Student Loan Forgiveness & Discharge
Student loan forgiveness is a process by which you can shed some or all of your educational debt. In exchange, you enter certain fields or choose certain careers. Typically, it is only applicable to federally funded student loans and not to private education loans.
How To Get Your Student Loans Forgiven: Three Paths
Student loan forgiveness is not easy to achieve, but there are three primary ways to get your student loan forgiven: one based on what type of career you choose (Public Service Loan Forgiveness), one based on you how many years you make on-time payments on a qualifying repayment plan, and one based on your ability to work and meet your loan obligations (student loan discharge). The first two are available for Federal student loans only and the last one is achievable for private student loans, as well.
Public Service Loan Forgiveness Program (PSLF)
Public Service Loan Forgiveness was created by the College Cost Reduction and Access Act of 2007 to encourage highly-qualified graduates to pursue careers in the public service sector, while lessoning the burden of student loans. In order to receive loan forgiveness under this program, you must be working in a public service job, consolidate your federal student loans to a qualifying repayment program, and make 10 years of on-time payments.
To qualify for this program, you must be making payments under the income-contingent, income-based, pay-as-you-earn or standard repayment plan.
As the program was created in 2007, no one has yet received loan forgiveness under this plan. The first group to qualify for Public Service Loan Forgiveness will meet the final requirement in 2017.
This forgiveness option applies solely to federal student loans. Private student loans are not eligible for Public Service Loan Forgiveness.
Career fields that qualify include education, law enforcement, health, public law, and veterinary medicine. For more information on this path to loan forgiveness, visit Public Service Loan Forgiveness.
Loan Forgiveness after 20 or 25 Years of On-Time Payments
The second kind of loan forgiveness is based on how long you make on-time payments, under a qualifying repayment plan. You do not need to be working in a specific career field to qualify for loan forgiveness based on your repayment history.
To qualify for loan forgiveness after 20 years of on-time payments, you must be enrolled in the pay-as-you-earn repayment plan during your 20 years of payments. This repayment plan will generally offer you the lowest monthly payment. To enroll in this repayment plan, you must demonstrate a financial hardship. You may remain in the program, however, after the hardship has resolved.
To qualify for loan forgiveness after 25 years of on-time payments, you must be enrolled in the income-contingent, or income-based repayment plans during your 25 years of payments.
Forgiveness based on 20 or 25 years of on-time payments is only available to Federal Student loans. Private student loans do not qualify.
Student Loan Discharge
There’s one additional way to achieve student loan forgiveness which is called discharge. Discharge is granted under very rare circumstances, like permanent disability or death. It is generally awarded by a judge and can apply to both Federal and private student loans. Read more about the differences between forgiveness and discharge.