Is the Department of Education forgiving student loans and Who qualifies for the student loan forgiveness program? These are all part of the numerous questions about the Department of Education we have received over the years.
The Department of Education’s student loan forgiveness program eliminates the remaining debt on your Direct Loans once you have repaid them using a qualifying repayment plan for 120 qualifying months while working full-time for a qualifying company. These terms, which signify that the government has discharged or canceled your loan, indicate that you no longer need to return any or all of it.
Students who have federal loan debts may be eligible for student loan forgiveness. With over 44 million Americans carrying over $1.6 trillion in student debt, the idea of having student loans canceled, forgiven, or discharged is a dream come true for some Americans.
It offers relief from the obligation to repay part or all of the federal direct loan. When a loan is forgiven, it indicates that the principal and interest payments on the government debt are no longer necessary.
But not all student loans satisfy the criteria for forgiveness. Typically, the federal government may forgive all or part of a student’s debt under certain conditions, such as serving in the military, volunteering, etc.
In some situations, the federal government may forgive a student loan owing to events beyond the borrower’s control, such as a borrower’s permanent incapacity, their passing, the falsification of their loan eligibility, or a school closing during an academic year.
How to Receive Loan Forgiveness for Students
The Public Service Loan Forgiveness Program and Income-Driven Repayment Forgiveness are the two main avenues for obtaining student loan forgiveness.
1. Public Service Loan Forgiveness Program (PSLF)
Borrowers with public service jobs in the government or non-profit sectors are the focus of the Public Service Loan Forgiveness Program (PSLF).
In order to qualify for the PSLF, borrowers must make at least 120 qualifying payments on time while employed by a recognized employer, such as the government or a non-profitable organization.
It means borrowers will be required to pay the minimum installments due after 10 years of monthly payments while working for a qualified employer. Some of the eligible employees may include police officers, nurses, doctors, social workers, etc., who work for qualified employers.
2. Income-Driven Repayment Service
Borrowers who don’t qualify for the PSLF program may still be eligible for the Income-Driven Repayment Service. However, the latter option takes longer to forgive the student loans than the PSLF and can take 20 to 25 years of payment, depending on the plan.
The Income-Driven Repayment utility program can take various forms—PAYE, Revised PAYE, income-contingent repayment, and income-based loan repayment. The plans are designed for people with large student loan debts relative to their incomes, and there’s no employer requirement, as is the case with the PSLF program.
Loan Forgiveness Programs
Key loan forgiveness programs within the United States include:
1. Military Student Loan Forgiveness
Military personnel serving in the National Guard, Air Force, Coast Guard, or military may qualify for student loan forgiveness.
Military personnel who meet the qualifications can receive up to $50,000 to pay off federal loans through a Student Loan Repayment Program. There are certain terms and conditions that military personnel and veterans must meet to qualify for the program.
2. Teachers’ Loan Forgiveness
The Teacher Loan Forgiveness program is available to teachers who have been employed full-time in public elementary or secondary schools for at least five consecutive years.
Elementary school teachers who qualify can get up to $5,000 in loan forgiveness. In contrast, lyceum teachers who teach certain subjects such as math, science, or education can get up to $17,500 in federal direct loans or staff loans. The program is available to teachers who took out student loans after October 1, 1998.
3. Nurse Loan Forgiveness
Nurses can also access a variety of programs for loan forgiveness. For instance, the nurse corps program is out there for nurse practitioners, registered nurses, or nurse faculty members working in underserved communities. Nurses who qualify can have up to 60% of their student loans paid over two years of employment.
Some states also offer loan repayment aid to nurses. For instance, nurses working in Illinois can apply for the Illinois Nurse Educator Program, which offers up to $5,000 per annum for four years in loan forgiveness.
4. Doctor’s Loan Forgiveness
Various loan forgiveness programs are designed for doctors. The most popular programs include the National Health Service Corps (NHSC) Program and the Indian Health Services Loan Program.
