It can be confusing to determine who is eligible for student loan forgiveness and what might be forgiven. This article will help you determine whether student loan forgiveness might be in your future.
Overview of student loan forgiveness
The federal government has several programs in place for student loan forgiveness. These programs often focus on public service and require the student to work in specific sectors for a period of time to qualify. Additional programs for student loan forgiveness might be available in the future.
Last year, President Joe Biden announced a student loan forgiveness program that would allow up to $20,000 in qualified federal student loans to be forgiven. In late June, the Supreme Court ruled against the plan, though Biden has promised to continue seeking ways to provide student loan forgiveness.
Discretionary income requirements for student loan forgiveness
Under Biden’s Saving on a Valuable Education Plan (or SAVE Plan) released after the Supreme Court ruling, undergraduate loan payments will be cut in half from 10% of discretionary income to 5% of incomes above 225% of the federal poverty line.
Discretionary income for purposes of income-contingent repayment plans is calculated using a specialized formula. It is the difference between your annual income and 150% of the poverty guideline for a family of your size in your geographic location.
Does private student loan forgiveness exist?
Private student loans are very rarely forgiven. If a program is available, it is often only available to borrowers who have died or have a severe, permanent disability. In some situations, bankruptcy may be an option to discharge private student loans, but the debtor’s assets and income circumstances must be extremely dire to discharge student loans. Under the vast majority of situations, private student loan forgiveness is not available.
Who is eligible for federal student loan forgiveness?
Many programs are available for federal student loan borrowers that reduce loan payments or cancel student loans. Each program has slightly different requirements and qualifications to determine who is eligible for student loan forgiveness.
1. Government and nonprofit employees
The Public Service Loan Forgiveness (PSLF) Program allows eligible employees and nonprofit workers to receive student loan forgiveness if they make at least 120 qualifying payments while working full time. Full-time employment is considered 30 hours a week.
Who qualifies for the PSLF Program?
You can use the PSLF Employer Search tool to see if your employer qualifies. Examples of borrowers that qualify include:
- Early childhood education providers
- Employees of a child or family services agency
- Faculty members at a tribal college or university
- Firefighters
- Law enforcement officers
- Librarian with a master’s degree at a Title I school
- Those in military service
- Nurses or medical technicians
- Professional providers of early intervention (disability) services
- Public defenders
- Speech pathologists with a master’s degree at a Title I school
- Volunteer service workers, such as AmeriCorps VISTA or Peace Corps
Many people will also qualify for Perkins Loan Cancellation and Discharge based on their employment or volunteer services.
2. Teachers
Teachers have a separate loan forgiveness program. If they teach full time for five consecutive academic years in a low-income elementary or secondary school, they may qualify for forgiveness of up to $17,500 of their direct loans or FFEL Program loans.
3. Students of closed colleges and universities
If a student attends a school and the school closes while the student was attending or after they withdraw, then that student may be eligible for loan forgiveness.
4. Students of compromised colleges
Discharge for direct loans might be available as a borrower defense. If the school the student attended misled them or engaged in misconduct, that could result in a loan discharge.
5. Individuals living with a permanent disability
Borrowers who have a permanent disability might qualify for a discharge in some circumstances.
6. The deceased
Federal student loans will generally be forgiven when the borrower dies, so their estate will not have to repay these loans.
7. Parents of the deceased
Parents who took out Parent Plus Loans may not have to repay loans if the child for whom the loan was taken out dies.
8. Bankrupt households
A discharge in bankruptcy can forgive student loans, but these situations are extremely rare. In most cases, bankruptcy will not affect student loans.
9. Individuals who have been victims of educational fraud
If your school falsely certifies that you are eligible for a loan or you are the victim of fraud, you may be able to discharge your student loans.
10. You’re owed a refund
If you withdrew from school but the school did not return student loan funds that should have been refunded, you may qualify for a discharge of the portion of those loans that should have been refunded.
Student Loan Forgiveness: Do You Qualify?
Student loan forgiveness programs may continue to evolve. The PSLF Help Tool is now available for borrowers to digitally apply for public service loan forgiveness and confirm eligibility. Who is eligible for student loan forgiveness and can take advantage of these programs depends on the borrower’s unique situation, industry, and other circumstances.
FAQ
What student loans do you not have to pay back?
You must pay back all student loans if you do not qualify for a specific loan forgiveness program or cancellation.
How do I know if my student loan is federal or private?
Federal student loans are from the federal government, but they may have private service providers. Private student loans are through a bank or other lending institution. Learn more about the difference here.
What student loans are not eligible for forgiveness?
Private student loans will not be forgiven. Programs for forgiveness are available to borrowers in certain industries and circumstances.
