Student Loan Forgiveness: Programs for Relief and Forgiveness

Student Loan Forgiveness: A Brief History

All payments on federal student loans were paused in March 2020 because of the impact of COVID-19 shutdowns. After multiple extensions of the pause, President Biden ended the suspension and payments resumed in October 2023.

To deliver relief for struggling borrowers, President Biden announced a proposal to cancel up to $20,000 in federal student loan debt for those who met household income requirements. However, this proposal was struck down by the Supreme Court on June 30, 2023.

The same day that the Supreme Court announced its ruling, President Biden released news on three new initiatives for debt relief. Each of them proposed big changes for people paying back their federal student loans:

The SAVE plan

The new income-driven repayment program called the SAVE Plan calculates your monthly payment amount based on your income and family size. The plan offers greater benefits than other, existing income-driven plans. In January 2024, President Biden announced that beginning in February, people who took out less than $12,000 in federal student loans and have been in repayment for 10 years would get their remaining student debt canceled immediately.

Where things stand: The SAVE program is in limbo until at least April 2025 while the federal courts decide if Biden’s program is legal. During that time, the 8 million people enrolled in SAVE are in forbearance.

The On-Ramp Program

The On-Ramp Program was a temporary period, from September 2023 to September 2024, designed to prevent the worst consequences of missed, late, or partial payments. If payments on federal student loans were not made during this time period, they were not submitted as delinquent to credit-score agencies. However, payments were still due, and interest continued to add up.

Where things stand: On September 30, 2024, the On-Ramp program ended, and missing and late payments once more count against a borrower’s credit history.

Proposed New Federal Student Loan Relief Programs

•   Have balances greater than what they originally borrowed

•   Have loans that first entered repayment decades ago

•   Attended college programs that did not provide sufficient financial value

•   Are eligible for relief under programs like income-driven repayment but have not applied

•   Have experienced financial hardship that the current student loan system does not adequately address.

Where things stand: On Dec. 20th, 2024, the White House announced it was no longer pursuing this path to debt cancellation because the administration had run out of time.

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 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 Covid-19-related pause on payments that lasted from March 2020 to October 2023 was the first time that financial hardship because of an economic crisis resulted in people being released from their federal student loans.

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Student Loan Forgiveness for Government & Nonprofit Workers

President Joe Biden said it was 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 few people took advantage. The Biden Administration made efforts to “cut the red tape” and strengthen this type of forgiveness.

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 careers for a number of years.

On Dec. 20th, 2024, the White House announced the approval of $4.28 billion in additional student loan relief for 54,900 borrowers across the country who work in public service. “This relief — which is the result of fixes that the Biden Administration has made to the PSLF program — brings the total loan forgiveness by the administration to approximately $180 billion for nearly 5 million Americans, including $78 billion for 1,062,870 borrowers through PSLF.

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 delivered need-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. The Internal Revenue Service says that in most cases, educational benefits are excluded from federal income tax withholding, Social Security tax, Medicare tax, and federal employment (FUTA) tax.

By law, tax-free benefits under an educational assistance program are limited to $5,250 per employee per year. Such policies serve as an incentive to keep valued employees. Ask your manager if they have a student loan repayment benefit.

💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.

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 be forgiven.

These options have changed in the last two years, but there are still ways to apply for an income-driven repayment plan.

The SAVE Plan

The SAVE Plan was put on pause because of a court challenge and is expected to remain in limbo until at least April 2025, the DOE says. During this time, SAVE enrollees do not make payments — the accounts are in forbearance. You can still apply for SAVE, but if you are accepted, your payments immediately go into forbearance.

When and if it is operating again, the SAVE Plan offers greater benefits than any other IDR plans. It could cut in half monthly payments for many borrowers with undergraduate loans, help some reach loan forgiveness more quickly, and cancel remaining debt for those who owe less than $12,000 and have made payments for at least 10 years.

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 have made payments under the plan for a certain period of time. If your loan balance is under $12,000, your balance will be forgiven if you’ve made 10 years of payments.

Two Income-Based Repayment Plans Reopened for Application

On Dec. 18th, 2024, the Department of Education announced that two forgiveness plans that had been retired because of SAVE would now reopen for applications. Why? Because SAVE going into forbearance means that those loan holders cannot make payments that count toward eventual cancellation of their loan. This is especially important for people who are trying to get their loans forgiven through PSLF. SAVE participants can consider switching to one of these plans or stick with SAVE and wait for the forbearance to end.

On the DOE website, a further explanation follows: “The Pay As You Earn (PAYE) Repayment and Income-Contingent Repayment (ICR) plans offer credit for Public Service Loan Forgiveness (PSLF) and income-driven repayment (IDR) to eligible borrowers enrolled in the currently enjoined Saving on a Valuable Education (SAVE) Plan, as well as additional terms that borrowers may wish to consider.”

Forgiveness With the PAYE Plan

The Pay As You Earn (PAYE) Plan is a repayment plan with monthly payments that are generally equal to 10% of your discretionary income, divided by 12, but never more than the 10-year Standard Repayment amount.

Eligibility

Your eligibility for PAYE depends on when you took out federal student loans. There are three parts to the “new borrower” requirement; and you must meet all three parts:

•   First, you must have had no outstanding balance on a Direct Loan or Federal Family Education Loan (FFEL) Program loan when you received a Direct Loan or FFEL Program loan on or after Oct. 1, 2007.

•   Second, you must have received (a) disbursement of a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a Direct PLUS Loan for students on or after Oct. 1, 2011; or (b) a Direct Consolidation Loan based on an application that was received on or after Oct. 1, 2011.

Forgiveness with Income-Contingent Repayment (ICR)

Any borrower with eligible federal student loans can make payments under the Income-Contingency Repayment plan. ICR provides $0 payments for single individuals earning up to $15,060 ($31,200 for a family of four) and 20% of income above that amount. It also has an alternative payment formula that may result in lower payments for borrowers whose loan debt is low relative to their income.

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, 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).

Note: ICR may cost more each month than any of the other income-driven repayment plans. It caps payments at 20% of your discretionary income and lasts 25 years.

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 January 2024, all 50 states and the District of Columbia offered 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

The Biden Administration approved $175 billion in student debt relief for nearly 5 million Americans, each of whom have been approved for an average of roughly $35,000 in student debt cancellation. However, the SAVE program, an income-based repayment program chosen by over 8 million, is on hold until at least April 2025 because of court challenges. Other options do exist for federal loan repayment based on what you can pay. There are likely to be many more changes in debt relief and forgiveness in 2025, so it’s important to follow the news on student loan repayment.

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.