The NHSC is available to licensed health care providers like dentists, medical care doctors, and behavioral clinicians, and it awards up to $50,000 in loan forgiveness.
On the other hand, the Indian Health Services program is available to doctors who practice in American Indian and Alaska Native communities who commit to two years of service. It offers up to $40,000 in student loan forgiveness.
Limitations of Repayment Plans
One of the limitations of student loan forgiveness programs is that the forgiven loan is taxable unless the beneficiary was required to work for a specific employer or profession to qualify for loan forgiveness.
Loan forgiveness is tax-exempt, while those under income-driven loan repayment are subject to taxation. Furthermore, loan forgiveness is available for defaulted federal loans.
Such loans will have to be revisited or consolidated to get them in good standing to be eligible for forgiveness programs. However, defaulted loans should be eligible for loan discharge programs.
How to apply for a public service loan forgiveness
To apply for PSLF, you’ll fill out an Employment Certification Form every year and make pay stubs, W-2 forms, or other documentation available as requested.
If you’ve got the repayment requirements, submit a PSLF application to the Department of Education. If it’s approved, the remaining balance of your loan will be forgiven.
But remember, the full PSLF program is in limbo until President Biden or Congress submits a plan for changing the program. It’s possible that monthly payments would even be slashed. People earning less than $25,000 a year and couples earning up to $50,000 would pay nothing toward their loans until their incomes rose above those levels.
The Teacher Loan Forgiveness Program
The Teacher Loan Forgiveness program was created in 1998 to encourage teachers to get jobs at elementary schools, secondary schools, and academic service agencies that serve low-income families. The U.S. Department of Education publishes a list of low-income elementary and secondary schools annually.
You need to teach full-time at a qualifying school for five full consecutive years. Then you’re eligible to have from $5,000 to up to $17,500 in loans forgiven.
Only direct subsidized and unsubsidized loans qualify. Plus, new loans don’t qualify. There are 13 states that provide some form of loan forgiveness for teachers, with varying requirements. Apply to the program by completing the Teacher Loan Forgiveness Application and submitting it to your loan servicer.
Loan Forgiveness for Nurses
Registered nurses, nurse practitioners, and members of nursing faculty who have high-need population areas or areas where there is a critical shortage could qualify to have up to 85% of their loans forgiven under the Nurse Corps Loan Repayment Program.
Qualified candidates can be practitioners; their student loans are forgiven for working two years in an underdeveloped area. Another 25% might be forgiven for working three years.
Some states also offer loan repayment assistance. Visit the Loan Forgiveness for Nurses website to see if yours is one of the 33 states that have one and what the eligibility requirements are.
Doctors’ Loan Forgiveness
The healthcare professions, especially physicians, dentists, pharmacists, and mental healthcare workers, have several options, both national and native, to receive loan forgiveness.
The requirements and the amount forgiven vary dramatically depending upon which program you enter. Take a look at the links to see the amount of loan forgiveness available and the requirements for Army doctors, Indian Health Services, and the National Institute of Health; as well as state-by-state programs.
Loan Forgiveness for Lawyers
There are a few million jokes about lawyers being bloodsuckers on society, but the federal loan program begs to differ. There’s a financial incentive for lawyers to practice in public service or government offices in order to have some portion of their law school loan forgiven.
For example, the Department of Justice provides up to $60,000 in loan forgiveness for lawyers who work there for a minimum of three years. The Air Force Judge Advocate program offers up to $65,000 in loan forgiveness.
The best place to start looking might be your own law school, since several colleges forgive some or all of the students’ debts for students who make less than $60,000 a year.
That amount varies, so ask your school to get the actual requirements and the amount forgiven. If you can’t qualify for a forgiveness program, check out refinancing your law school debt.
Loan Forgiveness for the Military
Each branch of the military has programs that help qualified members pay off their student loans, but the loan amounts are forgiven, and therefore the requirements that must be met vary dramatically.
