Student Loan Forgiveness: Programs for Relief and Forgiveness

Student Loan Forgiveness Programs

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    By Nancy Bilyeau

    President Joe Biden has taken steps to strengthen loan forgiveness and improve repayment programs for those paying off federal student loan debt.

    While the Biden administration extended the federal student loan payment pause multiple times, the Debt Ceiling Bill negotiated by President Biden and Congress in spring 2023 ended the pause, with bills due again in October 2023 . Around the same time, the Supreme Court struck down the Biden administration’s student loan forgiveness program.

    With forgiveness and the payment pause both at an end, the Department of Education has created a range of programs and strengthened existing ones to try to help ease the burden on people paying their federal student loans.

    Student Loan Forgiveness During the Biden Administration

    President Biden’s proposal to cancel up to $20,000 in federal student loan debt for those who met household income requirements was struck down by the Supreme Court on June 30, 2023.

    The same day that the Supreme Court announced its decision, President Biden released news on three initiatives:

    * The creation of a new income-driven repayment (IDR) program called the Saving on a Valuable Education (SAVE) Plan . The SAVE Plan calculates your monthly payment amount based on your income and family size and, according to the White House, offers greater benefits.

    * The creation of an On-Ramp Program. If borrowers believe they absolutely cannot return to repayment, the DOE created a temporary on-ramp period through Sept. 30, 2024. This prevents the worst consequences of missed, late, or partial payments, including negative credit reporting for delinquent payments for twelve months. However, payments are still due, and interest will continue to add up.

    * The potential creation of new federal student loan relief programs by 2025 through use of the Higher Education Act. More recently, it was announced that this initiative will target the following areas:

    •   Borrowers whose balances are greater than what they originally borrowed

    •   Borrowers whose loans first entered repayment decades ago

    •   Borrowers, who attended programs that did not provide sufficient financial value

    •   Borrowers who are eligible for relief under programs like income-driven repayment but have not applied

    •   Borrowers who have experienced financial hardship and need support, but for whom the current student loan system does not adequately address.

    President Biden has also improved the loan forgiveness programs that have existed for loan holders for several years. In early October, just after the pause officially ended, the president gave a press conference announcing that an additional 125,000 Americans have been approved for $9 billion in debt relief through fixes the DOE made to income-driven repayment (IDR) and Public Service Loan Forgiveness (PSLF) and through granting automatic relief for borrowers with total and permanent disabilities.

    What follows is an explanation of student loan forgiveness, what programs you can apply to, and what new programs are on the way.

    What Is Student Loan Forgiveness?

    Forgiveness of your loan means that you are no longer required to repay some or all of that student loan. In this context, “forgiveness” means absolving or giving up all claims on account of debt, loan, obligation, or another claim.

    Before the payment pause was instituted in 2020, student loan forgiveness was connected to your type of job (public-service careers were targeted), how long you had made qualifying payments, and sometimes which populations you served.

    The student loan debt cancellation proposed by President Biden in August 2022 — and struck down by the Supreme Court in June 2023 — was a different kind of forgiveness, as it was tired to the loan holder’s income rather than choice of career.

    Whatever the reason, the effect is the same: a reduction in the amount of federal student debt people owe.


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    Student Loan Forgiveness for Government & Nonprofit Workers

    President Joe Biden has said it is a DOE priority to focus on helping student loan borrowers who have worked at a nonprofit, in the military, or in federal, state, tribal, or local government.

    The government has been offering forgiveness on student loan debt held by people whose jobs serve the public for a number of years.

    However, many criticized these existing programs as too hard to understand and qualify for, and subsequently too few people received the loan repayments. The Biden Administration made efforts to “cut the red tape” and strengthen this type of forgiveness.

    “Because of complex eligibility restrictions, historic implementation failures, and poor counseling given to borrowers, many borrowers have not received the credit they deserve for their public service,” said the White House.

