A guide to student loan forgiveness programs

If you qualify, student loan forgiveness programs can eliminate some or all of your federal student loan debt.

Find out which federal student loan forgiveness programs are available to you and if you’re eligible for them. ( iStock )

Sixty-two percent of college students who graduated in 2019 had student loan debt, according to The Institute for College Access Success. The average student debt carried by those graduates was $28,950. With statistics like these, it’s no wonder so many Americans hope to take advantage of student loan forgiveness.

Student loan forgiveness, also known as cancellation or discharge, releases your obligation to repay some or all of your federal student loan debt. Reducing or eliminating your student debt burden can provide significant financial relief. But be aware that not everyone qualifies for student loan forgiveness. 

Public Service Loan Forgiveness (PSLF)

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As its name suggests, this loan forgiveness program aims to forgive federal student loans for those who work for a government or certain nonprofit organizations. Once you make 120 qualifying monthly payments under the PSLF Program, you may receive 100% forgiveness of the remaining balance on your federal student loans if you’re eligible. 

• Eligibility requirements – You must work full-time for a government entity or a tax-exempt 501(c)(3) organization and make your qualifying payments through an income-driven repayment (IDR) plan. You don’t have to make the 120 payments consecutively, but you must make them under a qualifying repayment plan. Partisan political organizations, labor unions and for-profit organizations don’t qualify for the PSLF Program.
• Loans that qualify – All Direct Loans (loans granted through the William D. Ford Federal Direct Loan Program from the Department of Education) qualify. Loans taken out under the Federal Family Education Loan (FFEL) Program and the Federal Perkins Loan Program don’t qualify, unless you first consolidate them into a Direct Consolidation Loan. Private student loans aren’t eligible for the PSLF Program.

Teacher Loan Forgiveness

The Teacher Loan Forgiveness Program provides eligible teachers with student loan forgiveness of up to $17,500 on their Direct Loans or Federal Stafford Loans. Teachers must work for five consecutive years at an elementary school, secondary school or educational service agency serving low-income students.

• Eligibility requirements – Your loans must not be in default, and you must work full-time as a highly qualified teacher for five consecutive academic years at a qualifying low-income school. “Highly qualified” means you must have a bachelor’s degree and a state certification or teaching license. One of those five years must fall after the 1997-98 academic year.
• Loans that qualify – Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford Loans

Income-Based Repayment (IBR)

An Income-Based Repayment (IBR) Plan adjusts your payment amount according to your income and family size. Income-based repayment isn’t a traditional loan forgiveness program but you can use the program for loan forgiveness. The IBR program caps your student loan payments at 10% or 15% of your discretionary income. Once you make regular payments through IBR for 20 or 25 years – depending on when you took out your loan – your remaining loan balance is forgiven.

What’s more, forgiven loan amounts under income-driven repayment plans are now tax-free through , thanks to a provision in the $1.9 trillion stimulus package passed by Congress in .

• Eligibility requirements – You need to make payments for 20 years (if you’re a new borrower on or after ) or 25 years (if you’re not a new borrower on or after that date).
• Loans that qualify – Only federal loans, including Stafford, Grad PLUS and Direct Consolidation Loans, qualify for IBR. Private student loans, Parent PLUS Loans (and consolidation loans that include a Parent PLUS Loan), FFEL PLUS Loans made to parents (and consolidation loans that include an FFEL PLUS Loan for parents) don’t qualify for IBR.