Ibrahim Gardner
Student loan forgiveness is a possible option for federal student loan borrowers, but it is important to be aware of the potential scams and the specific requirements of the various loan forgiveness programs. There are several ways to qualify for federal student loan forgiveness, including through public service, military service, or by consolidating loans. It is important to note that borrowers will never have to pay any fees to receive credit toward forgiveness, and that there are tools available to help borrowers understand their options and eligibility.
| Characteristics | Values |
|---|---|
| Who is eligible for federal student loan forgiveness? | Public service employees, including firefighters, police officers, nurses, and other emergency service employees. Employees of any state, local, or tribal government, and certain nonprofit agencies. Military service members and participants of AmeriCorps programs are also eligible. |
| What are the requirements? | To qualify for PSLF, you must make 120 qualifying monthly payments under a qualifying repayment plan, such as an IDR plan or a standard 10-year plan. |
| How long does it take? | Forgiveness is possible after 20 or 25 years of repayment, depending on the plan. |
| What are the other options? | Borrower defense to repayment and closed school discharge are other legal grounds for discharging federal Direct Loans. |
| Are there any fees? | No fees are required to receive credit toward forgiveness. If someone asks for payment, it is a scam. |
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What You'll Learn
Loan forgiveness for military service members
Military service members and veterans are eligible for several educational benefits, including student loan forgiveness. The US Department of Education and Department of Defense offer special benefits for military service members with federal student loans. These include interest rate caps under the Servicemembers Civil Relief Act, which lowers interest rates on student loans taken out before military service to 6%. This benefit applies to both federal and private student loans. Additionally, if you served for 12 months or more in a hostile area, you may qualify for a 0% interest rate on your federal loans for up to 5 years, even if you are no longer serving in the military.
Military service members can also benefit from the Public Service Loan Forgiveness (PSLF) program. Under PSLF, if you work in the military or another public service area for 10 years and have federal loans, you are likely eligible for loan forgiveness. The PSLF Help Tool can assist you in applying for this program.
Another option for loan forgiveness is the Total and Permanent Disability Discharge (TPDD) program. U.S. military veterans who are totally and permanently disabled may qualify for a discharge of 100% of their outstanding federal loans. The TPDD program is administered in collaboration with the VA and Nelnet, the official loan servicer for TPDD applications.
Furthermore, service members who served in locations that qualified for hostile-fire or imminent-danger pay may be eligible for the National Defense Student Loan Discharge. However, only borrowers with Perkins loans are eligible for this particular program. Those whose military service ended before August 14, 2008, may have up to 50% of their loans forgiven, while those who served after that date may qualify for 100% loan forgiveness.
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Loan forgiveness for public service employees
If you work full time for a government or not-for-profit organisation, you may qualify for forgiveness of the entire remaining balance of your Direct Loans through the Public Service Loan Forgiveness (PSLF) Program. This program was established in 2007 by Congress to encourage Americans to enter the public service sector.
To benefit from PSLF, you need to repay your federal student loans under an IDR plan or a standard 10-year plan. IDR plans base your monthly payment on your income and family size. After making 120 qualifying monthly payments, the remaining balance on your student loans may be forgiven.
It's important to note that individuals employed by organisations whose activities have a substantial illegal purpose are not eligible for PSLF. Additionally, your military service can count toward PSLF, and there are special benefits for military service members with federal student loans, including interest rate caps and Department of Defense student loan repayment programs.
Another option for loan forgiveness for public service is the Segal AmeriCorps Education Award. After completing a term of national service in an approved AmeriCorps program, you are eligible to receive this award, which can be used to repay qualified student loans.
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IDR plan repayment
An IDR (Income-Driven Repayment) plan is a federal student loan repayment program that bases your monthly payment amount on your income and family size. The four types of IDR plans are SAVE (which replaced the REPAYE plan), PAYE, IBR, and ICR.
