How to Get Student Loan Forgiveness? Who Will Qualify?

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In this article, you’re going to learn how to get student loan forgiveness and how to qualify.

Student loan debt is no different from any other. It is better for you to eliminate it as quickly as possible to build your financial future.

There are different strategies for getting out of student loans like student loan consolidation, refinancing, bankruptcy, etc. 

But a good option is student loan forgiveness. If you qualify for it then you can eliminate a big part of the loan. That’s why I’m here to help you get in-depth information about it.

Before diving into the article below is the exact breakdown of this article and you can jump to any section with a single click.

So let’s dive right in.

What is student loan forgiveness?

Let’s understand it.

It is an option for student loan borrowers in which a portion or all of their student loan is discharged if they meet specific requirements. This is done using the student loans forgiveness programs and each of these programs has different requirements.

There are only two main types of forgiveness programs. 

  • Public Service Student Loan Forgiveness (PSLF) 
  • Teachers Loan Forgiveness 

We will discuss them later.

The forgiveness applies to only federal student loans. There is no such forgiveness program for private student loans.

Related Post: How Does Student Loan Work? The Ultimate Guide!

How student loan cancelation, discharge, and forgiveness are different?

The terms cancelation, forgiveness, and discharge mean the same but they’re used for different circumstances. 

For example, if you get partial or all of a loan forgiven because of a job in a public sector or for any nonprofit organization then the term forgiveness or cancelation is used. But on the other side if you get forgiveness due to bankruptcy, death, closed school, and disability then the term discharge is used. 

In each of the terms above, you’ll be no longer liable to pay your student or make monthly payments either interest or principal.

How does student loan forgiveness work?

Students take loans for college education and for other higher education degrees. Now there is a possibility that after completing your education you get a job in a public sector or nonprofit organization where pay is low. And you can’t able to repay your loan or face financial difficulty.

So what happens is that the student loan borrowers apply for student loan forgiveness to eliminate all or portion of their debt. This relieves a significant amount of loan burden and lowers monthly payments.

If you’re a student loan borrower then getting the forgiveness you need to meet certain requirements. And this determines your eligibility criteria and the amount of loan forgiven.

This makes forgiveness a bit difficult that’s why a major portion of applicants are rejected. In fact, 98% of applicants were rejected between November 2020 and April 2021.

Now let say you’re approved for student loan forgiveness. Here you may be required to make 120 monthly payments before the student loan is forgiven. And if you’re a teacher then you can get either $17,500 or $5,000 of loan amount forgiven. This depends on which subject area you teach. 

In other ways like total and permanent disability or death, your whole loan will be forgiven.

Getting forgiveness helps you save thousands of dollars in principal and interest and is considered as income. Now, this income can be tax-deductible or not depending on the tax policy. You learn about tax in detail later in this article.

What are the types of student loan forgiveness?

There are certain types of forgiveness and discharge. And different types of borrowers can fall under these categories in different circumstances. So let’s dive into each one.

1. Public service loan forgiveness

PSLF is a federal government program that provides student loan borrowers to make 10 years or 120 monthly payments before their loan is forgiven. But this opportunity is for those borrowers who work for any government or nonprofit position that is low paying. For example, public interest, charity, and religious work. 

Basically, this program is to encourage borrowers to work in low-paying jobs and careers. For getting this opportunity you need to fulfill certain requirements like working for a government position or non-profit and a low-paying job, etc.

2. Closed school discharge

In case your school is closed while you’re studying then you can become eligible for closed school discharge. Here because your education remains incomplete due to school closure that’s why you get no degree. 

For the benefit of those students, the federal government offers a closed school discharge option. Here you’ve two options.

  • If you don’t want to waste your previous school education and time then you can transfer your credits to a new school that accepts it. So you don’t need to start over again. But the loan will not be forgiven.
  • If you don’t want to do that then credits can’t be transferred and you can apply for closed school discharge. Now you need to start your education again for that program or degree.

You can apply to closed school discharge if you:

  • Enrolled in school while it closed
  • It closed before 120 days after you withdraw from a program if the loan is disbursed before July 1, 2020.
  • School closed before 180 days of your withdrew if loan disbursed after July 1, 2020

3. Total and permanent disability discharge

If you’re totally or permanently disabled then you can get this forgiveness option. Under this you can avoid paying the following loans:

  • Federal direct loan 
  • The Federal family education loan
  • Federal Perkins loan
  • And teach grant service obligation

While applying for closed school discharge you need to provide one out of three documents from: 

  • US department of veterans affairs
  • social security administration 
  • or a physician

The application and documents will be submitted to the Nelnet servicer who handles these matters under the US department of education.

4. False certification discharge

If your school mistakenly certified you as eligible for a student loan then you can get a cancelation called false certification discharge.

