What Is the Student Loan Forgiveness Act?

January 27, 2018 · 4 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

What Is the Student Loan Forgiveness Act?

With Americans facing a record $1.34 trillion in combined student loan balances, many borrowers are on the hunt for ways to ease their debt burden. One option you may have seen is being called the Obama Student Loan Forgiveness Plan, which according to some websites, is a way for some borrowers to escape their debt for a small fee.

This offer might sound appealing, but there’s one problem: It’s fake. It’s just one example of real ads that scammers have used to target and bilk borrowers. Fraudsters have used lines like this to lure in their marks, then charged them hefty fees to fill out forms they could’ve filled out themselves for free. In the worst cases, people end up paying for nonexistent services.

Here are some answers to your burning questions on student loan forgiveness, so you don’t get sucked in by the cons:

Does any Student Loan Forgiveness Act exist?

Yes. The Student Loan Forgiveness Act was a congressional bill introduced in 2012 intended to help borrowers with paying down their student debt. In addition to capping interest rates for all federal loans, the proposed law would’ve introduced a repayment plan that allowed borrowers to have their loans forgiven after 10 years if they made monthly payments equivalent to 10% of their adjusted gross income. The bill also would’ve made borrowers in public service jobs eligible for loan forgiveness after five years, instead of 10.

Sound too good to be true? It is—at least for now. The bill never made it out of committee.

So, What is Obama’s New Student Loan Forgiveness Program?

Even though you may have heard about it, Obama’s New Student Loan Forgiveness Program doesn’t exist.

During his tenure, President Obama did expand the reach of federal loan forgiveness programs. A bill he signed in 2010 allowed students who took out certain federal loans to have their balances forgiven in 20 years, rather than 25. The same bill capped annual payments at 10% of adjusted gross income, rather than 15%. It also ushered in loan forgiveness after 10 years for borrowers working in qualified public service jobs.

Those changes preceded the introduction of the Student Loan Forgiveness Act
(SLFA), and was never officially called “Obama’s Student Loan Forgiveness Program.” Likewise, there is no “new” student loan forgiveness program in Obama’s name, either.

Then why have I read about Obama’s New Student Loan Forgiveness Program?

Because it’s a term that debt relief companies use to confuse student loan borrowers. The name seems convincing, since Obama did take action on student loans and legitimate federal loan forgiveness programs exist. That’s why some borrowers have been duped into paying high fees for pointless—or nonexistent—services. Don’t be fooled: The program isn’t real!

Are there legitimate options for student loan forgiveness?

Yes! The government currently offers many income-based repayment plans for federal student loans that can forgive your balance after 20 or 25 years. There are eligibility requirements, like making required monthly payments for a designated period of time, which are tied to your income. The plans you qualify for will depend on the types of loans you have and when you took them out.

You can have your loan forgiven in 10 years under the Public Service Loan Forgiveness program. To qualify, you must work full-time for a qualified government organization, nonprofit, or certain public-interest employers, such as a public interest law firm, public library, or public health provider.

Qualifying teachers can also get up to $17,500 of their federal loans forgiven after five years teaching full-time under the Teacher Loan Forgiveness Program . The American Federation of Teachers has a searchable database of state and local loan forgiveness programs.

Health professionals have access to other loan assistance programs. The federal government’s NURSE Corps Loan Repayment Program pays up to 85% of eligible nurses’ unpaid debt for nursing school.

The Indian Health Services’ Loan Repayment Program repays up to $40,000 in qualifying loans for doctors, nurses, psychologists, dentists, and other professionals who spend two years working in health facilities serving American Indian or Alaska Native communities.

The National Health Service Corps offers up to $50,000 for loan repayment to medical, dental, and mental health practitioners who spend two years working in underserved areas. Loan forgiveness programs are generally available for federal loans, as opposed to private ones. In rare cases, such as if your school closes down while you’re enrolled or soon after, you can get your student loan discharged or cancelled.

Interested in learning more about your options for student loan repayment? Check out SoFi’s student loan help center to get the answers you need about your student debt.

Check out SoFi to see how refinancing your student loans can help you.


SoFi Lending Corp. is licensed by the Department of Business Oversight under the California Financing Law, license number 6054612.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
SLR17149

TLS 1.2 Encrypted
Equal Housing Lender