    Public Service Loan Forgiveness (PSLF)

    If you have worked full time in public service (federal, state, local, tribal government or a non-profit organization) for 10 years or more, you may be eligible to have all your student debt canceled.

    Designed to steer people toward careers that help the public but might not pay a high salary, the Public Service Loan Forgiveness (PSLF) program cancels (or “forgives”) federal student loan debt for people holding certain public and nonprofit jobs after they have worked in these career for a number of years.

    On Oct. 4, President Joe Biden announced that, to date, almost $51 billion had been forgiven for 715,000 public servants through the PSLF programs, including the limited PSLF waiver and Temporary Expanded PSLF (TEPSLF).

    Eligibility

    Any U.S. federal, state, local, or tribal government agency is considered a government employer for the PSLF Program. This includes employers such as the U.S. military, public elementary and secondary schools, public colleges and universities, public child and family service agencies, and special governmental districts (including entities such as public transportation, water, bridge district, or housing authorities).

    You can find out if you are eligible by using the PSLF Help Tool on the government website. It will help you learn what the next steps are if you qualify.

    Requirements

    To proceed with PSLF, you need to:

    •   Be employed by a U.S. federal, state, local, or tribal government or qualifying not-for-profit organization (federal service includes U.S. military service);

    •   Work full time for that agency or organization;

    •   Have Direct Loans (or consolidate other federal student loans into a Direct Loan);

    •   Be signed up to repay your loans under an income-driven repayment plan or a a 10-year Standard Repayment Plan; and

    •   Make a total of 120 qualifying monthly payments that need not be consecutive.

    Federal Perkins Loan Cancellation

    A Federal Perkins Loan, or Perkins Loan, delivered needs-based aid to college students as part of the Federal Direct Student Loan Program. It ended in 2017, but Perkins loan forgiveness programs are available.

    Perkins loan holders who work in a public service position, such as teacher, nurse, or firefighter, can have their student debt partially or fully erased after working in these approved public service jobs for five years and making qualifying payments.

    Eligibility

    You qualify for cancellation of up to 100% of a Federal Perkins Loan if you have served full time in a public or nonprofit elementary or secondary school system as a:

    •   Teacher in a school serving students from low-income families;

    •   Special education teacher, including teachers of infants, toddlers, children, or youth with disabilities; or

    •   Teacher in the fields of mathematics, science, foreign languages, or bilingual education, or in any other field of expertise determined by a state education agency to have a shortage of qualified teachers in that state.

    Requirements

    The cancellation rate per completed academic year of full-time teaching or for each year of otherwise qualifying full-time service is:

    •   15% of the original principal loan amount for each of the first and second years;

    •   20% of the original principal loan amount for each of the third and fourth years; and

    •   30% of the original principal loan amount for the fifth year

    Application Process

    Application for cancellation or discharge of a Perkins Loan must be made to the school that made the loan or to the school’s Perkins Loan servicer, according to studentaid.gov. The school or its servicer can provide forms and instructions specific to your type of cancellation or discharge.

    Student Loan Forgiveness for Teachers

    While the PSLF offers forgiveness for teachers, there is another program, Teacher Loan Forgiveness, that helps people repay their federal loans. Note: Borrowers usually can’t receive credit toward Teacher Loan Forgiveness and PSLF for the same period.

    Teacher Loan Forgiveness

    Highly qualified teachers may be able to get forgiveness of up to $17,500 on their Direct Subsidized and Unsubsidized Loans and their Federal Stafford Loan.

    Eligibility

    Under this program, if you teach full-time for five complete and consecutive academic years in a low-income school or educational service agency and meet other qualifications, you may be eligible for forgiveness.

    Requirements

    To be a “highly qualified teacher,” you must have

    •   attained at least a bachelor’s degree;

    •   received full state certification as a teacher; and

    •   not had certification or licensure requirements waived on an emergency, temporary, or provisional basis.

    You’re considered to have received full state certification even if you received your certification through alternative routes to certification or bypassing the state teacher licensing examination.

