A Guide to Student Loan Forgiveness Programs

Written by: The College Finance Team
Updated: 11/18/21

With higher education costs skyrocketing, many students are forced to take out large loans to earn a degree. If you’re feeling the burden of a high loan balance and wondering if there’s a better way to manage your federal student loan debt, the good news is that there’s help if you know where to look. 

Student loan forgiveness programs can help offset this burden by offering partial or complete loan forgiveness under certain circumstances and for certain types of employment. In this article, we provide an overview of existing student loan forgiveness programs and how to qualify for them. 

What Are Student Loan Forgiveness Programs?

Loan forgiveness is when the lender — in the case of federal student loans, the federal government — forgives a portion of your loan balance so you no longer need to repay it. This is distinct from loan repayment assistance, which might be offered by certain organizations or employers who make all or part of your student loan payments on your behalf. 

Primary student loan forgiveness options come from income-based repayment plans for federal student loans, the Public Service Loan Forgiveness (PLSF) program, and the teacher loan forgiveness program, although other forgiveness options might be offered in the future. 

When you enter repayment on your federal student loans, you can default to the 10-year Standard Repayment Plan or select one of the U.S. Department of Education’s four income-based repayment plans that come with loan forgiveness after 20 or 25 years of extended federal student loan repayment. These four income-based plans work as follows:

  • Income-Based Repayment (IBR) Plan: If you took out your loans before 2014, monthly payments are 15% of your discretionary income under this plan, with the remaining balance being forgiven if such payments are made for 25 years. If you borrowed after 2014, payments are only 10% of your discretionary income, and the remaining balance is forgiven after 20 years. 
  • Pay As You Earn (PAYE) Repayment Plan: If you were a new borrower on or after Oct. 1, 2007, and have received a disbursement of a Direct Loan on or after Oct. 1, 2011, this plan allows monthly payments that are 10% of your discretionary income but never more than what you would pay with the 10-year Standard Repayment Plan. The remaining loan balance is forgiven after 20 years. 
  • Revised Pay As You Earn (REPAYE) Repayment Plan: This plan is almost the same as PAYE except it doesn’t matter when you borrowed, and your monthly payment is 10% of your discretionary income, regardless of whether that ends up being more than your 10-year Standard Repayment Plan payment. Also, if any of your loans were taken out for graduate study, your remaining balance will not be forgiven until after 25 years of payments have been made.
  • Income Contingent Repayment (ICR) Plan: Under this plan, your payment is the lesser of either 20% of your discretionary income or what you would pay with a fixed payment over the course of 12 years. The remaining balance is forgiven after 25 years of payments have been made.

Your discretionary income is the difference between your adjusted gross income and 150% of the poverty wages for your family size. If you are married and file jointly, your spouse’s income is included. You must also update your income information each year under these plans.

These options, however, really only lead to forgiveness for the lowest-income individuals with the highest loan balances. In most cases, a student loan borrower will end up paying off their loan balance under these plans before the end of the payment period is reached, which means that none of their loans will be forgiven. 

In fact, you may even end up paying less in total by sticking with the 10-year Standard Repayment Plan, assuming you can afford the payments because the shorter repayment period means you pay less total interest.

Student Loan Forgiveness, Cancellation, and Discharge Explained

You might hear the words forgiveness, cancellation, and discharge used interchangeably, but it’s important to note they don’t always mean the same thing. Your loan becomes forgiven or canceled if you’re no longer required to make payments due to your job or completion of an income-based repayment plan. 

However, if you’re no longer required to make payments because of permanent disability or school closure, this is referred to as a loan discharge. Contact your student loan servicer to learn more about the options available to you.

About Public Service Loan Forgiveness (PSLF)

The U.S. Department of Education offers a federal student loan forgiveness plan specifically for public service employees called the Public Service Loan Forgiveness Program (PSLF). If you qualify, this option is often one of the best. It requires that you enroll in one of the income-based repayment plans described above, except you’re granted loan forgiveness after only 10 years of payments instead of 20 or 25 years. 

Note that this type of loan forgiveness only applies to federal student loans and not any private loans you may have taken out. 

Who Qualifies for PSLF?

To qualify for PSLF, you must work in public service for 10 years while making consistent payments on your student loans through one of the income-based repayment plans. Types of employment that qualify for PSLF include:

  • Government organizations at any level (U.S. federal, state, local, or tribal)
  • Nonprofit organizations 
  • Full-time AmeriCorps or Peace Corps volunteers

To stay on track, you will need to submit a Public Service Loan Forgiveness Employer Certification Form annually or when you change jobs. Pay careful attention to the details on the StudentAid.gov website to ensure you meet all the requirements. 

About Temporary Expanded Public Service Loan Forgiveness (TEPSLF)

The Temporary Expanded Public Service Loan Forgiveness (TEPSLF) program extends the benefits of the PSLF program to those who would otherwise have qualified except that they had previously made loan payments under a nonqualifying payment plan. StudentAid.gov has a tool you can use to help see if you qualify. 

Who Qualifies for TEPSLF?

In general, you must meet the following conditions to qualify for TEPSLF:

  • You must have made all of your payments under a qualifying repayment plan for TEPSLF.
  • You must have had at least 10 years of full-time employment certified by a qualifying employer.
  • You must meet the TEPSLF requirement for the amount you paid 12 months before applying for TEPSLF, and the last payment you made before applying for TEPSLF must have been at least as much as you would have paid under an income-driven repayment plan.
  • You must make 120 qualifying payments under the new requirements for TEPSLF while working full time for a qualifying employer or employers.

Qualifying monthly payments are those made after Oct. 1, 2007, for the full amount due as shown on your bill, and were paid no later than 15 days after your due date — all while you were employed full time by a qualifying employer.

About the Teacher Loan Forgiveness Program

Teachers who teach in areas that serve low-income schools or students for five consecutive years may qualify for the Teacher Loan Forgiveness Program. If you’re a teacher or plan on going into teaching, you may qualify if you meet the following eligibility requirements:

  • You must not have had an outstanding balance on Direct or Federal Family Education Loan (FFEL) Program loans as of Oct. 1, 1998, or on the date you obtained the loan(s) after Oct. 1, 1998.
  • You must have been employed as a full-time, highly qualified teacher for five complete and consecutive academic years, and at least one of those years must have been after the 1997-98 academic year.
  • You must have been employed at an elementary school, secondary school, or educational service agency that serves low-income students.
  • The loan(s) for which you’re seeking forgiveness must have been made before the end of your five academic years of qualifying teaching service.

The maximum amount that can be forgiven is either $17,500 or $5,000, depending on the subject area taught (the higher amount is generally reserved for those who teach math or science at the secondary or special education level).

Learn Helpful Info About Your Student Loans With CollegeFinance.com

Paying off student loans is not for the faint of heart. If you’re looking for helpful information on how to manage student loan repayment, you’ve come to the right place. CollegeFinance.com seeks to offer you all the information you need to make informed financial decisions. 

Visit our resources to learn more about federal student aid, PLUS loans, federal Direct Consolidation Loans, loan cancellation, forbearance, and deferment, as well as student loan repayment options today.