Student Loan Forgiveness: The Programs And Options
Student loan forgiveness can be your ticket to getting out of that pesky debt.
So far, it doesn’t look like student loans will just go *poof* and be forgiven any time soon, though. There’s a lot of talk, but we’ll need to see bi-partisan support for this before any actual progress is made on it.
There are a number of programs that may be able to help out with forgiveness based on your current financial situation, employment status, or profession. You can leverage these to build a better financial future for yourself.
In 2021, student loan debt has ballooned to being over $1.7 trillion dollars. That’s scary.
We put together a list explain the different student loan forgiveness programs. Below, you can see which fits your unique situation – and loans, the most.
Income-Based Repayment Plan (IBR Plan)
Pay As You Earn Repayment Plan (PAYE Plan)
Revised Pay As You Earn Repayment Plan (REPAYE Plan)
Income-Contingent Repayment Plan (ICR Plan)
Public Service Loan Forgiveness (PSLF)
Special Circumstance Student Loan Discharge – student loan forgiveness program
Lawyer student loan repayment assistance
Loan Forgiveness for Nurses
Loan Forgiveness for Teachers
Student Loan Repayment Assistance For Doctors
Federal Perkins Loan Cancellation
Forgiveness and Assistance For Military Members
Total and Permanent Disability Discharge (New in 2019, double check if this one is real yet)
Student Loan Forgiveness: Income-Based Repayment Plan (IBR Plan)
The income-based repayment plan is one of the four income-driven repayment plans offered. The rates and terms for IBR vary depending on when student loans were borrowed. If your loans were taken out on or after July 1st, 2014, you will be considered a “new borrower” and payments are typically 10% of discretionary income. Student loan forgiveness would be provided after 20 years of qualifying payments.
Borrowers who took out loans pre-July 1st 2014 typically have payments capped at 15% of their discretionary income with forgiveness after 25 years of qualifying repayment.
Pay As You Earn Repayment Plan
This student loan forgiveness plan involves monthly payments that are typically equal to 10% of your discretionary income divided by 12. Your discretionary income is basically your available spending money.
That’s after taxes and other necessary expenses like your rent and food. The payment is calculated based on the size of your family, total eligible federal student loan balance, and your adjusted gross income (AGI).
Only Direct Loans qualify for this plan and you must be a new borrower as of 10/01/2007 (October 1st, 2007). Additionally, your Direct Loan must have been disbursed on or after October 1st, 2011.
New borrowers are those that had no outstanding balance on an FFEL Program loan or a Direct Loan when receiving a Direct Loan or FFEL Program loan on or after Oct 1st 2007. Make sure that this is your status if you plan to try and get student loan forgiveness this way.
Revised Pay As Your Earn Repayment Plan (REPAYE)
REPAYE is very similar to the previous student loan forgiveness plan discussed in terms of how payments are calculated. It’s 10% of your discretionary income divided by 12. The monthly payment calculation is based on your AGI, total eligible federal student loan balance and your family’s size.
The major difference is that Federal Direct PLUS Loans and Federal Direct Consolidation Loans containing at least one Federal Parent PLUS are not eligible for the REPAYE plan.
People participating in the Federal Family Education Loan Program (FFEL Program) are also not eligible for the plan.
Income-Contingent Repayment Plan (ICR Plan) for student loan forgiveness
Recent updates have been announced for how the ICR Plan Formula will be calculated as it relates to the William D. Ford Federal Direct Loan Program. Those can be reviewed here.
The Income-Contingent Repayment Plan is a student loan forgiveness repayment plan where you pay monthly payments that are the lesser of two things. Either, 20% of your discretionary income divided by 12 or what you would pay on a repayment plan with a fixed monthly payment over 12 years.
This plan is the only IDR option available for parent PLUS loan borrowers. It should be noted, however, that parents first need to consolidate their Direct PLUS Loans or Federal PLUS Loans into a Direct Consolidation Loan and then repay that new loan under this ICR Plan.
PLUS loans made to parents cannot be repaid under any IDR plan. The only way currently is to convert it into the Direct Consolidation Loan first.
Public Service Loan Forgiveness (PSLF)
In order to potentially qualify for PSLF, you will need to be employed by a U.S. federal, state, local, or tribal government or a not-for-profit organization. However, not everyone in those statuses of employment necessarily qualify.
Under this program, you can receive student loan forgiveness after making 120 qualifying monthly payments under a qualified repayment plan and while you work full-time for an employer that qualifies.
Check this out for the full run-down on what makes a person a fit for PSLF.
Special Circumstance Student Loan Discharge
Most people will not qualify for student loan forgiveness through discharge. However, it’s worth checking out the application on the studentaid.gov website.
You may be eligible for this if your school closed unexpectedly and you were unable to complete your education.
Lawyer student loan repayment assistance
There are a couple programs out there for law school graduates to take a look. The first is the Department of Justice’s Attorney Student Loan Repayment Program (ASLRP).
It’s an agency recruitment and retention incentive program. Attorneys are selected on a competitive basis (subject to availability of funds). When a person is accepted to the ASLRP, a 3-year service obligation to Justice is triggered.
More info is available on their website here about this student loan forgiveness program.
You can also look into LRAPS, or Loan repayment assistance programs. These are for law school graduates working in the public interest sector, government, or legal fields that don’t pay very much.
You can see a list of schools that have these programs on the American Bar website here and also statewide LRAPS, too.
Student Loan Forgiveness: Final Thoughts
No question about it, student loans are a dilemma. We aren’t really sure how to handle the $1.7 trillion crisis, however, certain people can leverage these programs to get some relief. Unfortunately, a lot of people who have entered these programs have run into all kinds of trouble in the past. For this reason, take caution when applying and make sure you read all the fine-print. Every little detail is important with these programs and you need to make sure you understand everything to avoid making a bunch of payments only to find out that your balance won’t be forgiven. Good luck!