How Can You Qualify for Student Loan Forgiveness?
From March 2020 through at least September 30, 2021, the interest rate on federal student loans has been set to zero percent, providing many loan holders with some much-needed breathing room.[1] But for others, the interest rate holiday pales in comparison to the ultimate form of student loan relief—loan forgiveness. What forgiveness programs are available, and how can you qualify?
Student Loan Forgiveness Programs
Perhaps the most well-known federal student loan forgiveness program is Public Service Loan Forgiveness (PSLF). Borrowers can qualify for PSLF if they make payments for 10 years (120 payments total), with all payments made while the borrower is working full-time in a qualified public service position.[2] Because most federal student loans are subject to a standard repayment period of 10 years, the only borrowers who will benefit from PSLF are those who are in an income-sensitive payment plan that extends the total pay period beyond 10 years (such as Pay as You Earn, Income-Based Repayment, or Income-Contingent Repayment).[3]
Another loan forgiveness program is Teacher Loan Forgiveness (TLF). This program offers forgiveness of up to $17,500 in federal student debt if a borrower teaches in a low-income school for five years.[4] Science, math, and certain special education teachers may be eligible for the full $17,500 in forgiveness, while all other elementary and secondary school teachers can receive up to $5,000 in forgiveness.
Closed School Discharge is available to borrowers who have taken out loans to attend a school that closed after the student enrolled or before they could graduate.[5]
Finally, borrowers who have become disabled after taking out federal student loans may be able to take advantage of the Total and Permanent Disability Discharge. This discharge is available for borrowers who have suffered a disabling condition that has lasted (or is expected to last) 60 months and will end in the borrower's death.[6]
Similarities and Differences Between These Loan Forgiveness Programs
It's first important to note that each of the above-listed programs applies exclusively to federal student loans. Private loans can have widely varying terms and conditions; although disability discharge and other forms of forgiveness might be available, they can be harder to track down.[7]
The qualifications for student loan forgiveness can vary depending on the program. These guidelines are strict; if you don't meet each one, don't expect your application to be approved.
- Neither PSLF nor the Disability Discharge program puts any cap on the amount that can be discharged;[8] TLF limits this amount to either $5,000 or $17,500.[9]
- There is no partial forgiveness for PSLF. In other words, you're in the same position after making payment 119 as you were after making the first payment—until you make payment 120, you're ineligible. However, partial forgiveness or discharge may be available for teachers, disabled individuals, and those who attended a closed school.[10]
- Both PSLF and TLF require the borrower to work in a certain position or at a certain type of employer. For Disability Discharge and Closed School Discharge, the borrower's current employer is irrelevant.[11]
Although forgiveness may not be an option for every borrower, these programs can provide a tremendous benefit to anyone whose student loans are putting a strain on their finances.
Important Disclosures:
This material is for general information only and is not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
[1]https://studentaid.gov/announcements-events/coronavirus
[2]https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service
[3] https://studentaid.gov/sites/default/files/public-service-loan-forgiveness-employment-certification-borrower-letter.pdf
[4]https://studentaid.gov/manage-loans/forgiveness-cancellation/teacher
[5]https://studentaid.gov/manage-loans/forgiveness-cancellation/closed-school
[6]https://studentaid.gov/manage-loans/forgiveness-cancellation/disability-discharge
[7] https://www.nerdwallet.com/article/loans/student-loans/private-student-loan-forgiveness
[8] https://www.forbes.com/sites/markkantrowitz/2021/02/16/student-loan-forgiveness-myths/?sh=34cc61f050c5
[9] https://studentaid.gov/manage-loans/forgiveness-cancellation/teacher
[10] https://studentaid.gov/help-center/answers/article/partial-forgiveness-for-some-qualifying-payments
[11] https://www.usnews.com/education/blogs/student-loan-ranger/articles/2017-12-20/5-differences-between-pslf-teacher-loan-forgiveness
Sources
https://studentaid.gov/sites/default/files/public-service-loan-forgiveness-employment-certification-borrower-letter.pdf
https://www.nerdwallet.com/article/loans/student-loans/private-student-loan-forgiveness
https://studentaid.gov/manage-loans/forgiveness-cancellation/teacher
https://www.forbes.com/sites/markkantrowitz/2021/02/16/student-loan-forgiveness-myths/?sh=34cc61f050c5
https://studentaid.gov/help-center/answers/article/partial-forgiveness-for-some-qualifying-payments
https://www.usnews.com/education/blogs/student-loan-ranger/articles/2017-12-20/5-differences-between-pslf-teacher-loan-forgiveness
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