The Truth About Student Loan Forgiveness Programs

As you begin to consider student loans--whether to fill in the tuition gap or cover the majority of your expenses--it’s wise to think ahead a few years to the time when you’ll start repayment. Despite any cure-all banner ads you may have seen in the course of your loan research, let us assure you from the get-go: there is no magic wand that makes student debt disappear.

The truth about student loan forgiveness is this: depending on the loan, there can be a measure of forgiveness. But there are specific criteria to qualify for any of it, and you'll have to demonstrate years of consistent repayment first.

Most graduates can expect a six-month window before repayment of Federal loans begins. There are some options to help you through this, including a standard ten-year repayment, graduated payments, or even deferment or forbearance (a temporary break in payment, or a temporary payment reduction). This last option should only be considered in extreme situation. Whatever your plan, always pay your monthly minimum on time. Missing or late payments can have serious repercussions down the line when you're ready to buy a car or a home.

Which Loans Are Actually Eligible for Forgiveness?

Income-Based Repayment (IBR)

• Method:  Monthly repayment amount limited to 15% of discretionary income.
• Forgiveness:  After 20 years of consistent payments; 25 years for loans taken prior to July 2014
• Eligible Loans:
  1. Direct Subsidized
  2. Direct Unsubsidized
  3. Direct PLUS (to graduate or professional student)
  4. Direct Consolidation
  5. Subsidized Federal Stafford
  6. Unsubsidized Federal Stafford
  7. FFEL Plus (to graduate or professional student)
  8. FFEL Consolidation (excluding repayment of PLUS loans to parents)
  9. Federal Perkins Loan (if consolidated)

PAYE (Pay As You Earn)

• Method:  Monthly repayment amount limited to 10% or 15% of discretionary income, and never more than the 10-year standard repayment amount. Note: you must demonstrate financial hardship to qualify. Also, the balance forgiven is taxable.
• Forgiveness:  Depending on the loan, 20 or 25 years of consistent payments
• Eligible Loans:
  1. Direct Subsidized
  2. Direct Unsubsidized
  3. Direct PLUS (graduate or professional students)
  4. Direct Consolidation (excluding repayment of PLUS loans to parents)
  5. Subsidized Federal Stafford (if consolidated)
  6. Unsubsidized Federal Stafford (if consolidated)
  7. FFEL PUS (to graduate or professional students, and if consolidated)
  8. FFEL Consolidation (if consolidated; excludes repayment of PLUS loans to parents)
  9. Federal Perkins Loans (if consolidated)

REPAYE

• Method:  Monthly repayment amount limited to 10% of discretionary income.
• Forgiveness:  20 years for undergraduate loans; 25 years for graduate and professional study loans
• Eligible Loans:
  1. Direct Subsidized
  2. Direct Unsubsidized
  3. Direct PLUS (to graduate or professional student)
  4. Direct Consolidation
  5. Subsidized Federal Stafford
  6. Unsubsidized Federal Stafford
  7. FFEL Plus (to graduate or professional student)
  8. FFEL Consolidation (excluding repayment of PLUS loans to parents)
  9. Federal Perkins Loan (if consolidated)

Teacher Loan Forgiveness

• Method:  Forgives up to $17,500 in loan debt of "highly qualified" math, science, and special education working in lower-income communities.
• Forgiveness:  Teachers working a minimum of 5 years in a low-income elementary or secondary school may qualify.
• Eligible Loans:
  1. Direct Subsidized
  2. Direct Unsubsidized
  3. Subsidized Federal Stafford
  4. Unsubsidized Federal Stafford

Total and Permanent Disability Discharge

With proof of total and permanent disability, these loans are forgiven:

• Eligible Loans:
  1. Direct
  2. FFEL
  3. Federal Perkins Loan 
     
     

There are profession-driven ways to work toward loan forgiveness, too. If you work for ten years at a qualifying public service organization and have 120 payments, you might qualify for loan forgiveness. There are similar options for medical, legal, military, and education professionals.

Student loans are a huge responsibility, but they needn't be a burden. We encourage you to apply for only what you truly need; do that and you'll minimize your debt and make repayment easier.

There’s no such thing as a comprehensive private student loan forgiveness program, but there are options out there that reward faithful loan repayment. It may not be easy to fully envision your future finances, but it’s always smart to ask yourself now ‘how will this loan affect me in the long run?’ With planning and attention to detail--and yes, perhaps a little bit of sacrifice in the early days after college--your financial future will remain bright.

We know because we’ve been there. Now, let our decades of experience work for you.

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