By Megan Doyle | American Express Credit Intel Freelance Contributor
7 Min Read | May 11, 2020 in Money
For the 44 million Americans with a total of $1.48 trillion in student loan debt, few things may sound as uplifting as the concept of student loan debt forgiveness.1,2 But in practice, student loan forgiveness programs are very complicated and hard to understand—and that led to controversy and criticism in 2019 after less than 1% of applicants were approved for the federal Public Service Loan Forgiveness (PSLF) program.3
Although the PSLF might be the most well-known student loan forgiveness program, it’s far from the only one out there. In addition to several other federal programs, nearly every state in the country offers some sort of debt forgiveness for former students who work specific jobs or live in specific regions.4
Sometimes referred to as cancellation, student loan debt forgiveness is when an eligible borrower is no longer required to make payments on their student loans, typically due to their job, location, or other highly specific circumstances.5 While certain debt relief companies might offer student programs, student loan forgiveness is always government sponsored.
Student loan debt forgiveness is not to be confused with student loan discharge, in which a borrower is no longer responsible for paying the remainder of their loans due to a catastrophic event like permanent disability, bankruptcy, or if your school closes before you complete your degree.6
There are several types of federal student loan debt forgiveness programs, and all have their own specific requirements. Here are some of the options available to indebted graduates:
Public Service Loan Forgiveness (PSLF): Perhaps the most well-known student loan forgiveness program, PSLF was created by the federal government in 2007 to help public service professionals pay off their federal Direct Loans. It sounds straightforward, but the requirements are actually very stringent—so stringent that according to the U.S. Federal Student Aid department’s June 2019 PSLF report, only 845 of the nearly 91,000 student loan borrowers who applied for PSLF have had their loan forgiveness approved.7
Still, qualifying is possible. You just need to carefully follow several requirements and stay on top of payments to make sure they count, says the Consumer Financial Protection Bureau (CFPB).8
Teacher Loan Forgiveness: Created by the Higher Education Amendments in 1998,9 the teacher loan forgiveness program lets qualifying teachers receive up to $17,500 in loan forgiveness on certain federal loans, depending on what subject they teach.10 Like the PSLF, requirements are strict.
Perkins Loan Cancellation: This federal student loan forgiveness program lets eligible nurses, firefighters, public defenders, and other qualified professionals discharge their federal Perkins Loans.11 Typically, a percentage of the loan is forgiven for each year of service. Depending on the borrower’s situation, Perkins Loans may be forgiven in full so long as the borrower is employed full-time in an eligible position for 5-7 years.12
Income-Driven Repayment Forgiveness: Income-driven federal loan repayment plans like Income-Based Repayment (IBR) and Pay As You Earn (PAYE) will forgive whatever remaining balance a borrower has after 20 or 25 years of on-time payment (depending on the loan and degree).13 Unlike other federal student loan forgiveness options, borrowers have to pay taxes on whatever amount is forgiven.
Military Forgiveness Programs: The U.S. military offers several student loan forgiveness and student loan relief options, such as the College Loan Repayment Program (LRP). LRP is an Army incentive that repays part of a soldier’s qualified student loans, but—need we say it?—requirements are strict.14
Nearly every state in the U.S. offers at least one student loan repayment assistant program. Like federal programs, requirements are highly specific. For states, student loan forgiveness is typically tied to a certain profession, local region, or both. Job requirements are usually in the health care, education, or legal services fields.15
What sets state-sponsored programs apart from federal student debt forgiveness programs is that many state programs cover private loans in addition to federal loans.16 And, in some cases, it might be possible to combine state or local programs with PSLF.17
Still, eligibility and statewide funding can change often, so experts suggest borrowers check in with the entities providing loan forgiveness options before applying.18
In addition to federal- and state-sponsored student loan forgiveness programs, some employers are taking it upon themselves to provide student loan repayment incentives, ranging anywhere from matching student loan repayments with 401(k) contributions to letting employees apply the value of unused benefits (like vacation time or health insurance) to their federal and private loans.19 According to a 2019 report by the Employee Benefit Research Institute, 11% of responding employers said they offer student debt assistance and another 24% plan to offer it.20
Why the employer generosity? “Studies suggest rising student-loan debt is hurting employees’ well-being, focus at work, and retirement planning,” Carl Gagnon, assistant vice president of global financial well-being at Unum Group, told The Wall Street Journal.21
Scattered among the many student loan debt forgiveness and student debt relief options is the occasional illicit service. Not every student loan debt relief service is a scam, but if you are considering one, the experts suggest careful due diligence first.
Experts suggest the following are red flags that might indicate a scammer:22
Student loan debt forgiveness might sound like a dream come true for any strapped-for-cash millennial trying to build up their savings. But most loan forgiveness programs are only available to public service professionals with certain loan types. Meanwhile, some employers are stepping in to offer student loan repayment benefits in response to the toll that student debt load takes on new hires.
1 “All You Need to Know About Student-Loan Forgiveness,” The Wall Street Journal
2 “Household Debt and Credit 2019 Q:2,” The Federal Reserve Bank of New York,
3 “States Tempt Recent College Graduates With Student-Loan Payoffs," The Wall Street Journal
4 “All You Need to Know About Student-Loan Forgiveness,” The Wall Street Journal
5 “Forgiveness, Cancellation, and discharge,” Federal Student Aid
7 June 2019 PSLF Report, Federal Student Aid
8 “Certify your service and stay on track for public service loan forgiveness,” Financial Avenue
9 “Teacher Loan Forgiveness,” Ed Financial Services
10 “All You Need to Know About Student Load Forgiveness,” The Wall Street Journal
12 "FAQ Borrower Forms," ESCI
13 “When Will Student Load Forgiveness Programs Actually Start Paying?,” Student Loan Hero
14 "Cancellation of Federal Student Loans," US Army MyArmyBenefits
15 “All You Need to Know About Student-Loan Forgiveness,” The Wall Street Journal
19 “Employers Try a New Perk: Matching Student Loan Payments With 401(k) Contributions,” The Wall Street Journal
21 "Employers Try a New Perk: Matching Student Loan Payments With 401(k) Contributions," The Wall Street Journal
22 "The Red Flags for Student-Loan Scams," The Wall Street Journal