Savanna Hoffman
Student loan forgiveness is a possible option for those who meet the requirements of the various loan forgiveness programs. The US Department of Education offers several programs that provide full or partial relief from federal student loan debt. One such program is the Income-Driven Repayment (IDR) plan, which forgives the remaining balance on student loans after a certain number of payments over 20 to 25 years. Another option is the Public Service Loan Forgiveness (PSLF) program, which forgives federal student loan balances for those who work full-time in government or not-for-profit jobs for 10 years. Additionally, borrowers with disabilities may qualify for a Total and Permanent Disability (TPD) discharge, and teachers can explore specific loan forgiveness programs designed for them. It's important to note that student loan forgiveness typically applies to federal loans, and borrowers should be cautious of scams that charge fees for assistance.
| Characteristics | Values |
|---|---|
| Forgiveness plan | Income-Driven Repayment (IDR) plan |
| Forgiveness eligibility | After 10, 20 or 25 years of repayment |
| Forgiveness eligibility | 240 or 300 monthly payments |
| Forgiveness eligibility | Working for a government or non-profit organization |
| Forgiveness eligibility | Having a disability that severely limits your ability to work |
| Forgiveness eligibility | Being a teacher, firefighter, police officer, nurse, or other emergency service employee |
| Forgiveness eligibility | Being a military service member |
| Forgiveness eligibility | Being a borrower defrauded by their school |
| Forgiveness ineligibility | Having repaid loans entirely before the IDR term expires |
| Forgiveness ineligibility | Having private student loans |
| Forgiveness ineligibility | Paying fees to receive credit toward forgiveness |
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What You'll Learn
Income-driven repayment plan forgiveness
Income-driven repayment plans (IDR) are a safety net for federal student loan borrowers who are struggling with payments on the standard 10-year repayment plan. IDR forgiveness refers to the forgiveness of student loan debt under any of the four IDR plans: Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE).
IDR forgiveness happens automatically after 20 or 25 years of monthly payments, depending on the specific plan. If your income increases over time, you may end up repaying your loans entirely before the IDR term expires, in which case none of your debt would be forgiven. The amount of debt forgiven also depends on how much you've already repaid over the life of your loan.
To be eligible for IDR forgiveness, you must first enroll in one of the four IDR plans. Millions of borrowers are expected to benefit from a one-time IDR account adjustment that counts past payments toward the 240 or 300 needed for income-driven repayment forgiveness. The Federal Student Aid office also plans to allow more loan statuses, such as deferments and forbearances, to count toward IDR forgiveness. Additionally, months spent in the pandemic student loan payment pause count toward IDR forgiveness, even if no payments were made.
It's important to note that previously, forgiven debt under income-driven plans was considered taxable income. However, the March 2021 American Rescue Plan made forgiven debt tax-free from December 2020 until the end of 2025. While the federal government will not treat debt forgiven by an IDR plan as taxable income through 2025, a few states still tax student loan forgiveness.
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PSLF for government or nonprofit workers
The Public Service Loan Forgiveness (PSLF) program was created by the US government as part of the College Cost Reduction and Access Act of 2007. PSLF offers federal student loan forgiveness to borrowers working full-time for the government or a qualifying nonprofit organization.
To qualify for PSLF, you must be employed full-time by a qualifying employer, which can include government organizations at any level (federal, state, local, or tribal) or qualifying nonprofit organizations. Qualifying nonprofit organizations can include those that don't have 501(c)(3) status but provide a qualifying public service as their primary purpose, such as religious organizations.
Borrowers must also enroll in an income-driven repayment (IDR) plan or the Standard Repayment Plan to pursue PSLF. Under an IDR plan, monthly payments are capped at a set percentage of your income. After 10 years of payments (120 qualifying payments) while working for a qualifying employer, your remaining federal student loan balance will be forgiven. It's important to note that PSLF is only available for federal student loans and not private student loans.
To stay on track for forgiveness, it's recommended to submit a PSLF certification form annually. You can use the Education Department's PSLF Help Tool to find out your eligibility based on your loans and employer. The Education Department directly manages PSLF applications and loan repayment. As of July 2024, $69.2 billion of student loan debt has been discharged through the PSLF program.
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Loan forgiveness for teachers
There are several loan forgiveness programs available for teachers in the US. The Public Service Loan Forgiveness (PSLF) program discharges the remaining balance on your Direct Loans after 120 qualifying payments (over a minimum of 10 years). To be eligible for this program, you must work for a qualifying employer, such as a government organization or a tax-exempt nonprofit organization. PSLF does not require you to teach at a low-income public school.