    If you’re a teacher at a public charter school, you are considered to have received full state certification as a teacher if you meet the requirements set forth in the state’s public charter school law.

    Application Process

    You apply for this forgiveness by submitting a completed Teacher Loan Forgiveness Application to your loan servicer after you’ve completed five consecutive years of qualifying teaching.

    Student Loan Repayment Assistance Programs for Teachers

    Some states also offer repayment programs for teachers. Among examples: The state of Tennessee has loan forgiveness for math and science teachers and Oklahoma has a Teacher Shortage Employment Incentive Program.

    The American Federation of Teachers’ database will let you see if your state or local government offers separate forgiveness options.

    Student Loan Forgiveness for Nurses

    Nurses can pursue different programs for forgiveness of their student loans.

    NURSE Corps Loan Repayment Program

    Loan repayment is available to registered nurses (RN), nurse faculty (NF), and advanced practice registered nurses (APRN) through the Nurse Corps Loan Repayment Program. The program gives funding preference to those who need the most help financially.

    Eligibility

    To be eligible, you must have received your nursing education from an accredited school of nursing located in a U.S. state or territory. And you must work full time in an eligible Critical Shortage Facility (CSF) in a high-need area.

    Requirements

    If your application is accepted, you will receive 60% of your total outstanding, qualifying, nursing education loans over the course of two years. After your two-year service contract, you may be eligible for a third year and an additional 25% of your loans.

    These funds are not exempt from federal income and employment taxes.

    Application Process

    Applications for the program can be found on the Nurse Corps website.

    Student Loan Repayment Assistance for Nurses

    In addition to the Nurse Corps Loan Repayment Program, loan holders can investigate the National Health Service Corps Loan Repayment Program (NHSC LRP), another student loan forgiveness option offered through the Health Resources and Services Administration.

    Full-time nurse practitioners, psychiatric nurse specialists, and nurse-midwives may be able to cancel up to $50,000 of both federal and private student loan debt through the program. Part-time nurse practitioners and nurse-midwives may receive up to $25,000 in loan forgiveness.

    In exchange for loan forgiveness, you must commit to at least two years of service at an NHSC-approved facility.

    Student Loan Forgiveness for Doctors & Health Care Professionals

    Medical professionals and healthcare workers have access to some respected student loan forgiveness programs. Their role during the pandemic as frontline workers made helping them with their loans a priority. Some of these programs forgive loans, while others provide money to student loan borrowers in the form of a loan repayment program.

    Among the programs that help healthcare workers with their loans are Public Service Loan Forgiveness (PSLF), the Perkins Loan Cancellation, and the NIH loan repayment programs (LRPs).

    National Health Service Corps (NHSC) Loan Repayment Assistance

    Nurses are one category of worker getting student loan forgiveness from NHSC. Licensed primary-care clinicians in eligible disciplines can also receive loan repayment assistance through the NHSC Loan Repayment Program (NHSC LRP).

    In exchange for loan repayment, you must serve at least two years of service at an NHSC-approved site in a Health Professional Shortage Area (HPSA).

    Student Loan Forgiveness for Lawyers

    With the hefty tuition bills they shoulder, lawyers would be understandably delighted to discover they qualify for student loan forgiveness.

    One path to just that is Public Service Loan Forgiveness (PSLF), which provides tax-free forgiveness on federal direct loans to borrowers who work for public-service employers. As a lawyer, that means working full time for a government entity or a 501(c)(3) nonprofit.

    Perkins loan forgiveness is another path for full-time public or community defenders who can have 100% of these loans forgiven over five years of service.

    Many states provide assistance to lawyers focused on public service.

    Military Student Loan Forgiveness and Assistance

    Members of the Armed Forces may qualify for forgiveness of the remaining balance of their Federal Direct Loans through Public Service Loan Forgiveness (PSLF).

