How to get student loans forgiven
Student loan forgiveness tips
- Private student loans cannot be cancelled or forgiven.
- Qualifying individuals can have certain federal student loans forgiven.
- City- and state-level grants can also help pay off federal student loans.
- Refinancing or consolidating student loans can be more cost-effective.
If you’ve faced a student loan bill, you’ve likely wanted to wish it away. The good news is, there are loan forgiveness programs that — with some legwork, commitment and time — cancel some or all of your student loans.
These forgiveness programs exist only for certain federal student loans. Forgiveness isn’t possible for private student loans, though consolidating or refinancing private loans can reduce monthly payments or interest rates.
Not all federal loans — or the individuals holding them — are eligible for forgiveness, either. Each of the three federal student loan forgiveness programs have specific employment requirements.
Public Service Loan Forgiveness
Designed for full-time employees working for government agencies or certain nonprofit organizations, the Public Service Loan Forgiveness program waives any loan balances remaining after you have made 120 qualifying monthly payments — the equivalent of about 10 years — on your student loan through an income-based repayment program.
The key word here is “qualifying” payments. Borrowers run into trouble by making payments that do not comply with the program’s guidelines and consequently do not contribute to the required 120 payments. It helps to understand how federal repayment plans work.
Public Service Loan Forgiveness applies only to Federal Direct Loans being repaid in an income-driven program, though other federal loans can be consolidated into Direct Loans to qualify. Borrowers must be full-time, direct employees of an eligible nonprofit or government organization. Qualified monthly payments don’t have to be consecutive — for example, if you are between eligible jobs for a time you aren’t disqualified from the program, but those payments don’t count toward your 120 payments. Paying more than the minimum payment won’t expedite the process, nor will it reduce the number of payments required.
How to apply
To ensure your payments benefit you, apply to the program as soon as possible. First, contact your loan servicer to see if you qualify and whether you should consolidate your loans before pursuing this program. You’ll fill out the federal Employment Certification form annually and if you change employers. Once all 120 payments are made, you’ll need to file an application for forgiveness – it’s not automatic.
With a 10-year minimum repayment schedule, Public Service Loan Forgiveness makes sense for those who have a low income relative to their student debt amount. Otherwise, you will have paid off your loan within the 10 years. Given the time commitment, this program is better for individuals who already plan to work in government or nonprofit sectors, rather than those simply looking to have a portion of their student loans waived.
Perkins Loan Cancellation and Discharge
The Perkins Loan Cancellation and Discharge program applies to those who have Perkins loans and work in certain public service professions, such as education, social services, law enforcement or the military.
You must meet the program’s requirements for public service. Depending on certain factors, all of your loan could be cancelled after five years. Typically, forgiveness is under a graduated structure: 15 percent of the original loan principal and associated interest is waived each year for two years of work; then 20 percent plus interest is waived for the third and fourth years; and the remaining 30 percent is waived the fifth year. To apply to the program, you aren’t required to work the full five years; if you work only one year at an eligible organization, you’re qualified to discharge 15 percent of your loans.
How to apply
If you haven’t begun working, you can file for deferment with your school’s financial aid office. Once you have completed one year of service, obtain a cancellation form from the office. Your school makes the decision about whether some or all of your loans can be discharged. Repeat the process each year. You may also retroactively file for cancellation, but only eligible employment after Oct. 7, 1998 qualifies.
This federal loan forgiveness program that requires the least commitment, so is a great option if you hold Perkins loans and work in public service for at least one year.
Teacher Loan Forgiveness
If you teach full time for five consecutive years at a school designated as serving low-income students, some of your federal loans may be forgiven.
Federal Direct Loans and Stafford Loans that are not in default are eligible. You must hold a state teaching certification and license, and teach at a school classified by the U.S. Department of Education as low income. Elementary and secondary school teachers may have up to $5,000 in loans forgiven, while secondary school science and mathematics teachers, as well as special education teachers, may have up to $17,500 forgiven.
How to apply
Complete five straight years of teaching, then file the Teacher Loan Forgiveness Application — certified by a school administrator — with your loan servicer.
Teachers eligible for this program are likely eligible for the Public Service Loan Forgiveness program as well. You can only participate in one program, however, so compare before you commit.
Extenuating circumstances may factor in to loan forgiveness. For example: your school closed down; the school misled or deceived you; you suffered total or permanent disability; or if the student died. Always be wary of deceptive programs and scams, such as the infamous “Obama Student Loan Forgiveness” ads that claim to eliminate student loans quickly and easily. Forgiveness programs aren’t quick, and they always require paperwork.
Also consider state programs or grants. Many are geared toward particular professions, such as education, medicine, law or agriculture, and are usually contingent upon working a certain number of years in that state.
Regardless of eligibility, you could save additional money by refinancing or consolidating your student loans. Speak with your loan servicer and other lenders to compare options.