Understanding Student Loan Forgiveness

If you’re one of the millions of Americans with student debt, you may be curious if you qualify for student loan forgiveness, and how to apply for it. 

Student loan forgiveness programs allow  the government to eliminate some or all of the federal debt that a student owes, meaning that they’re no longer responsible for paying back that money. In recent years, widespread student loan forgiveness has received attention, with some political candidates campaigning on the concept. Currently, there are several federal student loan forgiveness programs that students can get access to. These programs only apply to federally held student loans, not privately held educational debt.

Good to know: Unlike other kinds of debt, which can be discharged if you file for bankruptcy, you generally can’t get rid of student loan debt.

Who qualifies for forgiveness?

Here’s who can have part of their student forgiven, according to the Department of Education (DOE): 

Public servants 

As part of the Public Student Loan Forgiveness (PSLF) Program, people who work full-time for a federal, state, local, tribal, or non-profit organization in the U.S. may be eligible to have a portion of their debt forgiven. In order to qualify, the borrower must have Direct Loans, which they pay back with an income-driven repayment plan. Direct Loans are made directly by the federal government and the DOE, and include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidate Loans. They must also have made 120 qualifying payments after October 1, 2007. Qualifying payments must be made in full no later than 15 days after they’re due and after October 1, 2007 by a full-time worker. 

People who think they may  qualify for this forgiveness can inquire with the DOE by filling out a form and sending a signed version to FedLoan Servicing, the servicer responsible for handling this program. 

Teachers

People who have taught in low-income elementary or secondary schools for five consecutive years can be eligible for up to $17,500 in student loan forgiveness on Direct Loans or Federal Family Education Loan (FFEL) program debt. The FFEL program ended in 2010, but worked with private lenders to provide loans guaranteed by the federal government. There are various requirements for those teachers who seek this forgiveness. For example, they must be “highly qualified,” as defined by the DOE, meaning that they’ve attained at least a bachelor’s degree, received their full state teacher certification, and not had certification or licensure requirements waived on an emergency, temporary, or provisional basis. You can find more information about eligibility here.

Eligible teachers can apply by filling out a Teacher Loan Forgiveness Application, which must be filled out in part by the administrator at the school where they work.  

Teachers with Perkins Loans, which are low-interest loans issued to students with exceptional financial need, can also see 100% of that loan canceled. (Note: As of June 30, 2018, schools can no longer issue these loans.) Full-time teachers serving low-income families, full-time special education teachers, and full-time math, science, foreign language, bilingual teachers, and any full-time educators with a focus that are in short supply, can have their Perkins Loans canceled. These teachers must work in public or non-profit elementary or secondary schools. 

Those educators interested in seeking forgiveness should reach out to the school that holds the Perkins Loan, or the loan’s servicer, to apply. 

Closed schools 

People with Direct Loans, FFEL Program Loans, or Perkins Loans whose schools closed down while they were enrolled may also be eligible to have loans canceled. In some cases, forgiveness may apply to students whose schools closed while they were on a leave of absence or withdrew.

Borrowers Defense program

Students whose schools shut down because their educational institution misled them, or because it engaged in misconduct or violations of state law, may also be eligible for debt cancellation. They can apply for forgiveness through a DOE program called the Borrower Defense Loan Discharge program. The fraudulent schools have typically included for-profit colleges, meaning they are privately operated and seek to make money, as opposed to nonprofit institutions, which channel funds back into student education and the school. In June 2021, the DOE expanded the list of schools to include more institutions, such as ITT Technical Institute. 

People with with disabilities 

People with total and permanent disabilities are also eligible for discharge of Direct Loans, FFEL program loans, Perkins Loans, and of the service requirement for TEACH Grants. In August 2021, President Biden made it easier for disabled borrowers to get forgiveness, removing some of the administrative hurdles that had made it difficult to apply for the program. 

Other circumstances

There are other conditions that can qualify for student loan forgiveness, such as when the borrower dies. Additionally, if you never received a loan refund from a school from which you withdrew, you may also be eligible for forgiveness.