    In addition, while you are on active duty, the government can waive many of the documentation requirements attached to federal student loan benefits. For example, if you are on an income-driven repayment plan and military service prevents you from providing updated information on your family size and income, you can request to have your monthly payment amount maintained.

    Student Loan Forgiveness for Volunteers

    If you are a Peace Corps or AmeriCorps volunteer, you may qualify for loan forgiveness. AmeriCorps Volunteers in Service to America focuses on alleviating poverty through partnerships with government agencies and nonprofit organizations. Participants in AmeriCorps VISTA, who perform tasks such as fundraising and grant writing, must commit to a one-year term of full-time service and may serve for up to five years in total.

    After completing their service requirement, volunteers are eligible for the Segal Education Award or a cash stipend of $1,800, in which case the volunteer also may be eligible for up to 15% cancellation of certain kinds of student loans.

    Student Loan Repayment Assistance from your Employer

    Many employers subsidize their workers’ repayment of student loans as a benefit. Employers can offer up to $5,250 in student loan repayments tax-free through 2025. Such policies serve as an incentive to keep valued employees. Ask your boss if they have a student loan repayment benefit.


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    Student Loan Forgiveness by Federal Repayment Plan

    Many federal student loan holders are eligible for an income-driven repayment plan at some point. An income-driven plan sets your monthly student loan payment at an amount that is intended to be affordable based on your income and family size. And borrowers who continue to qualify for an income-driven repayment plan and make their payments may eventually see their remaining loan balances forgiven.

    The SAVE Plan

    The SAVE Plan — which is replacing the old REPAYE plan — will offer greater benefits than any of the other IDR plans. It will halve monthly payments for many borrowers with undergraduate loans and help some reach loan forgiveness more quickly.

    Features to keep in mind:

    •   The SAVE Plan is an IDR plan, so it bases your monthly payment on your income and family size.

    •   The SAVE Plan lowers payments for almost all people compared to other IDR plans because your payments are based on a smaller portion of your adjusted gross income (AGI).

    •   The SAVE Plan has an interest benefit: If you make your full monthly payment, but it is not enough to cover the accrued monthly interest, the government covers the rest of the interest that accrued that month. This means that the SAVE Plan prevents your balance from growing due to unpaid interest.

    •   Loan balances will be forgiven for borrowers who make payments under the plan for a period of time. If your loan balance is under $12,000, your balance will be forgiven after ten years of payments; if your balance is over $12,000, it may take up to 20 years.

    •   More elements of SAVE will go into effect in summer 2024 and will lower payments even more for borrowers with undergraduate loans. For undergraduate loans, cut in half the amount that borrowers have to pay each month from 10% to 5% of discretionary income.

    Forgiveness with Income-Based Repayment (IBR)

    The existing Income-Based Repayment Plan (IBR) is a repayment plan with monthly payments that are generally equal to 15% (10% if you are a new borrower on or after July 1, 2014) of your discretionary income, divided by 12.

    Eligibility

    Generally, you’ll meet this requirement if your federal student loan debt is higher than your annual discretionary income or represents a significant portion of your annual income.

    To determine if you would qualify for a lower monthly payment amount under the Income-Based Repayment Plan, check out the Loan Simulator or contact your loan servicer.

    Forgiveness With Pay As You Earn (PAYE)

    The existing Pay As You Earn Plan is a repayment plan that caps federal student loan payments at 10% of your discretionary income and forgives your remaining balance after 20 years of repayment.

    Eligibility

    PAYE has an eligibility requirement you must meet to qualify for the plan. To qualify, the payment you would be required to make under the PAYE (based on your income and family size) must be less than what you would pay under the Standard Repayment Plan with a 10-year repayment period.

    Forgiveness with Income-Contingent Repayment (ICR)

    Any borrower with eligible federal student loans can make payments under this plan.

