Guide to Student Loan Forgiveness for Mental Health Workers

By Anna Davies · August 19, 2023 · 9 minute read

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Guide to Student Loan Forgiveness for Mental Health Workers

With mass student loan forgiveness blocked by the Supreme Court, you may be curious about what other relief options are available, especially if you work (or plan to work) in a field that requires graduate school — and significant student debt — but may not pay a high salary.

The good news is that there are multiple programs that offer student loan forgiveness or relief for mental health professionals, including counselors and therapists. Forgiveness programs for mental health professionals are designed to encourage individuals to enter and stay in the profession.

Read on to learn about programs and strategies that can help you repay any student loans you have taken out (or plan to take out) to become a mental health professional.

Key Points

•   Multiple programs offer student loan forgiveness or relief specifically for mental health professionals to encourage careers in this field.

•   Strategies for managing student loan debt include income-driven repayment plans and seeking employment in roles eligible for loan forgiveness.

•   The Public Service Loan Forgiveness Program (PSLF) is available for those meeting specific criteria, including working with a qualifying organization and making 120 qualifying payments.

•   Loan forgiveness might be taxable depending on the specific program, with some exceptions like PSLF which is not taxed.

•   Other forgiveness options include state-sponsored programs and specific initiatives for healthcare workers under federal acts like the Patient Protection and Affordable Care Act.

How to Plan for the Future With Student Loan Debt as a Mental Health Professional

Whether you take out private student loans or federal student loans to pay for your education in the mental health field, you’ll need to consider how you will eventually repay those loans. It can also be challenging to navigate career opportunities when you know that you have student loans to repay. The good news: You’re not alone. And there is no one right path to pay back student loan debt.

It can be helpful to talk to graduates and see how they paid off student loans. One big crossroads can be whether to take a higher paying job in the private sector or work in a nonprofit role that could give you an avenue toward loan forgiveness through a program like the Public Service Loan Forgiveness Program (PSLF). Another option to manage repayment is to use an income-driven repayment plan, like the new Saving on a Valuable Education, or SAVE, Plan (which will replace the existing Revised Pay As You Earn, or REPAYE, Plan).

There may also be programs unique to your career. For example, the Health Resources and Services Administration (HRSA), a government branch, offers loan repayment programs for mental health professionals who meet certain criteria, such as serving in a health professional shortage area. Speaking with your supervisor, your colleagues, and keeping abreast of news within professional organizations can help alert you to unique repayment opportunities.

Recommended: REPAYE vs PAYE: What’s the Difference?

What is a Student Loan Forgiveness Program?

A student loan forgiveness program operates the way it sounds: Student loans can be forgiven if certain criteria within the program are met. But each student loan forgiveness program has different criteria. It’s important to completely understand the scope of the forgiveness program. Reading this student loan forgiveness guide can help you understand where the national conversation is regarding loan forgiveness in the future as well as options available for forgiveness now.

When student loans are forgiven, usually after a set amount of payments, the balance is forgiven. But that balance may be taxed, depending on the program. For example, forgiveness received under PSLF is not considered taxable, according to the IRS. But under PAYE and REPAYE programs, any canceled student loan debt is considered taxable.

There may also be loan repayment assistance programs (LRAPs) for your profession or field, as well as state-sponsored loan forgiveness programs.

Recommended: Supreme Court Blocks Student Loan Forgiveness

Will Student Loans be Forgiven After Ten Years?

Loans are not automatically forgiven after ten years. But one potential avenue for mental health student loan forgiveness is the federal Public Service and Loan Forgiveness (PSLF) program. This program requires eligible candidates to work with a qualifying organization and make 120 qualifying monthly payments. It also requires that the loans you hold be federal Direct Loans (or that the federal loans you currently have are consolidated into a Direct Loan).

Qualifying for PSLF can be challenging and requires borrowers to certify their employment to be sure their payments count toward the program. In addition to making 120 payments while working at a qualifying employer, you have to be working for a qualifying employer when you submit the forgiveness application and when the loan is forgiven.

Consult with your loan servicer if you have any questions and be sure to read all of the details about the program.

Typical Requirements for Student Loan Forgiveness

In general, forgiveness programs have criteria. These may include:

•  A history of payments, with no payments skipped

•  Working at a qualifying organization, in a qualifying capacity (ie, full-time instead of part-time)

•  Correctly filling out paperwork for forgiveness

•  Potentially paying taxes on the amount forgiven

Understanding the criteria, reading the fine print, and researching any points of confusion can be helpful in ensuring that your application is processed successfully. The eligibility and forgiveness requirements may vary depending on the forgiveness program, so be sure to fully understand the criteria for the loan forgiveness option you are pursuing.

Difference Between Loan Forgiveness, Loan Cancellation, and Loan Discharge

These three terms are sometimes used interchangeably. Quite simply, all three terms mean you’re no longer required to pay some or all of your loan. But there are no “easy” ways to get out of paying student loans.

