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Debt Forgiveness for Student Loans: Myth or Reality?

debt forgiveness for student loans

When you are in big trouble, you might think there is no way out. Feeling the burden of debt on your shoulders- late payments, inability to afford the repayment, or simply the long payback period- can make you lose all your hopes. Luckily, there is a way to get rid of your debt even without making a payment. This magical way is called student loan forgiveness. Forgiveness usually covers your debt fully or partially, in return for service commitment or simply a condition like disability. If you have federal loans, you have easy access to debt forgiveness for student loans. There exist several programs that can erase your debt instantly. For private lenders, it is hard to find a forgiveness option, but we know a method to help such borrowers save money. Check out this guide now to find out which forgiveness programs you qualify for. 

1. Public Service Loan Forgiveness

Public Service Loan Forgiveness (PSLF) is one of the most popular debt forgiveness programs. If you enroll in PSLF, you get rid of the remaining debt once you make 120 qualifying payments. All your payments should be in full amount. You should work for a public organization during the repayment period – federal, state, tribal, local or nonprofit establishment. Besides, it is mandatory to enroll in Income-Driven Repayment plans.

Only Direct loans qualify for this program. This option of debt forgiveness for student loans grants unlimited debt cancellation, whether you have $1000 or $10,000 after the repayment. However, it takes a minimum of 10 years to get forgiveness which is the main disadvantage. 

TEPSLF- Temporary Extended Public Service Loan Forgiveness

Many borrowers failed the Public Service Loan Forgiveness program because some or all of their payments did not meet qualification criteria. Keep in mind that 120 qualifying payments do not need to be consecutive. Even if you had some unqualifying payments, you could continue to meet the 120 payment criteria. 

TEPSLF is a branch of the PSLF program which allows borrowers to get forgiveness if some of their payments were disqualified. However, this program has limited funding. Hence, borrowers should act fast to benefit from this forgiveness opportunity.

Application Process

Before you decide to apply, make sure you get familiar with all conditions of the program on the Student Aid website or our blogs. 

To apply for these programs, you need to fill the PSLF/PSLF form and add employer certification. FedLoan Servicing is the loan servicer dealing with this debt forgiveness for student loans. Hence, you need to submit the forms by mail or fax to the FedLoan Servicing. Alternatively, if this organization is already your loan servicer, you can use its online platform.

2. Borrowers’ Defense to Repayment

Borrowers’ Defense to Repayment is an excellent program that thrived during Obama’s administration. This program aims to protect students who were misled by their schools. Some schools lied to students about job replacement rates, the true cost of education, or the quality of education. Hence, students made the wrong decision for enrollment and accumulated huge debt. Obama believed that making such students repay the debt is unfair treatment.

If you can prove that your school engaged in illegal, unethical activities which influenced your decisions, you can get partial or complete debt forgiveness for student loans. However, you can apply for forgiveness only for Direct loans. 

Luckily, the Biden administration also highly supports this program. Hence, you have a higher chance of getting forgiveness than before. Recently, the Education Department secretary announced that they are granting full forgiveness to borrowers who received only a partial discharge during the Trump administration.

Application Process

Application to this debt forgiveness for student loans is possible through the Student Aid platform. You need to fill an application form that explains all details of your loan, personal information, why you believe the school misled you, etc. 

You have to be as clear as possible while filing the application form. Design your arguments in a logical sequence. Include all details of why you believe you qualify for loan forgiveness. It is highly advisable to provide supporting documents that prove unfair treatment. 

For example, submit it as evidence if you have a brochure where the school lied about education costs or job replacement rates. Besides, your agreements with the school or email communications with the enrollment officers can help you develop a strong case.

3. Teacher Loan Forgiveness

debt forgiveness for student loans

Do you plan to have a teaching career? You might get rid of up to $17,500 student loans if you qualify for Teacher Loan Forgiveness. This debt forgiveness for student loans is available to Direct and Stafford loans, whether subsidized or unsubsidized. You need to have worked as a full-time teacher for five consecutive years, out of which at least one year is after the 97-98 academic year.

Additionally, teachers should work in schools that serve low-income families. Schools can be elementary, secondary, etc. Basic requirements are having at least a bachelor’s degree, certification or license. You can receive $17,500 forgiveness if you are a highly qualified teacher. Such teachers work in mathematics, science, or with children with specific needs. 