There are only three types of a false certification under which you can apply and qualify for loan cancelation:

  1. Ability to benefit: If your school falsely certified you for the loan eligibility while considering that you benefit from their training. But you didn’t fulfill the requirement for the ability to benefit that was in effect when school-certified you as eligible. So you can get the false certification discharge situation.
  2. Disqualifying status: If your education at a school was for getting a job or career in a specific field. But while school certified your eligibility you aren’t meeting the requirement of that profession or employment. It can be due to poor mental health, criminal record, age, or any other problem. 
  3. An unauthorized signature or unauthorized payment: In case your school signed the application or promissory note without your permission. Also if your school electronically transferred funds without your authorization and endorsed check without your permission. Also, the loan amount is applied to charges you owe to school or isn’t disbursed to you.

Before applying you should determine that which of the category you fall in. When you find that then there is a separate application for applying to get the cancelation. 

5. Perkins loan cancellation and discharge

You can qualify for all of your federal Perkins loan discharge if you’re serving:

  • At a public, a nonprofit, elementary, or secondary school in the position of teacher, 
  • Special education teacher, or teacher in science subjects, foreign language.

It also includes other expertise for which state education agencies have a shortage of expert teachers.

This isn’t limited to teachers only but other employments and volunteer services are also included. You can qualify for full or partial Perkins loan discharge. It depends on loan type ad loan date.

Here is the list of professions and conditions that make you qualify for Perkins loan discharge: 

  • Firefighter
  • Military service
  • An employee at a child or family services agency
  • Officer of law enforcement
  • A faculty member at university or tribal college
  • A nurse or medical technician
  • Bankruptcy
  • School closure or closed
  • Total or permanent disability 

6. Discharge due to death

If a student who took a student loan dies due to any reason then his loan will be discharged. In the case of parents PLUS loan if parents die or the student dies on behalf of which they took loan then their loan will be discharged. They’re no longer liable to make payments.

For taking death discharge you need to provide proof of death to the loan servicer. The documents include a death certificate, a certified copy of the death certificate, and/or an accurate copy of one of these two certificates.

7. Borrower defense to repayment

This is an option that students can use to get their loan forgiven if the school, college, or university misled, defrauded, or violated the state laws. In that case, the student can apply for borrower defense. 

If you’re approved then the following benefits are given:

  • 100% of the loan is forgiven
  • If any payments were made they’re reimbursed to you
  • There will be no negative effect on your credit score and report
  • If you lost federal student loan aid eligibility then it is reinstated

But if you don’t qualify or are approved for the borrower defense then you need to pay all student loans with interest accrued.

8. Unpaid refund discharge

If you withdrew from the school after taking the student loan then the school is required to return all or a portion of that loan to the loan servicer. If the school doesn’t return that money then you can file an unpaid refund discharge. In case of approval, the amount not returned will be discharged.

You can usually use this option if you withdraw before completing 60% of the academic year or semester or loan period.

The unpaid refund discharge is used when you’ve taken a loan under the Willian D.Ford Federal Direct loan program or Federal Family Education Loan Program. If your school is closed then you can check your eligibility to apply for closed school discharge. 

9. Teacher loan forgiveness

You can get forgiveness of up to $5,000 and a maximum of $17,500 in student loan forgiveness as a teacher. 

If you’re a full-time teacher for:

  • Five consecutive years
  • In a low-income school or educational service agency
  • Fulfill other necessary requirements 

Then you can get forgiveness of $17,500 maximum under direct subsidized federal loans.

If you’re a highly qualified teacher of:

  • Mathematics, or science subjects
  • Provide education to disabled children at the elementary and secondary level

then you can get up to $17,500 amount forgiven. Other than that you get only a $5,000 loan forgiven. But this is a huge saving interms of principal and interest.

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10. Discharge in bankruptcy

If you can’t afford to make student loan payments and they put an undue financial hardship on you then you can file a bankruptcy. The debt forgiven or canceled due to bankruptcy is called discharge in bankruptcy.

You can file bankruptcy under chapter 7 and chapter 13. But you need to provide valid reasons and qualify for the requirement. 

Here are the main things that you must satisfy to qualify for discharge in bankruptcy: 

  • You can’t live on a minimal standard of life if you’re forced to pay the debt.
  • If you pay the loan then a large portion of time during that payment you will suffer serious financial hardships.
  • You put a good amount of effort to pay the loan before going into bankruptcy.

So if you qualify then you can avail this opportunity. And when your debt is discharged in bankruptcy you will no longer need to make payments. Your creditor will be legally bound to not contact you for any debt collection and write off the outstanding amount.

Student loan forgiveness pros and cons

It comes with some upsides and downsides that you need to consider in mind. It is a good idea in some situations but not for all the students. 

