Loan Forgiveness Programs

Loan forgiveness programs relieve borrowers of the responsibility to repay a portion of the whole of their loan debt. Forgiveness is often offered for certain types of loans, although eligibility is limited to consumers in particular public service, educational, or military occupations. Besides, private loans don't qualify; only direct federal loans are eligible for loan forgiveness.

PSLF

Public Service Loan Forgiveness is one of the most popular student loan programs. It is a federal program that forgives student loan debt for members of certain public and nonprofit organizations. In addition, it cancels any remaining federal student loans when you've made 120 qualifying payments while employed by a qualified company.

To qualify for loan forgiveness, you must fulfill all of the program's criteria. Here are the top five requirements that borrowers must meet in order to be eligible for PSLF:

1. Borrowers must be employed by a federal, state, municipal, or tribal government or a non-profit organization in the United States. Federal service includes military duty in the United States. 
2. Borrowers must be full-time employees of that agency or organization.
3. Borrowers must be eligible for Direct Loans (or consolidate other federal student loans into a Direct Loan).
4. Borrowers are required to repay their loans using an income-driven repayment plan. 
5. Borrowers are required to have 120 qualifying payments.

It should be noted, however, that less than 3% of PSLF applicants are eligible.

Teacher Loan Forgiveness

Many Americans incur thousands of dollars in student loan debt to become teachers; however, then they earn less than they might have in the private sector. Teacher loan forgiveness is a government program that allows for the cancellation of up to $17,500 in student loans for teachers who teach in low-income schools. However, it is important to note that the entire $17,500 remission is only available to highly qualified secondary math or science teachers or special education instructors. Under this program, all other instructors who otherwise satisfy the qualifications can earn up to $5,000 in loan forgiveness.

Teachers may be eligible if they:

1. Have worked as a full-time teacher for at least five years in a row.
2. Work at an elementary or secondary school or for a non-profit organization that promotes low-income pupils.
3. Have no delinquent federal direct student loans or Stafford loans.

Teacher Loan Forgiveness is only offered to people who have at least a bachelor's degree, complete state certification as a teacher, and have not had any licenses waived.

Closed School Discharge

If you attended a school that closed while you were attending or if you left during the lookback period (120 days before the school's closure), you are eligible for the Closed School Discharge. The program applies to loans acquired on or after January 1, 1986. PLUS and Perkins loans, as well as FFEL and Direct Stafford loans, are all eligible. If the school shuts before the child finishes the program, parent PLUS loan borrowers should also be eligible.

Eligibility requirements for the Closed School Discharge program are as follows:

1. Your loans were disbursed before July 1, 2020, and your school will close within 120 days of your withdrawal.
2. Your loans were disbursed on or after July 1, 2020, and your school will close 180 days after you withdraw.
3. You are also eligible if you were on an allowed leave of absence at the time of the closure.

If you match the qualifying criteria, the Secretary will send you an application that you may submit to your loan servicer.  Alternatively, you can inquire directly with your loan servicer about the application process for having your debt discharged.

Perkins Loan Cancellation and Discharge

If you have a Federal Perkins loan, you may be able to have 50% or 100% of it discharged. Borrowers who are eligible must apply to the school that provided the loan or the approved loan servicer. If you have worked full-time as a teacher in a public or nonprofit elementary or secondary education system, you may be eligible for a loan cancellation of up to 100 percent. Other beneficiaries who can be qualified include:

1. teachers in schools that serve low-income pupils;
2. special education teachers, including those who work with disabled babies, toddlers, children, and teenagers; 
3. teachers working in those fields identified by state education agencies that have a shortage of qualified teachers in that state.

Your Perkins Loan may be discharged under specific situations. When your debt is discharged, it implies you are no longer required to repay it. The following conditions may result in discharge:

• Bankruptcy
• Death
• School closing
• Service-related disability (veterans)
• Spouse of a victim of the 9/11 attacks
• Permanent and total impairment

Note, that if you consolidate your Perkins Loan with your other federal loans, you will not be eligible for the Perkins loan cancelation. If you believe you may be qualified for Perkins Loan Cancellation and Discharge, gather further information and speak with your loan holder about this possibility. 

Bottom Line

Of course, the list could go on and on with numerous forms of loan forgiveness programs. Those described above are only a few examples of such programs used by Americans each year. Since the start of the Biden Administration, the Department of Education has offered over 600,000 borrowers more than $12 billion in student debt forgiveness while simultaneously extending the pause on monthly payments for most federal loans until August 31, 2022.

However, if you're looking for debt relief, you must thoroughly investigate the program, the providers, and the requirements. Apply with caution, and be aware that you may become a victim of student loan forgiveness scams if you apply without adequately researching the program. These are illegal organizations that promise forgiveness in exchange for money or personal information.