A guide to student loan forgiveness programs

Sixty-two percent of college students who graduated in 2019 had student loan debt, according to The Institute for College Access & Success. The average student debt carried by those graduates was $28,950. With statistics like these, it’s no wonder so many Americans hope to take advantage of student loan forgiveness.

Student loan forgiveness, also known as cancellation or discharge, releases your obligation to repay some or all of your federal student loan debt. Reducing or eliminating your student debt burden can provide significant financial relief. But be aware that not everyone qualifies for student loan forgiveness.

Here’s what you need to know about student loan forgiveness programs.

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• Public Service Loan Forgiveness (PSLF)
• Teacher Loan Forgiveness
• Income-Based Repayment (IBR)
• Income-Contingent Repayment (ICR)
• Other types of student loan forgiveness
• Perkins Loan cancellation and discharge
• Closed school discharge
• Total and permanent disability discharge
• Discharge due to death
• False certification discharge
• Unpaid refund discharge
• Borrower defense loan discharge

Public Service Loan Forgiveness (PSLF)

As its name suggests, this loan forgiveness program aims to forgive federal student loans for those who work for a government or certain nonprofit organizations. Once you make 120 qualifying monthly payments under the PSLF Program, you may receive 100% forgiveness of the remaining balance on your federal student loans if you’re eligible.

• Eligibility requirements — You must work full-time for a government entity or a tax-exempt 501(c)(3) organization and make your qualifying payments through an income-driven repayment (IDR) plan. You don’t have to make the 120 payments consecutively, but you must make them under a qualifying repayment plan. Partisan political organizations, labor unions and for-profit organizations don’t qualify for the PSLF Program.
• Loans that qualify — All Direct Loans (loans granted through the William D. Ford Federal Direct Loan Program from the Department of Education) qualify. Loans taken out under the Federal Family Education Loan (FFEL) Program and the Federal Perkins Loan Program don’t qualify, unless you first consolidate them into a Direct Consolidation Loan. Private student loans aren’t eligible for the PSLF Program.

Teacher Loan Forgiveness

The Teacher Loan Forgiveness Program provides eligible teachers with student loan forgiveness of up to $17,500 on their Direct Loans or Federal Stafford Loans. Teachers must work for five consecutive years at an elementary school, secondary school or educational service agency serving low-income students.

• Eligibility requirements — Your loans must not be in default, and you must work full-time as a highly qualified teacher for five consecutive academic years at a qualifying low-income school. "Highly qualified" means you must have a bachelor’s degree and a state certification or teaching license. One of those five years must fall after the 1997-98 academic year.
• Loans that qualify — Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford Loans

Income-Based Repayment (IBR)

An Income-Based Repayment (IBR) Plan adjusts your payment amount according to your income and family size. Income-based repayment isn’t a traditional loan forgiveness program but you can use the program for loan forgiveness. The IBR program caps your student loan payments at 10% or 15% of your discretionary income. Once you make regular payments through IBR for 20 or 25 years — depending on when you took out your loan — your remaining loan balance is forgiven.

What’s more, forgiven loan amounts under income-driven repayment plans are now tax-free through Jan. 1, 2026, thanks to a provision in the $1.9 trillion stimulus package passed by Congress in March 2021.

• Eligibility requirements — You need to make payments for 20 years (if you’re a new borrower on or after July 1, 2014) or 25 years (if you’re not a new borrower on or after that date).
• Loans that qualify — Only federal loans, including Stafford, Grad PLUS and Direct Consolidation Loans, qualify for IBR. Private student loans, Parent PLUS Loans (and consolidation loans that include a Parent PLUS Loan), FFEL PLUS Loans made to parents (and consolidation loans that include an FFEL PLUS Loan for parents) don’t qualify for IBR.

Income-Contingent Repayment (ICR)

Like the Income-Based Repayment Plan, the Income-Contingent Repayment (ICR) Plan aims to help you reduce your payments based on your income and family size. If you qualify, your payment will be the lesser of 20% of your discretionary income or what you’d pay on a fixed 12-year repayment plan.

• Eligibility requirements — After making regular on-time payments for 25 years, your remaining loan balance will be forgiven.
• Loans that qualify — Direct Loans and Parent PLUS Loans are eligible. Federal Perkins Loans, Federal Family Education Loans and Direct PLUS Loans don’t qualify unless you consolidate them into Direct Consolidation Loans first.

