Student Loan Forgiveness - The Ultimate Guide

Are you looking for student loan forgiveness options?

We have created a simple guide that will help student loan borrowers like you identify several programs they can take advantage of. Check this article and take notes of the programs that might work for you.

Next, you can read more about each option in our blogs and get to know your options in more detail.

What Is Student Loan Forgiveness?

Student loan forgiveness is a program capable of eliminating your student debt - partially or fully. In different scenarios, student loan cancellation and discharge programs can be used instead of student loan forgiveness. However, they all serve a single purpose: reducing the financial burden of student loan borrowers.

Loan forgiveness programs can be provided by federal, state, or local governments. Different organizations can generate funds to help borrowers repay debt in return for service or depending on the financial situation. In this guide, we will mainly discuss the forgiveness programs supported by the US federal government.

What is Student Loan Discharge?

Student Loan Discharge is similar to forgiveness. However, discharge usually eliminates the whole debt. Besides, discharge can depend on uncontrollable, external factors. For example, closed school discharge cancels the student loans of borrowers whose schools closed before they could graduate.

It is not possible to progress toward such a discharge program by, e.g., serving in return. If the school closes, the borrower gains automatic eligibility.

How Does Student Loan Forgiveness Work?

Sure, not everyone can get debt relief. Borrowers usually get qualified for loan forgiveness due to their service, such as in the public sector or as teachers in poor schools. Once the borrowers provide the service, they get eligible for forgiveness.

For example, Public Service Loan Forgiveness eliminates the remaining debt of the borrowers when they make 120 qualifying payments while working in a public organization. However, there are exceptions.

Borrowers’ Defense to Repayment is also a forgiveness program, but borrowers do not need to serve in return. We will discuss the details in subsequent sections.

More on this>>>How Do Student Loans Work in 2021?

Your Student Loan Forgiveness Options

If you have a federal loan, you will have several student loan forgiveness and discharge options. The government worries about the increasing student loan debt amounts and helps borrowers repay the debt.

However, the options for private loan borrowers are limited. We will present main forgiveness and discharge programs in the following sections, but you will need to check each option in detail through our blogs or on the official Student Aid website.

1. Public Service Loan Forgivenes

Eligibility Requirements for PSLF:
- be employed by a non-profit organization or the US government
- work either full time or at least 30 hours for that agency
- make 120 qualifying payments
- repay your loans under an income-driven payment plan
- have Direct Loans or consolidate your loans into Direct Loans

Public Service Loan Forgiveness is one of the most trusted and preferred options to eliminate federal student loan debt. This program eliminates remaining debt once the debtors make 120 qualifying payments. Therefore, it takes a minimum of 10 years to achieve forgiveness.

The borrower should work for a federal, state, local, tribal, or non-profit organization during the whole period. You can work full-time or part-time, but your total work hours should be a minimum of 30 hours per week. Borrowers should enroll in Income-driven repayment plans and pay the total billed amount on time so that their payments qualify for 120 payment requirements.

Pros
• 100% debt elimination
• Non-taxable forgiveness
• Repayment with affordable repayment plans

Cons
• Minimum ten years till the forgiveness
• Hard to get 120 qualifying payments
• Extensive eligibility requirements

What is Expected from the Public Service Loan Forgiveness in 2021-22?

President Biden acknowledges the importance of the PSLF program as it helps people serving the nation. However, he believes the program is complex and hard to achieve for borrowers. Hence, in his “Plan for Education beyond High School,” he suggests simplifying the program.

The New PSLF program should grant $10,000 per service year, and borrowers can get a maximum of $50,000 in return for a five-time application. This plan eliminates the cons of PSLF, such as long periods of waiting till forgiveness, and makes it easy to benefit.

However, it also reduces the benefit amount. Currently, borrowers can get 100% debt cancellation with the PSLF, but if Biden’s suggestions are applied, the maximum forgiveness amount will be $50,000.

Further reading>>> Public Service Loan Forgiveness

More on this>>> Joe Biden’s Student Loan Plan: What can Change in 2021?

2. Borrowers’ Defense to Repayment

Another excellent student loan forgiveness program is Borrowers’ Defense to Repayment, also known as Borrower’s Defense Rule or Borrower’s Defense Against Repayment. This program protects the rights of students whom their schools misled.

In recent years, schools, specifically for-profit ones, have lied to students about the actual cost of education, curriculum content, student loans, etc., to convince them to enroll. As a result, students made wrong decisions and faced challenges while studying. Borrower’s Defense Rule allows these students to get rid of the accumulated debt if they can prove the misleading actions of the school.

Hence, borrowers should collect evidence like email communications, contracts, or brochures where false information is shared and apply to Borrowers’ Defense to a Repayment program. You can get partial or full forgiveness.

Pros
• No mandatory service is required in return
• Non-taxable forgiveness
• Biden plans to revive the program

Cons
• Proving the school’s wrongdoing can be hard
• Prior conflicts decreased the attractiveness of the program

What is Expected from the Borrowers’ Defense to Repayment in 2021-22?

During the Trump Administration, Borrower’s Defense Rule lost its attractiveness. The previous Education Secretary did not support this program believing that it was unfair to other taxpayers who have no student loan debt.

Hence, the application review process for this student loan forgiveness program was delayed, and many borrowers got rejections. Besides, the calculation method for what percentage of discharge the borrower qualifies for was changed. As a result, some borrowers got approval for forgiveness but received 0% discharge.