The Teacher Loan Forgiveness (TLF) program forgives up to $17,500 of your Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford Loans. To qualify, you must have been employed as a full-time teacher at an eligible school for five complete and consecutive academic years, with at least one of those years falling after the 1997-98 academic year. Certain highly qualified special education, secondary mathematics, or science teachers can qualify for up to $17,500 in forgiveness, while other eligible teachers can qualify for up to $5,000.
The Perkins Loan Cancellation program forgives up to 100% of your Federal Perkins Loans if you teach full-time at a low-income school or teach certain subjects, such as mathematics, science, foreign languages, bilingual education, or special education. This program forgives portions of your loans in yearly increments of 15% after you meet service requirements.
Many states also offer their own loan forgiveness programs for teachers, especially if you teach in a high-need area. Reach out to your state's education agency to learn more about specific programs and eligibility requirements.
It is important to note that income-driven repayment plan forgiveness may also be an option for teachers, but it requires enrollment in one of the four IDR plans and typically takes 10 to 25 years to achieve loan forgiveness. As of 2021, only 32 borrowers had received IDR loan forgiveness, according to an analysis by the Student Borrower Protection Center and the National Consumer Law Center.
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Loan forgiveness for military service members
Military service members and veterans are eligible for educational benefits such as the G.I. Bill, and they may also qualify for student loan forgiveness. Forgiveness programs typically clear loans because of an individual's service or employment, while discharge is usually based on their inability to repay loans due to other issues.
Veteran and military student loan forgiveness programs include:
- Public Service Loan Forgiveness (PSLF): This program forgives the remaining balance of your loans after you work for a qualifying non-profit or government organization. If you plan to work in the military or another area of public service for 10 years and you have federal loans, you likely qualify for an income-driven repayment plan and loan forgiveness through PSLF.
- Total and Permanent Disability Discharge (TPD): U.S. military veterans who are totally and permanently disabled can qualify for a discharge of 100% of their outstanding federal loans.
- National Defense Student Loan Discharge: Service members who were in a location that qualified for hostile-fire or imminent-danger pay may be eligible for this program. Only borrowers with Perkins loans are eligible.
Additionally, under the Servicemembers Civil Relief Act (SCRA), military service members on active duty can have their student loan interest rates capped at 6%. This benefit applies to both federal and private student loans. The interest rate deduction will be applied automatically on federal loans, but borrowers with private loans will have to file a request manually.
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One-time IDR account adjustments
The Income-Driven Repayment (IDR) One Time Adjustment, also known as the IDR account adjustment or payment recount, is a program that provides loan forgiveness to eligible borrowers. The program was enacted by the Department of Education to address issues with how IDR plans were managed and how records were kept, which prevented millions of eligible borrowers from having their loans forgiven.
Under the IDR account adjustment, the Education Department reviews borrowers' accounts and gives them credit for certain months that didn't previously qualify toward IDR forgiveness. This includes any time in repayment after July 1, 1994, which will now be counted as IDR-qualifying months, even if the borrower was not enrolled in an IDR plan at the time. This adjustment also applies to Public Service Loan Forgiveness (PSLF) and will count toward PSLF loan forgiveness as long as the borrower meets the other employment requirements.
It's important to note that not all time will count toward the payment count adjustment. Time in default before the COVID-19 payment pause, in-school deferments, most grace periods after the borrower left school, and any months where the loans were subject to a court judgment will not count toward IDR or PSLF loan forgiveness under this adjustment.
The IDR account adjustment is a temporary initiative that provides more opportunities for borrowers to earn qualifying payment credits and get closer to loan forgiveness. Borrowers can use the Federal Student Aid Loan Simulator to estimate their monthly payments and overall payments, as well as the amount and timing of forgiveness they may qualify for under different repayment plans.
The deadline for consolidation to receive the full benefit of the IDR payment count adjustment was extended to April 30, 2024, and then again to June 30, 2024. This applies to borrowers with Parent PLUS, commercially managed Federal Family Education (FFEL), Perkins, or Health Education Assistance Loan (HEAL) loans. After this deadline, borrowers with non-federally held loans must consolidate their loans into a Direct-Consolidation Loan to get the full benefits of the adjustment.
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Frequently asked questions
An IDR or income-driven repayment plan sets your monthly payment amount based on your income and family size.
To qualify for IDR loan forgiveness, you must first enrol in one of the four IDR plans. Then, you must make 240 or 300 monthly payments over 20 or 25 years.
There are several different loan forgiveness programs. For example, if you have a disability that impacts your ability to work, you may qualify for TPD discharge. If you work in public service, you may also qualify for PSLF, which forgives your remaining federal student loan balance after 10 years of payments.
