Student Loan Forgiveness

Several government programs offer student loan forgiveness to qualifying borrowers. These programs aren’t available to everyone, as there’s no such thing as universal government student loan forgiveness. But if you’re currently repaying student debt, it’s worth seeing if you qualify for a forgiveness program.

What Is Student Loan Debt Forgiveness?

Student loan forgiveness wipes some or all of what you owe off the books. This kind of debt forgiveness applies only in specific cases and, in most instances, only to federal student loans.

Government programs that apply to federal student loans are covered below, but private student loans rarely have debt forgiveness programs. Some lenders may offer private student loan debt relief, but this varies depending on the lender. There are other options that can potentially work with private student loans, including debt relief.

If you aren’t sure what kind of student loan you have, log in to StudentAid.gov and check the My Aid section. Loans listed in that section are federal student loans. Or you can contact your loan servicer and ask.

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Student Loans Forgiven With Income-Driven Repayment Plans

One benefit of federal student loans is the income-driven repayment (IDR) plan. An IDR plan could make repayment more affordable because the payment is based on your income and family size. You must recertify your income and family size every year you’re on this government debt relief plan so your loan servicer can recalculate your payment amount.

An IDR plan ensures that your student loan payments don’t take up too much of your income. There are multiple IDR plans available, and payments range from 10% to 20% of discretionary income.

An IDR plan can also lead to forgiveness of a portion of your student loan. Once you've made qualifying payments towards an IDR plan for 20 or 25 years (depending on the specifics of your loan and IDR plan), any remaining loan balance may be forgiven.

Student Loan Forgiveness Programs by Occupation

There are a few federal loan forgiveness programs designed to reward people for pursuing certain occupations after they get out of school. Here are some examples.

Public Service Loan Forgiveness

Public Service Loan Forgiveness (PSLF) is available to eligible government and non-profit employees. 

If you’re a full-time employee of a qualifying organization, you may be eligible to have your remaining loan balance forgiven. This can happen after you've made 120 qualifying payments (at least 10 years' worth of monthly payments). To qualify for PSLF, you must pay your student loans through an income-driven repayment plan.

Teacher loan forgiveness

This program provides a limited amount of federal student loan debt forgiveness for borrowers who teach in schools that serve low-income families.

Teacher loan forgiveness (TLF) can provide up to $17,500 in student debt relief. Qualifying requirements include:

• Teaching in elementary or secondary schools or educational service agencies that serve low-income families

• Completing five full, consecutive school years of teaching at a qualifying school.

Note that you can’t receive a benefit under both the TLF program and the PSLF program for the same period of teaching service.

Student debt forgiveness for military service

People who serve in the military may qualify for the PSLF program described above. In addition, the government offers a variety of assistance programs and repayment plans as a reward for military service.

Some examples include:

• A cap on your loan interest rate during periods of active duty

• A 0% interest rate for up to 60 months while serving in a hostile area

• Postponement of repayment during and immediately after active duty

• Repayment of your loan by the Department of Defense in certain cases

• Discharge of your student loans in the event of a service-connected disability.

Eligibility is based on specific circumstances. Visit the Federal Student Aid website for more information on student loan benefits for military members.

Segal AmeriCorps Education Award

This is student financial assistance for people who complete a term of service within a 12-month period in a qualifying Americorps program. These include:

• AmeriCorps NCCC

• AmeriCorps State and National

• AmeriCorps VISTA

This award isn't technically loan forgiveness. Instead, it's an award grant that can be used towards repaying an education loan or for future academic expenses.

Student Loan Forgiveness for Total and Permanent Disability

If you have a permanent disability that severely limits your ability to work, you could be eligible for a total and permanent disability (TPD) discharge. Physical and mental disabilities both qualify. To prove that you meet the requirements for a TPD discharge, you must provide documentation from one of three sources:

1. The U.S. Department of Veterans Affairs (VA)

2. The Social Security Administration (SSA)

3. An authorized medical professional

Once you receive a TPD discharge, you don’t need to continue repaying William D. Ford Federal Direct Loan Program loans, Federal Family Education Loan (FFEL) Program loans, and Federal Perkins Loans.