Usually, forgiveness and cancellation mean that, due to either a forgiveness application or your current job, you no longer have to pay loans. Discharge refers to a situation beyond your control, such as total and permanent disability or the closure of your school. In very rare cases, student loans are discharged due to bankruptcy. You will likely have to apply for cancellation, forgiveness, or discharge and will likely need to continue making payments while the application is processed.

Recommended: Bankruptcy and Student Loans, Explained

Student Loan Forgiveness Options For Mental Health Workers

Depending on your place of employment, you may have other options for forgiveness through specific mental health worker programs. There also may be scholarships and grants available in your field of study. Also something to consider: Some private employers offer student loan repayment as part of their packages. This can be worth asking potential employers as you look for jobs. There are also other federal programs to know about:

PPACA and HERA Student Loan Programs for Counselors

As part of the Patient Protection and Affordable Care Act, legislation expanded opportunities for student loan forgiveness for healthcare professionals, including mental health counselors. While many of these forgiveness programs are state-run, this act did ensure that any forgiven funds would not be considered taxable income for people seeking forgiveness through programs supporting health care professionals working in underserved areas.

Under the Higher Education Reconciliation Act (HERA) certain federal loans, including Stafford Loans, and Direct Loans (both Subsidized and Unsubsidized Direct Loans) are eligible for a graduated repayment plan. Under this plan, your federal loan repayments start low and gradually increase every two years. This can be an option if you expect your income to increase over the years.

National Health Services Corps Loan Repayment Program

The National Health Services Corps offers loan repayment programs through your state. Each state has different eligibility requirements, including eligible disciplines. These state-run programs also may differ in terms of service commitments but usually, the commitments start at two years for an eligible position. These will generally be at centers funded by the Health Resources and Services Administration.

Mental Health Loan Forgiveness Alternatives

The criteria and requirements for some forgiveness programs can be challenging to fit. But that doesn’t mean there’s no way to pay down loans. Understanding all your options can help you navigate the best potential avenue for you.

Refinance Your Mental Health Student Loan

Refinancing your student loans could potentially help save you money in the long term, and might give you more flexibility in your budget.

When you refinance, you take all your loans and consolidate them into one loan. For qualifying borrowers, this loan may have a lower interest rate, which could reduce the amount of money you owe in interest over the life of the loan. It also may have a different payment term, so that you are paying the loan off over a longer (or shorter) period of time. Keep in mind that, while a longer loan term may result in lower monthly payments, it might also mean paying more in interest over the life of the loan.

You can often check your loan refinance rate without affecting your credit score and choose terms that work for you.

Scholarships and Grants

There may be scholarships and grants, either from your institution or your place of work. This can help pay down student loan debt. It’s also worth remembering that some private-sector employers may offer student loan repayment as a perk. Talking with colleagues, supervisors, and the financial aid office at your school may help you find programs that may be specific to your field or your school.

Pay Off Student loan Debt

In some cases, it may make sense to prioritize paying down student loan debt. This may include taking on part-time work, decreasing living expenses, and trying to carve out opportunities to pay more than the monthly student loan payment. These strategies can help you pay off your student loans faster and, in turn, could lower the total cost of the loans.

The Takeaway

Working as a mental health professional can be rewarding, but might require you to borrow money to pay for your education. There are numerous options both for taking out and paying back student loans for mental health counselors and therapists. Depending on your profession and employer, you might qualify for certain types of loan forgiveness, such as Public Service Loan Forgiveness Program (PSLF), if you have federal student loans.

It can be helpful to talk to colleagues about their student loan pathway, join professional organizations, and keep an ear to the ground regarding grants, scholarships, and employer-sponsored loan repayment programs.

Also keep in mind that you can use a private student loan to help pay for your undergraduate or graduate education in the mental health field (or to refinance loans you already have). While private loans don’t come with government-sponsored protections like PSLF, some private lenders offer hardship and deferment programs of their own.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ on Mental Health Forgiveness

How do counselors and mental health professionals plan for the future with student loan debt?

Understanding options for paying back loans can be helpful for mental health professionals. Depending on what type of loan you have and what type of mental health work you do, your loan repayment options might include Public Service Student Loan Forgiveness (PSLF), income-based repayment plans, and refinancing your student loans. You might also consider taking a job in the private sector, which may pay more and allow you to comfortably cover loan payments.

Do healthcare workers qualify for loan forgiveness?

In some cases, healthcare workers qualify for eligible forgiveness programs. This depends on the state the healthcare worker resides, as well as their place of employment.

What are some student loan forgiveness options for mental health workers?

Mental health workers who work in underserved areas may be able to apply for forgiveness programs run at their state level for healthcare professionals. Eligibility depends on criteria including place of employment. Student loan forgiveness options may also include the federal Public Service Loan Forgiveness program (PSLF), as well as some income-based repayment options.

Photo credit: iStock/Vertigo3d

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