Don’t worry if you have student loans and you feel like paying them off is a burden; you’re not alone!
Depending on when you graduated from college, there is a high probability that if you went to a four-year college, you took out some student loans! In fact, estimates state that 70% of college graduates graduated with student loan debt.
With such a high percentage of students graduating from college with student loans, paying back your student loans can take shape in many ways, including paying extra each month, making the minimum payments, or looking into student loan forgiveness.
Today, we will explore the ever-evolving and even sometimes controversial student loan forgiveness program. After you’re done reading, you will learn how to get student loan forgiveness based on the needed qualifications and when it makes sense (and doesn’t) to pursue student loan forgiveness.
What is Student Loan Forgiveness?
Student loan forgiveness refers to the cancellation or discharge of student loan debt. It can include the full balance or part of the balance being forgiven. In other words, it’s a full or partial reduction of your student debt balance!
Forgiveness is reserved for federally-funded student loans and comes in several forms, including:
- Public Service Loan Forgiveness (PSLF)
- Loan Discharged/Cancellation
- Closed School Discharge
- Teacher Loan Forgiveness
The most common student loan forgiveness program is the Public Service Loan Forgiveness program. PSLF is both widely regarded and controversial because of the confusing jargon and qualifications that the program entails.
PSLF has been under fire and rightfully so.
From May 2018 to May 2019, 99% of applicants were denied forgiveness through the government-sponsored Temporary Expanded PSLF (TEPSLF) program, an extension of PSLF. Many applicants were denied because they didn’t meet the criteria, or in the case of TEPSLF, they didn’t even know the program existed.
While loan forgiveness can be tricky business, there are still ways to get student loan forgiveness, here is how:
How to Get Student Loan Forgiveness
Below you will find a list of the most common programs for loan forgiveness and the qualifications needed to qualify for each.
1. Public Service Loan Forgiveness (PSLF)
Before considering PSLF, you need to check if you qualify by working for one of the following:
- Government organizations at any level (U.S. federal, state, local, or tribal)
- Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
These jobs DO NOT qualify for PSLF:
- Labor unions
- Partisan political organizations
- For-profit organizations, including for-profit government contractors
Directly from the Studentaid.gov website, “The qualifications for knowing whether or not you qualify for loan forgiveness does not pertain to your specific job, but instead who employs you.”
For example, my wife, who, after earning her Doctorate, went on to work at a private hospital; thus, she was unable to qualify for PSLF. On the other hand, when I was hired as a teacher in 2010, I was eligible for teacher loan forgiveness because I taught special education.
(Note: We had over $300,000 in student loans and decided to pay them off instead of waiting for forgiveness)
Next, it’s essential to make sure you know what type of loan you have as only Direct Loans qualify you for Public Service Loan Forgiveness.
Loans that DO NOT qualify for forgiveness under the PSLF program include:
- Federal Family Education Loan (FFEL)
- Federal Perkins Loan (Perkins)
- Direct Consolidation Loan
If you have Federal Direct Loans (Direct) and you meet the mark for employment, you can qualify for PSLF after 120 monthly payments. Once you have made the required 120 student loan payments (10 years) and none have been later than15 days, you can fill out the PSLF form: https://studentaid.gov/app/downloadPslfForm.action?formShortName=pslfapp
You can also qualify to have your payments reduced under the Income-Drive Repayment (IDR) program, potentially resulting in paying smaller amounts (depending on your income) over the ten-year-payback-period before applying for forgiveness.
2. Income-Driven Repayment Forgiveness
Income-Driven Repayment Forgiveness is a program designed to cancel any remaining student loans after 20 or 25 years of income-driven payments. Currently, there are four such programs available and offered for Federal student loan borrowers only (IBR, PAYE, REPAYE, and ICR).
Typically, using income-based repayment (IBR), borrowers pay a prorated amount on their student loan payment each month, all based on their income. The idea is to help borrowers who don’t make enough to live and cover student loans after college.
Borrowers interested can apply for IBR on the federal student loan website. Each year they have to reapply with current income and employment information.
Cons Behind Income-Driven Repayment (IDR):
A quick Google search of IDR horror stories might make you reconsider the IDR program, and rightfully so.
Some borrowers fail to recognize that by paying less than the monthly minimum on their student loans, they are not covering the principal paydown, so the interest grows on their student loans.