You can apply for both Public Service Loan Forgiveness and Teacher Loan Forgiveness to get rid of your debt. However, you cannot do it during the same working period. In other words, while you serve five years for Teacher Loan Forgiveness, you cannot progress for PSLF. 

Application Process

Before you apply for this debt forgiveness for student loans, you need to serve for five years as required. After this period, you should fill in the application form and submit it to your loan servicer. Keep in mind that there is a separate section in the application form for employers. Your school officer or agency where you served should fill this section.

4. Perkins Loan Cancellation / Discharge

The abovementioned programs are mostly available for Direct or FFEL loans. However, you can apply for the Perkins Loan Cancellation and Discharge program if you have Perkins loans.

Perkins Loan Cancellation is usually available to teachers, and it grants 100% forgiveness. If you work as a teacher in public or nonprofit schools, you can qualify for this debt forgiveness for student loans. For the first two years of service, you will get 15% debt forgiveness. Then, for the 3rd and 4th years, your discharge percentage will be 20%. Finally, in the fifth year, you will receive a 30% deduction for your debt balance. 

Besides teachers, firefighters, military personnel, nurses, public defenders, or Volunteers in the Peace Corps can apply to this program. You can view the full list on the Student Aid website. 

Meanwhile, the Perkins Loan Discharge program also exists. If you are a veteran, spouse of a victim of 9/11, face bankruptcy, school closure, or disability, you can get your student loan discharge

Application Process

You need to contact your loan servicer or the school where you got Perkins’s loans to start the application process. In this way. The school or loan officer will share the details of how to apply for this debt forgiveness for student loans. If you want to get expert help, you can also contact our debt specialists.

5. Total and Permanent Disability Discharge

Another highly beneficial program is Total and Permanent Disability discharge. If you have a total and permanent disability, you can get debt forgiveness for student loans- Direct, FFEL, and Perkins loans. However, first, you need to prove your disability.

The government accepts documentation on disability from Veteran Affairs, Social Security Administration, and physicians with valid licenses. The Education Department usually works with SSA or VA to get information on borrowers who could qualify for this debt forgiveness program. Sometimes, they can directly contact you without even your application. However, you can also submit the documentation to get a discharge.

If you get documentation from SSA or a physician, you will be subject to a 3-year monitoring period. During this time, if your disability conditions improve and you gain employment capability, you might lose discharge status. As a result, borrowers can become responsible for debt repayment again.

Application Process

Nelnet is the loan servicer for this debt forgiveness for student loans. Hence, you need to submit your application request to Nelnet. If you want to apply, contact the loan servicer by phone or email. Besides, you can start an application online.

Once you submit your request, the Nelnet loan servicer will check the records to determine if you qualify for forgiveness. Next, they will suspend your debt repayment for 120 days to finalize the application. During this time, you do not need to make payments.

While applying, you need to fill Section 1-3 and add your supporting documents if an SSA or VA document is used. In case of getting a physician’s validation, let the physician complete Section 4. 

6. Closed School Discharge

Sometimes schools close while studying or shortly after withdrawal which makes students’ degrees less worthy. Even several schools closed due to losing accreditation, gained bad reputation and employers lost trust toward these school’s diplomas. Hence, it should be unfair if the student borrowers still continue making debt payments.

Closed School Discharge helps borrowers to get rid of their debt if their school closes while studying or shortly after withdrawal. This debt forgiveness for student loans covers 100% of the total debt balance. However, you should not use the credits to continue your education in another school. In such a case, you will not qualify for the forgiveness opportunity.

The law allows forgiveness of students who were enrolled at the time of closure or who were on a maximum 120 days period after withdrawal. Yet, if your loan was first disbursed after July 2020, this period is extended to 180 days.

Additionally, keep in mind that you still qualify for discharge even if you received a diploma but did not finalize the program. 

Application Process

Usually, Closed School Discharge happens automatically. Once you qualify for the forgiveness, the loan servicer contacts you about the possibility. However, it takes three years till automatic discharge is applied. If you do not want to wait, you can contact your loan servicer and explain why you qualify for the discharge.

