4 student loan forgiveness options

Federal student loan forgiveness programs can wipe out student loans incurred to pay for college. Here are 4 programs to consider. (Shutterstock)

Student loan forgiveness has been grabbing headlines since the 2020 presidential election, when then-candidate Joe Biden made broad forgiveness one of his campaign planks. 

The debate continues on whether the government can and will forgive some federal student loan debt. But you don’t have to wait for politicians to make a decision. Existing federal student loan forgiveness options may be a way for you to get rid of your student loan debt faster. Here’s what to know about the programs and whether you might qualify. 

If you have private student loans, you can learn more about student loan refinancing and compare rates from multiple private student loan lenders.

• Public Service Loan Forgiveness
• Income-Based Repayment
• Pay As You Earn
• Student loan forgiveness by profession
• What to do if you don’t qualify for student loan forgiveness

Public Service Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) Program is designed to forgive federal student loan debt for government and not-for-profit employees.

It wipes out the remaining balance on your federal student loans after making 120 qualifying monthly payments while working for an eligible employer. 

To qualify for this program you must:

• Work full-time for the federal, state, local, or tribal government or a not-for-profit organization
• Have Direct Loans (or consolidate other federal student loans into a Direct Consolidation Loan)
• Make 120 qualifying payments under an income-driven repayment plan

To apply, you need to submit an application on the StudentAid.gov website. You should apply as soon as you start working for an eligible employer. You’ll submit the same form annually, and any time you change jobs, to ensure you’re on the right track.

Income-Based Repayment

Although not technically a forgiveness program, an Income-Based Repayment (IBR) Plan can lead to eventual forgiveness. An IBR Plan is a good option for student loan borrowers with a low income compared to their debt who are having financial difficulties. 

This plan caps your student loan payments at 10% of your discretionary income if you’re a new borrower after July 1, 2014, or 15% if you’re not a new borrower after that date. In either case, your payment won’t be higher than it would be under the 10-year Standard Repayment Plan.

After 20 years of payments (25 years if you’re not a new borrower on or after July 1, 2014), the U.S. Department of Education will forgive any remaining loan balance. But keep in mind you’ll pay more in interest if you’re on this plan for 20 or 25 years than you would if you’d stayed on a 10-year Standard Repayment Plan.

Pay As You Earn

Under a Pay As You Earn (PAYE) Plan, your federal student loan payments are capped at 10% of your discretionary income. Your payment will never be more than it would be under a 10-year Standard Repayment Plan.

After 20 years, the federal government will forgive any remaining loan balance.

To qualify for a PAYE Plan, you must be a new borrower after Oct. 1, 2007, and you must have received a Direct Loan disbursement after Oct. 1, 2011.

If you have private loans and aren’t eligible for an income-driven repayment plan, you can easily compare prequalified rates from multiple private lenders using Credible.

Student loan forgiveness by profession

Some professions offer the potential for student loan forgiveness, including:

• Teaching — Teachers can apply for the Teacher Loan Forgiveness Program, which forgives up to $17,500 of federal student loan debt for educators who work full-time for five consecutive years in a low-income school or educational service agency.
• Nursing — Nurses may qualify for the Nurse Corps Loan Repayment Program, which pays up to 85% of federal student loan debt for nurses who work at a designated Critical Shortage Facility or nursing school for two years.
• Healthcare — Health professionals who work for a minimum of two years in designated Health Professional Shortage Areas (primarily rural towns and low-income communities) may have some of their federal student loan debt forgiven under the State Loan Repayment Program.
• Law — The U.S. Department of Justice’s Attorney Student Loan Repayment Program provides student loan forgiveness for new attorneys who agree to work for the Justice Department for three years.

What to do if you don’t qualify for student loan forgiveness

The eligibility requirements for different student loan forgiveness programs, such as alternatives to private student loan forgiveness, can be strict, and you typically need to make payments for years before getting any relief.

If you don’t qualify for one of the above programs, here are other options for paying down your student loan debt quicker: 

• Refinance at a lower rate. You may qualify for a lower interest rate if you refinance your federal student loans into a private student loan. Just keep in mind that refinancing into a private student loan means losing out on many federal loan benefits, including PSLF, forbearance and deferment options, and income-driven repayment plans.
• Refinance into a shorter repayment term. Refinancing into a shorter repayment term typically means making larger monthly payments. However, shortening the repayment period usually means saving money on interest. Again, consider whether losing out on federal student loan benefits is worth the savings before refinancing into a private student loan.
• Make extra principal payments. On top of your required monthly student loan payments, you can make additional payments toward the loan principal. These extra payments help you pay off your student loans faster than you would by only making the minimum payment each month.

To get started on refinancing your student loans, visit Credible and compare prequalified rates from multiple lenders.