There is a three-year post-discharge monitoring period for TPD discharges through SSA documents or a medical professional’s certification. The monitoring period isn’t required for TPD discharges based on documentation from the VA.

Forgiveness for Students at Fraudulent Institutions

Many student borrowers were victimized by schools that made fraudulent claims about their degree programs. In some cases, those programs left students with education loans to repay, but without the earning potential to repay them.

People in that situation may be eligible to make a borrower defense to repayment claim. This is a possible path to debt forgiveness for victims of fraudulent institutions.

These claims are granted case by case. Also, the government has granted blanket relief to groups of students where fraud affected a large number of people.

Here are some of the schools whose former students might be eligible for debt relief via a borrower defense to repayment claim:

• Ashford University

• Corinthian Colleges

• DeVry University

• Globe University

• ITT Technical Institute

• Marinello School of Beauty

• Minnesota School of Business

• The Art Institutes

• Westwood College

Debt Settlement for Student Loans

Debt settlement means negotiating to have a creditor accept less than the full amount owed. You can try negotiating for yourself, or hire someone to do it for you. Debt settlement is sometimes an option for private student loans, but generally not for federal student loans.

Various forgiveness and repayment programs for federal student loans already exist. If you don't qualify for one of these, it may be hard to prove sufficient need to be granted loan forgiveness through debt settlement.

Since private student loans don’t have formal forgiveness programs, debt settlement is more likely to be an option. If you demonstrate that you can’t pay the full amount, the lender might decide it’s better to settle for a partial amount than go through a lengthy collections process. For debt settlement to work, you need to offer a worthwhile amount to the lender (or the collection agency if the loan has gone to collections).

There are downsides to debt settlement. You’re more likely to succeed if you’ve already defaulted on your student loan payments, but default and debt settlement are likely to lower your credit score. The IRS also normally considers loan debt that’s forgiven in a settlement to be taxable income. If your debts exceed your assets, however, the IRS considers you insolvent, which means your forgiven debt is likely not taxable.

Even with those drawbacks, debt settlement can be the best option for getting free of private student loans and other debt. If you’re having trouble keeping up with your payments, you may want to see if you can negotiate a settlement or have a professional debt settlement company handle it for you.

What About Bankruptcy and Student Loans?

Traditionally, student loans have been excluded from bankruptcy proceedings. You could discharge other types of debt in bankruptcy, but not student debt. While that has changed in recent years, it’s still difficult to discharge student loans in bankruptcy compared to other debts.

To discharge student loan debt, you must file a separate action called an adversary proceeding during the bankruptcy process. In the adversary proceeding, you request that the court discharge your student loans because repayment would cause undue hardship.

Here’s how bankruptcy courts determine whether repaying student loans would lead to undue hardship:

• If you’re forced to repay the loan, it would prevent you from maintaining a minimal standard of living.

• This hardship would be likely to continue for an extended portion of the repayment period.

• You made a reasonable effort to keep up with payments before filing bankruptcy.

The bankruptcy court may decide to fully discharge your student loans, meaning you don’t need to repay them anymore. It could also forgive a portion of your student loans, which is known as a partial discharge. Or, the court could adjust the loan terms so that you can continue making payments.

Bankruptcy stays on your credit report for seven to 10 years. Because of the filing fees and the impact bankruptcy has on your credit, it often only makes sense if you have a large amount of debt and debt forgiveness and debt relief programs aren’t options.

Getting Free of Student Loan Debt

You have options for getting rid of student loan debt, even if you took out large loans to pay for school. There are plenty of federal student loan forgiveness programs you may qualify for, including income-based plans that ensure your payment amount isn’t too much to handle. For private student loans, you could ask your lender to adjust the terms of your payment plan, or you could give debt settlement a try.