Other types of student loan forgiveness

Here are some additional student loan forgiveness programs to consider:

• Student loan forgiveness programs for nurses — These programs include Public Service Loan Forgiveness, Perkins Loan cancellation, the Nurse Corps Loan Repayment Program and state loan forgiveness programs for nurses.
• Student loan forgiveness programs for members of the armed forces — These programs include Public Service Loan Forgiveness, Department of Defense Repayment and Veterans Total and Permanent Disability Discharge.
• State-sponsored repayment assistance programs — Many states offer student loan repayment assistance programs for their residents. For example, Massachusetts provides up to $50,000 in student loan relief for eligible health care employees through the Massachusetts Loan Repayment Program for Health Professionals. Check your state’s Department of Education website to find out what forgiveness options are available to you.
• Loan repayment assistance programs — LRAPs are designed for those who work in a public service profession. Eligibility requirements vary by program.

Perkins Loan cancellation and discharge

With Perkins Loan cancellation, up to 100% of your Federal Perkins Loan can be canceled, so long as you work in a qualifying public service job or as an eligible volunteer for five years.

• Eligibility requirements — To qualify, borrowers must have a Perkins Loan and work in a qualifying job, usually one that involves helping the public in a critical area of need. Eligibility requirements typically vary by profession. For example, teachers can qualify for up to 100% cancellation if they teach in a school that serves students from low-income families.
• Loans that qualify — Federal Perkins Loans

Closed school discharge

You may be eligible for a closed school discharge if your school closes under certain circumstances. If you qualify, a loan discharge relieves you of your responsibility to repay your student loan, and you may even be able to receive a partial or full refund of your past payments.

• Eligibility requirements — Your school must close while you’re enrolled or within 120 days of your withdrawal (if loans were first issued before July 1, 2020). If your loans were disbursed on or after that date, you’re eligible if your school closes within 180 days of your withdrawal. You’re also eligible if you were on an approved leave of absence when your school closed.
• Loans that qualify — Federal Direct Loans, FFEL Loans or Federal Perkins Loans

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Total and permanent disability discharge

If you can’t work because you’re totally and permanently disabled, you may be eligible to have the remaining balance on your student loans discharged.

• Eligibility requirements — You must be able to provide documentation from the U.S. Department of Veterans Affairs, the Social Security Administration or a physician proving total and permanent disability. The government may monitor your finances and disability for three years and reinstate the loans if you don’t meet the requirements.
• Loans that qualify — Federal Direct Loans, FFEL Loans, Federal Perkins Loans

Discharge due to death

If you die, your federal student loans can be discharged with no obligation to your heirs, so long as someone you appoint submits a death certificate to your loan servicer. Also, if your parents took out a Parent PLUS Loan to fund your education, those loans will be discharged if you or your parent pass away.

• Eligibility requirements — A family member or other representative must provide proof of death. Ask your loan servicer if it has additional requirements.
• Loans that qualify — Federal Direct Loans, FFEL Loans and Perkins Loans are eligible. Parents PLUS Loans may be eligible if you or your parent borrower dies.

False certification discharge

A federal student loan can be discharged when a school falsely certifies your eligibility to receive the loan. If you qualify for this type of discharge, you’ll no longer be obligated to repay the loan or related loan fees, and you’ll receive a refund for your previous payments on the loan.

• Eligibility requirements — Your loans may be discharged if your school falsely certified your eligibility based on your ability to benefit from its training, if the school certified your loan eligibility when you had a disqualifying status or if the school signed your name on the loan application or promissory note without your authorization.
• Loans that qualify — Direct Loans and FFEL Loans

Unpaid refund discharge

If you withdrew from school after taking out a federal student loan, the school may be obligated by law to return some or all of the loan funds to your loan servicer. If the school fails to return the loan funds after your withdrawal, you may be eligible for a discharge up to the amount your school owed the servicer.

• Eligibility requirements — Your school must have failed to refund the required loan funds to your loan servicer. Call your loan servicer for more details.
• Loans that qualify — Direct Loans, FFEL Loans and Parent PLUS Loans

Borrower defense loan discharge

You may qualify for this discharge if your school misled you or broke state laws. In this case, you could receive a discharge of some or all of your federal student loan debt.

• Eligibility requirements — The school must have engaged in misconduct directly related to your student loan or the education program you received through the loan. You’ll need to provide documents that demonstrate any financial harm due to the school’s conduct, and the documentation should support your belief that you qualify for a loan discharge.
• Loans that qualify — Direct Loans

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