If you repay your loans under an IDR plan, your remaining loan balance may be forgiven after you make a certain number of payments over 20 or 25 years (240 or 300 monthly payments). The specific IDR repayment period and monthly payment amount depend on the IDR plan for which you are eligible. You can use the Loan Simulator to compare plans, estimate monthly payment amounts, and see if you’re eligible for an IDR plan.
You may need to consolidate your loans first to become eligible for an IDR plan. Even if you weren’t in an IDR plan before, it may be a good idea to sign up for one now, as your account may have been credited with more time toward IDR loan forgiveness through the account adjustment.
To benefit from PSLF (Public Service Loan Forgiveness), you need to repay your federal student loans under an IDR plan or a standard 10-year plan.
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Consolidating FFELP and Perkins loans
FFELP and Perkins loans are not forgivable under Income-Based Repayment (IBR), Pay as Your Earn (PAYE), or Public Service Loan Forgiveness (PSLF). However, borrowers can convert FFEL and Perkins loans to Direct Loans, which are forgivable under these programs. To do this, borrowers must apply for a Direct Consolidation Loan that repays FFEL and/or Perkins Loans, or have had that loan disbursed, on or before October 31, 2022. A borrower who submits a Direct Consolidation Loan application by October 31, 2022, is still eligible as long as the application results in a Direct Consolidation Loan being made even if it is made after October 31, 2022.
Borrowers who have received a Direct Consolidation Loan and have submitted a PSLF Certification and Application Form that the Department approves will have any period of repayment from October 2007 until the date of consolidation treated as a qualifying payment. This corresponds to the period of qualifying employment on loans made under the FFEL Program, the William D. Ford Federal Direct Loan (Direct Loan) Program, and/or the Federal Perkins Loan Program that the borrower consolidated.
For borrowers who have a Direct Loan, including Direct Consolidation Loans or Direct Non-Consolidation Loans, and who have certified employment for PSLF that the Department approves, any period of repayment from October 2007 through October 2022 that corresponds to the period of qualifying employment will be treated as a qualifying payment.
The deadline to consolidate if you have FFEL or Perkins loans with different repayment histories is December 31, 2023. This deadline has been updated to April 30, 2024. The Federal Direct Consolidation Loan Application and Promissory Note can be completed by signing in to the www.studentaid.gov website. An applicant will have the opportunity to add or remove loans from the information obtained from the National Student Loan Data System (NSLDS) lookup. Once an applicant submits their application electronically, the consolidation servicer will complete the actions required to consolidate the applicant's eligible loans.
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Closed school discharge
If your school closes while you are enrolled, or shortly after you withdraw, you may be eligible for a closed school discharge. This means your federal loans will be forgiven. To be eligible, you must meet one of the following conditions:
- The school closed while you were enrolled, or on an approved leave of absence, and you did not complete your program.
- You withdrew from the school within 120 or 180 days of it closing (depending on when your loans were issued) and did not complete your program.
If your application for a closed school discharge is approved, the Department of Education will cancel the loans you borrowed to attend the closed school, refund any payments made on those loans, and delete any negative credit history for those loans from your credit report. Discharged amounts do not count as taxable income on your federal return.
If your school is on the path to closure, it may offer a teach-out plan, which helps you finish your coursework at another institution. If you complete your program via a teach-out plan, you will not be eligible for a closed school discharge. However, transferring your credits to a different institution does not disqualify you from loan discharge.
If you feel that the closed school defrauded or misled you, you may be able to receive relief under a program called borrower defence to repayment. To do this, you would have to demonstrate that your school violated laws in its state when it came to educational services or loans. This option is available whether or not you have graduated.
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Frequently asked questions
An IDR plan is an income-driven repayment plan that bases your monthly payment on your income and family size.
You must have ED-held loans that have accumulated time in repayment of at least 20 or 25 years.
Any months with time in repayment status, 12+ months of consecutive forbearance, months spent in economic hardship, and months in deferment prior to 2013.
Public service employees, including firefighters, police officers, nurses, and other emergency service employees, can qualify for PSLF.