7. Other Federal Discharge Programs

debt forgiveness for student loans

In general, forgiveness programs can demand service in return, like in the case of PSLF or Teacher Loan Forgiveness. However, discharge usually happens due to uncontrollable factors. We have already got familiar with Closed School and Disability Discharge. In addition, there exist some other discharge options such as death, bankruptcy, false certification, etc.

You can get familiar with each of the mentioned options on the Student Aid website or through Student Loans Resolved blogs. Make sure you read a lot and understand all eligibility requirements. 

It is also advisable to contact a third-party debt specialist, like the ones in SLR, who can guide you through the best options. Our experts will collect information about your finances, make extensive analyses and find the most suitable loan forgiveness program. We have helped thousands of borrowers sharing the same struggles as you do. So schedule a free consultation now for a debt-free future. 

8. State Student Loan Forgiveness

The abovementioned programs for debt forgiveness for student loans are provided by the federal government or Education Department. If you do not qualify for them, you can also look for local programs that your state provides. 

For example, Alaska has a program called “SHARP,” which aims to increase the number of healthcare professionals in underserved areas. It is possible to get up to $47,000 debt forgiveness/loan repayment in exchange for a commitment agreement. This program can be a great opportunity if you work in the medical, dental, or behavioral fields. 

Similarly, other states have their own programs. They might not offer high benefits as federal programs do, but they are still worth trying if you have student loans.

9. Private Student Loan Forgiveness

Unfortunately, federal debt forgiveness for student loans is not available to private student loans. In addition, most of the state programs also do not cover the private debt. Hence, private loan borrowers usually face a hard time finding a forgiveness opportunity.

In general, if you need student loans, first explore your federal options. Why? First, federal loans are cheaper. The government thinks about the welfare of students before profitability. Hence, it requires only a small interest rate. Meanwhile, private lenders require high interest because their goal is profitability. 

Second, the government offers different forgiveness and discharge options to stimulate employees or help them during financial hardships. However, the government cannot pressure private lenders to do so. Hence, private lenders do not give you a chance to get rid of the debt. You lose the qualification to almost all federal loan forgiveness programs when you get a private loan.

Only a few private lenders can grant debt forgiveness for student loans. Unfortunately, such programs are usually for the borrower’s death or, in the case of total disability. Still, even these forgiveness options are hard to find.

Therefore, what private loan borrowers can do is refinancing their debt. We will discuss what is refinancing in the subsequent section.

What is Student Loan Refinancing?

Let us first tell you what refinancing is not. It is not a forgiveness or discharge option. Rather refinancing allows you to change your loan to a cheaper option and save money. 

For example, if interest rates start falling, your loan interest might not change if it is fixed. Hence, you can refinance your loan- get a new loan from a different lender and use the money to pay out your existing loan. In this way, you will change your lender and qualify for a lower interest rate. However, you need to be careful. Read the loan terms carefully and ensure that the new loan has more favorable terms.

You can refinance both federal and private loans. However, it is advisable not to refinance federal loans because, in this case, you will lose eligibility to federal debt forgiveness for student loans. 

Eligibility Conditions

Student loan refinancing companies mostly require three conditions- stable income, good credit performance, and a co-signer. Income and high credit score -650 or higher- guarantee that the borrower will be able to repay the debt. If you have an average or bad credit history, a co-signer can be mandatory. However, there still exist companies that do not require a co-signer for reliable borrowers.

Application Process

To refinance your loan, first, start with analyzing the market. Find several refinancing companies and compare their requirements. Sure, the one with the lowest interest rate is usually desirable.

Before you apply, see if you can find a ‘pre-selection test’ on lenders’ official websites. Such tests or tools are online, and you can submit your data to determine your approximate interest rate. Using these tools does not affect your credit performance. However, if you apply and get a rejection several times, your credit score can be lower.

Final Words

There exist several options for eliminating your debt. Federal and state programs are usually the most attractive ones to get rid of your debt. However, they can require a service commitment in return or a condition, like disability. 

Meanwhile, it is hard to find debt forgiveness for student loans if you have private debt. One of the best options for private borrowers is refinancing. In short, if you want to get forgiveness, check all options and find which one suits your conditions the best. Additionally, you can contact our debt specialists for free to explore your options.