    This plan is the only available income-driven repayment option for parent PLUS loan borrowers. Although PLUS loans made to parents can’t be repaid under any of the income-driven repayment plans (including the ICR Plan), parent borrowers may consolidate their Direct PLUS Loans or Federal PLUS Loans into a Direct Consolidation Loan and then repay the new consolidation loan under the ICR Plan (though not under any other income-driven plan).

    ICR costs more each month than other income-driven repayment plans. It caps payments at 20% of your discretionary income and lasts 25 years.

    Eligibility

    ICR is a favored income-driven choice if you have parent PLUS loans or a consolidation loan that includes parent PLUS loans and you want slightly lower payments to potentially pay less interest.

    Student Loan Discharge for Special Circumstances

    If you’re no longer required to make payments on your loans due to other circumstances, such as a total and permanent disability or the closure of the school where you received your loans, this is called discharge.

    On Oct. 4, President Biden announced that the government was forgiving $1.2 billion for nearly 22,000 borrowers who have a total or permanent disability and have been identified and approved for discharge through a data match with the Social Security Administration.

    The president also announced $22.5 billion for more than 1.3 million borrowers who were cheated by their schools, saw their institutions precipitously close, or are covered by related court settlements.

    State-based Student Loan Repayment Assistance Programs (LRAPs)

    Along with the student loan forgiveness options provided by the federal government — which are available to anyone anywhere in the U.S. — individual states have their own debt cancellation programs.

    As of June 2022, 49 states and the District of Columbia offer at least one student loan forgiveness program.

    More information is available in the states themselves.

    Student Loan Forgiveness for Private Education Debt

    Most lenders of private student loans do not offer forgiveness for debt owed.

    The exceptions are permanent disability and death. However, in some cases, the debt may be inherited by the surviving spouse or by a cosigner. It’s important to check your policy.

    Some lenders do make individual arrangements if you contact them and make a case for severe reduction of income. Reach out to your lender to find out if any accommodation can be made or if refinancing would help.

    What About Taxes on Student Loan Forgiveness?

    The Internal Revenue Service considers canceled debt, including most forms of student loan debt forgiveness or student loan discharge, to be taxable income.

    Fortunately, borrowers working toward loan forgiveness have been exempt from taxes thanks to the American Rescue Plan Act of 2021. This measure made forgiven student loans exempt from federal income taxes, but only for loans discharged between January 1, 2021, and December 31, 2022.

    Also, student loan amounts forgiven under PSLF are not considered income for tax purposes. You won’t be taxed by the federal government, but your state may tax you. The DOE says on its website: “Any debt forgiven as a result of PSLF won’t create a federal tax liability for you.”

    Various states have different policies about whether to tax forgiven student loan debt.

    If you have debt forgiven, please contact an accountant to see what the consequences are for your tax return.

    Student Loan Forgiveness Scams

    Unfortunately, student loan forgiveness scams exist. Clues are when they promise immediate forgiveness, say the programs are “first-come, first serve,” ask for a fee to process your payment, or solicit you asking for bank or identity information upfront.

    The Takeaway

    While the Biden administration’s income-based student loan forgiveness program was struck down by the Supreme Court, there are still paths for federal student loan borrowers to get some or all of their loan balances forgiven. These include seeking forgiveness under Public Service Loan Forgiveness, and getting loans forgiven after making payments under an income-driven repayment plan.

    Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

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    Student Loan Forgiveness FAQ

    Is there a legitimate student loan forgiveness program?

    The U.S. Department of Education offers several legitimate programs that can reduce or eliminate federal student loan debt.

    What qualifies you for student loan forgiveness?

    For the student loan forgiveness programs that have existed for several years, like Public Service Loan Forgiveness, eligibility is based on the type of federal student loan you received, your income, and your chosen career. Only federal student loans are eligible for forgiveness.

    How do I apply for student loan forgiveness?

    Most forgiveness for student loans can be pursued through the federal Department of Education. Others are available through your state. Also, some employers subsidize their workers’ student loans.


    SoFi Student Loan Refinance
    If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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