Why is student loan forgiveness a good idea?

  • It helps you lower the burden of debt and interest. Getting a portion of your student loan forgiven can help you avoid paying thousands of dollars in interest in the future. 
  • You save money and can put it towards retirement or paying off other debts.
  • It doesn’t have a negative impact on your credit score and credit report. The credit bureaus are legally bound to remove any negative information.
  • Gives relief from anxiety and depression as a result of the debt burden and so you can pay more attention to other things.
  • A number of jobs can qualify you for forgiveness. It doesn’t consider the type of job you do but which category the employer falls in.
  • The loan is forgiven under PSLF, teacher loan forgiveness, NHSC, and law school loan assistance repayment plan is not taxable. 

Why is student loan forgiveness a bad idea?

  • The first and foremost factor is that the rejection rate of applicants is very high. According to data, only 0.3% of student loan has been forgiven and most people who are eligible don’t know how to qualify.
  • Under the public service loan forgiveness program you need to make 10 years or 120 monthly repayments to get forgiveness for the remaining loan. That is not the right decision because it will ruin your financial future.
  • The teacher loan forgiveness is limited and only offers forgiveness of up to $5,000 and $17,500 maximum. This still requires them to work 5 years complete and in low-paying public sector jobs. 
  • If the loan is forgiven under the death of the borrower, closed school discharge, disability, and false certifications then it is taxable. So you can get a big tax bill.
  • In case you don’t qualify for forgiveness then your interest amount grows the whole debt. This can create a debt burden for you.
  • Private student loans are not eligible for forgiveness. So if you are under a private loan burden then might be you need to pay it or file bankruptcy which ruins your credit score.

Taking these pros and cons in mind is more important for a sound decision. The student loan forgiveness option sounds good but is not easily available.

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How to get student loan forgiveness?

Getting loan forgiveness isn’t easy. You need to follow some steps to eventually try your luck. So here is how to apply for it:

  • The first step: if you’re applying under any forgiveness program most importantly PLSF and teacher loan forgiveness then check requirements. Read the requirements in full and detail to understand whether you fulfill them or not.
  • The second step: is to contact your loan servicer and submit the application form if you qualify for the required program.
  • The third step: is to wait for the response. Here your eligibility will be checked and you may need to provide extra documents if needed.

If you get lucky and qualified for forgiveness then good otherwise in case of rejection you need to pay back your loan.

Who qualifies for student loan forgiveness?

For getting forgiveness first you need to qualify for the program. Now, what are the rules and how to qualify for student loan forgiveness are discussed in this section. Qualification requirements for each type of forgiveness are different but here you get a general idea.

So let’s check it.

  • You must have a financial need for qualifying for the majority of the programs. Like facing financial hardships.
  • Should be enrolled or accepted for an eligible certificate or degree program as a regular student.
  • Need to have a valid SSN number but except the states including Micronesia, the Republic of Palau, and the Marshall Islands.
  • You should be a citizen of the USA or an eligible non-citizen.
  • The student must be enrolled for at least half the time in the program to qualify for direct loan forgiveness program funds.
  • Signed the certification statement on FAFSA.
  • Students maintained satisfying academic progress in a career or college school.
  • You should have shown that you’re qualified to get a career or college school degree.
  • If you’re a teacher then you must have 5 years of professional teaching record in a public or non-profit institution.

These are some general terms and conditions. If you want to get more information you can visit StudentAid.

How much would student loan forgiveness cost?

The forgiveness programs have no application or any other fee. They are free for everyone. But you need to only fulfill the specific requirements for getting this opportunity.

What disability will qualify for student loan forgiveness?

The total and permanent disability will qualify for forgiveness. If you’re a veteran then you need to provide documents from the VA. If you’re not a veteran then you need to provide documents from the social security administration or a physician.

How long does it take for student loans to be forgiven?

If you don’t make any student loan payments after 20 or 25 years then the remaining debt is discharged. This depends on when you had taken the first loan. Along with that if you’re working in a public sector or for a non-profit employer then you need to take 10 years or 120 months repayments to get your additional loan discharged. 

But if you’re disabled then you can get the whole loan discharged if you qualify for the opportunity. While in the case of a teacher you’re only able to get either $5,000 or $17,500 discharge and need to pay the remaining debt.

Conclusion

Now you have a clear idea of what is student loan forgiveness. Along with that, you learned its types and pros/cons and how to get it. 

Getting a student loan forgiveness opportunity isn’t easy. You need to qualify for lots of requirements before forgiveness.

That’s why should read the terms and conditions. I’ve listed only a few of them that are main but you can get full detail on Studentaid.gov a dedicated site to student loans.

Now tell me in your comments what is your decision about student loan forgiveness? Either you’re going to take on this opportunity or not.

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Ahmad Ali