State programs

Forty-five states and the District of Columbia have their own debt forgiveness programs. And they run the gamut for professionals working in a variety of fields, from education to dentistry and law.

Colorado, for example, forgives debt up to $90,000 for health professionals working in underserved areas of the state.

Maine has a program for teachers that forgives loans based on years of service in its elementary school system.

You can find out if your state offers its own student debt forgiveness program here.

Forgiveness under President Biden 

President Biden’s American Families Plan calls for four years of free community college, as well as support for parents seeking child care. Biden campaigned in part on the promise that he would cancel $10,000 in student loan debt for every borrower, and all the debt held by people who earn up to $125,000, and graduated from historically black colleges and universities (HBCUs). Beyond what his administration has already forgiven, President Biden has yet to make any moves towards widespread forgiveness. Some members of Congress are pushing for more than $10,000 of forgiveness. Democratic Senators Elizabeth Warren and Chuck Schumer have proposed that Biden forgive up to $50,000 in student debt via executive order. Generally, Congress doesn’t appear to be prioritizing widespread student loan forgiveness in the near future.

Since taking office in January 2021, President Biden has forgiven $8.7 billion in student debt. In August 2021, the Biden administration announced that it would automatically forgive the loans of 323,000 borrowers with total and permanent disability, amounting to $5.8 billion in debt. Qualifying borrowers need to a​​ppear on a data match between the DOE and the U.S. Social Security Administration or between the DOE and the U.S. Department of Veteran Affairs. 

In June 2021, the DOE approved $500 million in student loan forgiveness for former students of ITT Technical Institute, a private chain of colleges that was shut down in 2016 for misrepresentation. Borrowers qualify based on the type of loans they have, and must apply through the DOE. Additionally, in October 2021, the Biden administration said that people employed by government or non-profit organizations who’ve made 120 qualifying payments under certain programs may qualify for certain forgiveness as well. 

U.S. student debt keeps growing

As of September 2021, total student debt in the U.S. amounts to $1.73 trillion, and that rate is reportedly growing six times faster than the country’s rate of economic growth. More than 43 million people in the U.S. hold student debt. The average amount of debt per student is $39,351. 

In March 2020, at the start of the Covid-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act suspended most student loan payments through September 2020. That deadline was extended multiple times, but the grace period will come to a close on January 30, 2022. After that date, federal student loan payments will pick up again. 

Managing your debt 

While a new, national student loan forgiveness program might not be on the immediate horizon, you should do your due diligence and find out if you’re eligible for the forgiveness programs that already exist, and consider applying.

If you haven’t been making payments on your loans since the grace period began in March 2020, you should start preparing for those payments to resume. Make sure that you have room in your monthly budget for your payments. If you don’t have a budget, consider making one. One budget you might consider is the 50-30-20 budget, which encourages you to split your monthly income into 50% for essential expenses, like loan payments, 30% for nonessential costs like going out to eat, and 20% for savings and investing. If the money you would have spent on student loan payments has gone to nonessential spending in the last two years, adjust your budget accordingly before February 2022. 

Before payments pick up, you should check in with your loan servicer. “Logging in and reviewing your terms is essential in order to understand your repayment plan, and make any changes necessary prior to payments starting. Loan servicers are about to get slammed with many people calling in to ask questions, so make sure you log in early and ask any questions before loan payments start again,” says Carlos Aguila, a Certified Public Accountant (CPA), based out of Allentown, Pennsylvania. You should especially connect with your provider if you graduated during the pandemic and have yet to start making payments towards your debt, says Aguila.

If you’re concerned about your ability to make your monthly payments, you should also speak to your provider to let them know your situation, and see what you can do to address it. Consolidating your student loans might be a good option for you if you have more than one loan. It’s important to know some of the potential downsides of consolidation as well, particularly if you’re consolidating with a private lender, which can come with higher costs and more restrictions.