Forgiveness of student loans is a hot topic, especially as more and more students enter the workforce with crushing debt. According to the Wall Street Journal, Americans owe over $1.5 trillion in outstanding student loan debt (over $2 trillion when combined with federal loans), and that number doesn’t seem to be getting smaller anytime soon. While there are ways that borrowers can lower their payments or get out of their debt entirely, many people wonder whether forgiveness programs actually exist. The answer? Yes! But there are caveats on how you take advantage of these programs—and what you need to do in order for them to work for you. Let’s break down some common myths about forgiveness programs:
Student Loan Forgiveness Real
1 Yes, forgiveness is possible.
It is possible to get forgiveness. You just have to make sure you’re doing everything right and being smart about it.
In order for your student loans to be forgiven, you have to meet certain eligibility requirements and then stay on track with paying them back. The federal government offers income-driven repayment plans that can lower the amount of money you owe each month based on your income and family size. These programs also offer several ways for students who work in public service or teach full-time at a low-income school and agree not to seek outside employment during the school year:
- Pay as little as $0 per month toward your student loans (and still qualify for loan forgiveness after 20 years) through Public Service Loan Forgiveness if you work full-time at certain nonprofits or other public service organizations;
- Have payments suspended while working toward an advanced degree; or
- Stop making payments altogether when working full time in an eligible teaching role while also receiving student loan forgiveness after 10 years with teacher education loan forgiveness.
2 Paying on time is the #1 factor.
If you want to get student loan forgiveness, the #1 factor is making timely payments. The more on-time payments you make, the lower your monthly payment will be and the greater amount of forgiveness you could receive. If you don’t make a payment on time, it will cost you more in interest and could delay your ability to get student loan forgiveness altogether.
If your income is low enough that partial financial hardship prevents from paying all of your scheduled payments, or if some other circumstance prevents from making regular monthly payments for a period of time (such as being unemployed), there are alternative plans available for borrowers who struggle with making on-time payments during these times without incurring additional penalties such as late fees or collection calls.
3 Income-driven repayment plans make it more likely.
Income-driven repayment plans, which are based on your income and family size, can make it more likely that you’ll qualify for student loan forgiveness. They are available for federal student loans (including graduate and undergraduate loans) as well as for all types of federal loans: FFEL and Direct Loan programs.
4 Perkins Loans are forgiven after 10 years.
Perkins Loans are a form of federal student loan that are only available to students who are enrolled in a program that is at least a two-year program at an eligible school. These loans are not available to students who are enrolled in a program that is less than two years.
Perkins Loans have a limit of up to $8,000 per year and usually carry an annual interest rate of 5%.
5 Public service loan forgiveness can forgive loans after 120 payments.
Public service loan forgiveness can forgive loans after 120 payments. You may be eligible for this program if you’re working in a qualifying public service job and have made a total of 120 qualifying monthly payments (or 10 years, whichever comes first).
Qualifying employers include:
- Federal government agencies, including the military
- State government agencies, including police departments and firefighters
- Local government agencies like public libraries or school districts
6 Teacher Loan Forgiveness offsets $17,500 of direct or subsidized loans for up to five consecutive years of service for teachers at low-income schools.
The Teacher Loan Forgiveness program offsets $17,500 of direct or subsidized loans for up to five consecutive years of service for teachers at low-income schools.
To be eligible, you must have been teaching at a low-income school that serves students from low-income families. You also need to have been teaching full time in the same position for five consecutive years. This means that if you leave and come back within five years, it will count as part-time since you didn’t complete a full five years of service in one go.
The forgiveness is provided on an annual basis: $5,000 per year for each year of teaching that qualifies as “full time.” In other words, if you teach two positions over five years (a total six) then your loan would be forgiven after 10 months (50% x $5k = $2k).
7 Other options exist for certain professions and locations.
Certain professions and locations have unique loan forgiveness opportunities. If you’re a teacher, law enforcement officer, firefighter, or military service member (including National Guard) you may qualify for Public Service Loan Forgiveness.
There are also some state-specific programs available for teachers in Colorado and North Carolina that may help reduce your student debt burden. Additionally, certain types of employers offer student loan assistance as a benefit to their employees—and occasionally this assistance comes with forgiveness on the back end (though often at a hefty interest rate).
Finally, there are some companies that offer both student loan assistance and forgiveness programs for employees who work in certain industries like education or healthcare.
8 You can get forgiveness, but you have to be smart about it!
While there are a number of options for student loan forgiveness, you need to be careful. You don’t want to make a bad decision that will leave you with more debt than when you started.
Remember, your loans are not forgiven until they are paid off in full. Your balance might not change at all if your monthly payment is high enough that it takes many years to pay them off. If this happens, call the lender and ask them what their support team can do for you so that your loans will be paid off sooner rather than later!
Other ways that student loan forgiveness does not work:
- You won’t get anything unless it is actually due (like if one of the interest rates goes up) or there’s some other change in circumstances (such as being laid off).
If you’re struggling to make your loan payments, one of the best options is to switch to an income-driven repayment plan. This will allow you to pay a lower amount each month and then have your balance forgiven after 20 or 25 years. You may also be able to take advantage of other forgiveness programs such as Public Service Loan Forgiveness or Teacher Loan Forgiveness if you qualify based on your profession and location.