Luckily, Biden supports this program. New Education Secretary already granted complete forgiveness to borrowers who received partial forgiveness before. They are also working on changing the discharge calculation method. Hopefully, with Biden’s support, more people will benefit from this student loan forgiveness program.

Further reading>>> More than 100,000 Borrowers Get Student Loan Debt Forgiveness.

More on this>>> Borrower’s Defense in 2021: Can Joe Biden Revive the Program?

3. Teacher Loan Forgiveness

Eligibility Requirements for Teacher Loan Forgiveness:
- Teach for at least 5 consecutive academic years
- Teach at an elementary or secondary school of low-income students

If you serve or plan to serve in schools providing education to children of low-income families, you can apply for Teacher Loan Forgiveness. This student loan forgiveness program grants either $17,500 or $5,000 in return for five consecutive service years. Highly qualified teachers in science, math and special education areas will receive $17,500. This program applies to Direct and FFEL loans. You can apply for Teacher Loan Forgiveness by submitting the application form to your loan servicer.

Pros
• Short service period

Cons
• Lower forgiveness amount

More on this>>> Teacher Loan Forgiveness Program: Eligibility Requirements

4. Perkins Loan Cancellation

If you have Perkins loans, you can get rid of 100% of the debt through Perkins Loan Cancellation. This program applies to teachers, nurses, firefighters, attorneys, military members, and volunteers (in AmeriCorps VISTA and Peace Corps).

The full discharge is accessible in five years. In the first two years of service, the borrowers receive 15% discharge, followed by 20% discharge for the next two years. Finally, in the fifth year, applicants receive 30% forgiveness for the remaining outstanding balance.

Pros
• 100% discharge
• Applies to diverse professions

Cons
• Only Perkins Loans are eligible

More on this>>> How Does Perkins Loan Forgiveness Get You Out of Debt

5. Closed School Discharge

In recent years, many for-profit schools have closed. Students were left with no degree but with vast amounts of student loan debt. Luckily, the government cares about these students. Closed School Discharge applies to borrowers who were studying or withdrew in a short period before the closure. However, you should not transfer your credits to a comparable program to qualify for forgiveness. If you continue your education to a similar degree, you will lose eligibility.

It is possible to apply for the Closed School Discharge through the loan servicer, but an automatic discharge will happen within three years.

Pros
• 100% discharge
• Non-taxable forgiveness
• Easy qualifications

Cons
• It only applies to school closure cases
• It is not accessible if continuing education in a comparable degree

More on this>>> Here is a Way to Get Rid of Student Debt for Closed School

6. Total and Permanent Disability Discharge

Disability discharge eliminates the whole debt once the borrower proves total and permanent disability. It applies to Direct, FFEL, or Perkins loans. Borrowers can prove disability through Veteran Affairs or Social Security documentation and Physician’s certification.

In some cases, the Education Department reaches the borrower to offer discharge as they get regular information about eligible debtors from VA and SSA. Borrowers who get documents from SSA or a Physician are subject to a three-year monitoring period. If during this period, their disability eligibility is eliminated, they will lose discharge. Therefore, they will be required to continue repaying the debt.

Pros
• Full discharge
• Applies to a wide variety of loans
• Automatic eligibility

Cons
• Discharge status can be lost in the 3-year monitoring period

More on this>>> Student Loan Forgiveness for Disability: 100% Debt Discharge

7. Bankruptcy Discharge

It is technically possible to get student loan forgiveness through a bankruptcy discharge. However, it is not recommended due to many negative consequences. Borrowers should prove undue hardship to be eligible for bankruptcy discharge. It means borrowers should prove that they might not survive if they repay the debt. Besides, debtors should indicate that they have done everything possible to repay the loans.

Pros
• Full forgiveness might be possible

Cons
• Adverse impact on credit history
• Hard to prove undue hardship

8. Private Student Loan Forgiveness

When it comes to private student loans, it is hard to find an option to get forgiveness. Private lenders provide private loans. Private companies are interested in profitability which is why they do not bother themselves with forgiveness. Only a few lenders allow disability and death discharge. If you have private loans, you should contact your lender to learn about the options.

There also exist programs that can be an alternative to forgiveness as they reduce the debt obligations. For instance, student loan refinancing is one of the best alternatives for private borrowers. This program can help you reduce interest rates and save money.

More on this>>> Private Student Loan Forgiveness Alternatives

Pros
• Both federal and private loans are eligible
• Fast solution

Cons
• Usually less effective than federal student aid programs

9. Joe Biden’s Student Loan Forgiveness

Before Biden was elected, he expressed his support for $10,000 student loan forgiveness per borrower. However, later, some Democrats started to pressure him to grant not $10,000 forgiveness but $50,000 loan cancellation per borrower. Besides, the Democrats asked the President to provide forgiveness through executive action without getting Congress approval.

Biden currently does not favor executive action, and he noted that if Democrats want forgiveness, they should convince others and get Congress approval. Among people, this suggestion is highly supported.

Yet, this forgiveness is ambiguous. It is not expected that Biden’s loan forgiveness proposal will be put into law in a short period. Hence, it is better to check other forgiveness programs rather than waiting for direct forgiveness.

More on this>>> $50,000 Student Loan Forgiveness: Coverage, Benefits, and Conflicts

Here is a Free Consultation for You

Now that you are familiar with student loan forgiveness options, select a few you might qualify. However, before taking any action, we advise you to get expert help. Like those in Student Loans Resolved, student loan experts have helped hundreds of borrowers who share similar concerns as you do. Our experts know which program fits your situation the best and how to maximize your chances in the application. We offer a FREE consultation - call us now to explore your options.