Visit the entire Guide to Military Student Loan Forgiveness and Repayment to find the program that best suits your situation and branch of the military.
- Who is eligible for forgiveness? What sorts of debts will be forgiven?
Current students and borrowers who have federally held undergraduate, graduate, and parent plus loans that were distributed on or before June 30, 2022, are eligible for the relief, says Megan Walter, a policy analyst for the National Association of Student Aid administrators.
The White House announced that single borrowers earning less than $125,000 per annum, or households earning up to $250,000, are eligible for $10,000 in loan forgiveness. Borrowers who fall into the income caps and received Pell Grants in college will receive an extra $10,000 – totaling $20,000 in forgiveness.
- How is relief administered? Do I want to sign up or apply?
The White House announced in its handout that nearly 8 million borrowers could also be eligible to receive relief automatically because their income data is already. The Department of Education may have the required data for borrowers based on information submitted for income-driven repayment plans or for the Free Application for Federal Student Aid, referred to as FAFSA.
Borrowers whose income data isn’t already on file with the Department of Education can expect an application to be available by early October 2022. Once borrowers submit their application, they will expect relief within four to six weeks, consistent with the Federal Student Aid website. The Department of Education advises borrowers to register for the relief before Nov. 15, 2022, to receive relief before the payment pause expires at the top of December.
- How is income eligibility determined?
Borrowers will have the choice to use either their 2021 or 2020 tax return information when applying for loan forgiveness. Whether or not borrowers have a single income above $125,000 or a household income above $250,000 at the time of the announcement, they will still qualify as long as their income in 2021 or 2020 was under the threshold, Walczak says.
For current students, the Department of Education will have income data for any borrowers who completed the FAFSA in 2021-2022, Walter says. For borrowers who were dependents during the 2021-2022 academic year, the Department of Education will use parental income information to calculate loan cancellation eligibility.
How does this affect public service loan forgiveness?
In October 2021, the Biden Administration announced a limited-time waiver for the eligibility requirements for the general public service loan forgiveness program, which had faced criticism and investigations for its high ineligibility rates. Borrowers that worked in certain nonprofit and public service sectors for 10 years or more, whether or not consecutively, could be eligible for all of their student debt to be canceled or get credit toward forgiveness.
This, however, is a break away from the one-time student loan forgiveness recently announced by the Biden Administration and will have no impact on a borrower’s eligibility for either $10,000 or $20,000 in forgiveness, consistent with the NASFAA.
What if I continued paying despite the repayment pause during the pandemic? Am I able to receive reimbursement?
Relief is capped at the quantity of your outstanding debt, consistent with StudentAid.gov. For instance, a student who made payments to bring their balance right down to $15,000 but is entitled to $20,000 in forgiveness would only receive $15,000 in relief. The Department of Education hasn’t indicated that it’ll reimburse borrowers for payments made during the pandemic pause.
That said, borrowers can contact their loan servicer to request a refund for any payments they made since the pause began on March 13, 2020. Borrowers should remember, however, that accepting a refund would result in that money being added back to the loan balance.
What if I didn’t finish my degree? Do I still qualify?
Yes. The Department of Education confirmed it.
What does this mean for borrowers who took out private student loans?
The Biden Administration’s debt relief plan doesn’t apply to borrowers with private student loans. Borrowers who consolidated their federal loans with a personal company are also ineligible because their loans are no longer held by the federal government.
In April, the Department of Education announced the “fresh start” plan that seeks to assist approximately 7.5 million borrowers avoid the negative effects of default and obtaining “good standing” on their federal student loans. The initiative, consistent with the Department of Education, “will increase the long-term repayment success of borrowers “This will help borrowers with defaulted federal student loans access low monthly payments under affordable income-driven repayment (IDR) plans and also provide substantial benefits to borrowers over the coming months.”