For those in the Income Contingent Repayment (ICR) plan (1 of the 4 IDR plans) any accrued interest is capitalized and added to the principal balance. This causes the size of your loan balance to increase, and you’ll end up paying even more than you thought you owed.
It can be a slippery slope if you don’t have a solid financial plan or budget.
3. Teacher Loan Forgiveness
I mentioned it earlier, but if you teach in a high demand field or at a Title I school, you may be eligible for loan forgiveness under the Teacher Loan Forgiveness program or the later mentioned, Perkins loan cancellation program.
Teachers who teach in low-income areas or for Title 1 schools can be eligible for up to $17,500 in student loan forgiveness towards their Direct or Stafford loans after 5 consecutive years of teaching.
How to qualify:
- Check to see if your school meets the criteria for low-income or Title 1
- Visit the Federal Student Loan website and complete the forms to apply for Teacher Loan Forgiveness
4. Military Service
If you currently serve or have previously served in the United States Military, you may be eligible for loan forgiveness under the Student Loan Repayment Program. For example, some military reservice programs like the Arm Reserves offer 15% or $1,500 annually (whichever is greater) in loan forgiveness for qualified individuals enlisting for the first time.
5. Other Forms of Loan Forgiveness
There are other forms of loan forgiveness out there, and depending on what you do for work, it’s not a bad idea to look into it on your end.
Other forms of student loan forgiveness can include forgiveness by work-sponsored programs, state-sponsored loan forgiveness programs for doctors, nurses, teachers, and the Perkins Federal Loan Cancellation program.
From 2010-2014, I was able to have $10,000 of my $40,000 in student loans forgiven under the Perkins Federal Loan Cancellation teacher benefit program. Designed for teachers who work full time in a low-income public school or who teach qualifying high-demand subjects, such as special education (that is what I did), math, or science each year, a percentage of student loans is forgiven.
Additionally, some school districts in need of high-quality teachers offer forgiveness programs through grants and incentives.
It’s best to check with your work, state, or the Federal Student Loan website to see if you qualify and to explore all possible options. My wife’s work offers student loan forgiveness up to $300 per month with a stipulation of working a certain amount of time for her company.
This leads to the final question, is pursuing loan forgiveness worth it?
Is it worth pursuing student loan forgiveness?
In most cases, looking at the statistics of who is approved and who isn’t, loan forgiveness can be risky.
Paying less than the minimum for 10 or 20 years means your student loan balance will grow leaps and bounds, and there is always the chance that you can be denied down the road. With political volatility and programs such as PSLF always on the chopping block, waiting around for loan forgiveness is really putting your financial future in someone else’s hands.
There are countless stories about borrowers who took out loans, made the 120 consecutive qualifying payments, and were later denied forgiveness. For example, one borrower reported that after taking out $35,000 in student loans and making 10 years of IBR payments she was denied forgiveness. To make things worse, her student loan balance was sitting at $52,000! Yikes.
This is not to say you shouldn’t consider loan forgiveness, and it doesn’t hurt to do your homework. To see if you qualify, make sure you do the following:
- Check if your employment qualifies for loan forgiveness
- Visit the federal student aid website
- Reapply/Recertify for IDR each year as needed and stay up to date on program changes
- Look at jobs that offer forgiveness
- Save the money you would have paid toward repaying the full loan amount in a separate account. If forgiveness doesn’t work you will have the money set aside and ready to go. If forgiveness does work, you have a nice chunk of change to invest!
Quick Ideas to Help You Pay Back Your Student Loans
If you’re unsure about forgiveness or Income-Driven Repayment, you can look into additional ways to make money to help you cover the minimum payments.
With the internet, there are ways to supplement your income to help you pay your student loans. Consider using some of these ideas to help you pay back your student loans:
- Make additional principal payments each month (targeting one specific loan)
- Work overtime or pick up a part-time job to supplement income
- Rent a room out instead of your own apartment
- Live at home and make extra payments
- Downsize your lifestyle temporarily
- Ask for a raise at work, use that to pay off student loans
- Hold off on investing until your loans are gone
Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $200,000 in student loans with his wife in less than four years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post and more! An avid runner, Josh and his wife love fitness and spending time with each other and their dog Morgan!