the employee has already been working for the said agency.
Faculty Loan Repayment Program
How Does It Work:
The Faculty Loan Repayment Program offered by the Health Resource and Service Administration (HRSA) is another program that is offered as a positive incentive by health organizations looking to recruit new employees and retain current professionals with student loan debt. These applicants consist of health profession faculty in numerous health care fields and help allow these professionals to accelerate their careers and help younger health personnel in helping and serving local communities. Borrowers may receive up to $40,000 in loan repayments, with additional installments issued to further help in the professional’s taxes while using the program
Who Is Eligible:
Those who wish to take advantage of a Faculty Loan Repayment Program must seek a position within the health and medical field at a qualifying institution.
How to Apply:
To apply for the Faculty Loan Repayment Program you must visit the HRSA website to fill out the Faculty Loan Repayment Program application. You can also explore their program guide to learn more about how this program can provide much-needed relief. After filling out the application, borrowers must submit the form through the HRSA customer service portal to determine their eligibility.
How to Apply for for Student Loan Forgiveness
The application process for applying to a student loan forgiveness program will vary widely based on the type of loans received while in school, the income of the applicant, as well as the professional position the borrower is in during the time of applying for relief. While there may be numerous student loan forgiveness programs available, understanding how each specific program works is crucial in determining eligibility and learning if these programs can benefit your overall professional journey and save you countless money over time.
By learning more about some of the popular student loan forgiveness programs we’ve detailed, you can be one step closer to financial relief and comfort. By visiting the application links and reviewing the eligibility requirements for reach, both current and former college students can maximize the value of their higher education. To find some amazing and reputable colleges with scholarships, grants, and student loan assistance, explore the list of colleges below!
