Taking on student loan debt while you are completing your education makes much sense. But once you graduate, are you eligible for college loan forgiveness? Private student loans do not qualify for college loan forgiveness programs, but if you meet certain requirements, you can get rid of your federal student loans through one of several loan forgiveness programs. The Department of Education (DOE) offers several forms of college loan forgiveness to recent graduates. The federal government wants to incentivize certain career paths or methods of giving back to the community. While you may need to make monthly payments on your student loans for a few months or years, qualifying for a DOE forgiveness program can eliminate the remainder of your loan debt.
According to the federal government, college loan forgiveness, cancellation, and discharge are effectively the same thing. Each of these processes eliminates your federal student loan debt. However, they do mean slightly different things.
Federal loans that qualify for college loan forgiveness include:
If you have an FFEL or Perkins loan, you must first consolidate these loans through the direct consolidation loans program; then, you will qualify for forgiveness program options. Depending on your needs and the program you apply to for college loan forgiveness, you may receive partial forgiveness and pay only the remaining balance, or you can get full loan forgiveness, so you do not need to pay anything on your federal student loans. If you have private student loans, you will need to continue paying these.
Each federal college loan forgiveness program has different eligibility requirements. Here are the current options for loan forgiveness or cancellation:
If you have worked in a position in any of the above fields since you graduated from college, you can apply to PSLF if:
To start the process of receiving PSLF, you must submit an employment certification form either every year or when you change employers. Information on this form will let you know whether you are making qualifying payments on your loan. Qualifying monthly payments are defined by the DOE as those made:
Your qualifying payments do not need to be consecutive. In some cases, like if you are a Peace Corps volunteer or in military service, you need to set up deferment of your payments. You will not be penalized during this time for not making payments and can pick up making qualifying payments when the deferment or forbearance period is over. The six-month post-graduation grace period works like a deferment period. However, you cannot make multiple payments in one month by paying more than the amount listed on your bill. While you can use this approach to pay down your student loans faster, it does not qualify as two payments. With the number of qualifying monthly payments, PSLF takes ten years to complete. The standard loan repayment plan is ten years, so setting up income-driven repayment can lower your monthly payments in a manageable way. PSLF may not be a good option if you can pay off your federal student loans in ten years or less. You will pay less interest over time by sticking to the standard repayment option, if possible. Those qualifying for PSLF likely need periods of deferment, accommodations for making little to no money while working full-time, or other financial circumstances. Jobs that benefit the public good do not typically pay well, and the federal government incentivizes this type of work through the PSLF.
Each state has a different certification process, and some may offer different avenues for public school versus charter school or private school teachers. As long as you meet these standards in the state where you live and teach, you qualify for the Teacher Loan Forgiveness Program. You must teach at one of the schools or educational services listed in the Annual Directory of Designated Low-Income Schools for Teacher Cancellation Benefits (Low-Income School Directory). This is published by the DOE every year and is available online. While many teachers qualify for the lower amount of college loan forgiveness ($5,000), some types of teaching qualify for the larger amount of $17,500. Teachers may be eligible if they work in:
In your first two-year contract, the program can reduce 60% of your current college loan debt. After this first contract, entering your third year of nursing employment, you can have an additional 25% of your student debt eliminated.
Some scammers use the term Loan Repayment Assistance Program (LRAP) to steal private information or money from people who want to get rid of their student loan debt. There are 24 legal and useful LRAPs, across several states, according to the American Bar Association (ABA):
Nearly all of these programs require that participants work in public interest law. Some receive funding from state legislatures, while others involve private sector funding. While the ABA lists information on each of these programs, states are mandated to administer funds through LRAP programs in different ways. There are various requirements depending on where you live or go to school.
If you enter a form of public service after graduating college, you will likely qualify for one of these loan forgiveness programs. Each program requires some amount of payment on the loan. You may not receive full loan forgiveness, and you may have to wait a few years to know whether you qualify.
College loan forgiveness is a great option for federal loans, but if you do not enter public service, realize you can pay your regular monthly payments on a standard repayment plan, or receive enough financial windfalls, you do not need to go through this paperwork.