Finding the Right Option for Student Loan Forgiveness

There are several different programs that offer waivers, also referred to as discharges:

Public Service Loan Forgiveness (PSLF) is the largest and most widely used program. It applies to people who work in a qualified public service profession, such as teaching or nursing. Once you meet the criteria for qualification, ALL remaining balances on your qualified federal student loans may be forgiven.

The Federal Student Loan Repayment (or Repayment) Program is a specialized option, forgiving student loan balances for military service members. The Department of Defense pays up to $10,000 per year up to a maximum limit of $60,000. You must have served for at least three years, to qualify. The Department of Defense loan repayment can also be applied to students serving in the National Guard armed forces.

Veterans Totally and Permanently Disabled for Duty, offers veterans total loan forgiveness if they have a service-connected disability and are unable to continue on active duty.

Forgiveness or Forgiveness for Volunteer Student Loans is a collection of programs that forgive the debt of student loans granted to those who have performed volunteer services:

  • May qualify for up to $4,725 in debt if you work for AmeriCorps for 12 months
  • You may also qualify for $4,725 in loan forgiveness through 1,700 hours of service at VISTA (Volunteers in Service to America)
  • Peace Corps volunteers can receive up to 70% cancellation Perkins Loan forgiveness after two years of service

The National Defense Education Act (NDEA) also forgives up to $17,500 in remaining loan balances for teachers working with low-income students.

Each federal student loan forgiveness program requires that you meet different eligibility requirements. PSLF has the most “walkthroughs” to qualify, but it is also the program that forgives the most debt. Depending on your school and profession, there may also be other smaller programs offered locally. Check with professional or trade associations, as well as your school, for a complete list that applies to your personal situation.

Student loan forgiveness if your school closed or offered false certification

In addition to the options above, there is another way to qualify for government student loan forgiveness. It is used when school closures and problems with false certifications from unaccredited institutions occur. This relates specifically to for-profit 2-year business schools. If your school closes before you can graduate, educational service agencies may agree to cancel. Student loan discharge is basically like forgiveness: it erases debt as if you never owned a loan.

This also applies to higher education institutes that provide fake certifications. If you graduate, and then discover that your certification is not legitimate, you may qualify to make your student debt unenforceable. The closure of schools has been in the news in recent years, as have Institutes such as ITT and Corinthian.

How the Federal Student Loan Repayment Program works

This program can apply to more government agencies than just the military. However, the Department of Defense is the largest agency that uses them. It is designed to help government agencies recruit and retain the best candidates for employment.

  • You must sign a service agreement with the government agency you work for.
  • The agreement states that you will work for the agency for a period of at least three years.
  • Each agency sets the rules about when and how you will get your funds or have existing balances forgiven.
  • You can receive up to $10,000 per calendar year, but you cannot receive more than $60,000 in total
  • If you leave the position, you must repay the money, if it has already been spent to cover your education costs.

How forgiveness works if your school closes

You must complete an Application for School Closing Student Loan Forgiveness. The Department of Education (DOE) reviews your application and determines if you qualify. In most cases, you only qualify for school closure forgiveness cancellation and discharge if you were enrolled during the closure or withdrew within 120 days of the school closing.

How does student loan forgiveness work?

Each program has a different set of rules that apply to how the conditions for each waiver work. In general, the money is received after taking out the loans and finishing school. That is why it is called forgiveness, because you have incurred a debt that you need to eliminate.

How Public Service Loan Forgiveness – PSLF works

First, you must enroll in a federal hardship-based payment plan. The following programs qualify:

  • Income-Based Payments (IBR)
  • Income Contingent Payment (ICR)
  • Pay As You Earn (Paye)
  • Revised Pay As You Earn (RPYE)

You must work in a profession qualified as belonging to the public service. You can certify your position through

Then you make 120 qualifying payments on your payment plan.

You must remain in that position or another qualified public service position for the entire period of your debt payment or repayment.

Every time you change jobs, be sure to re-certify.

After 10 years, you’ll qualify for full student loan forgiveness on your remaining balances.

It’s worth noting here, that the federal government will not directly forgive your loans. For that matter, you don’t owe the federal government directly, even when you have federal student loans. The government selects loan servicers to be qualified loan servicing agencies. Companies like Navient loan services for borrowers applying through the Free Application for Federal Student Aid (FAFSA). Therefore, you should also apply for student loan forgiveness through your servicers.