Student loans: as time goes by, college and graduate students increasingly can’t live without them. In order to make your higher education dreams come true, it usually requires taking out some sort of student loans. And as much as you’d wish for them to just go away or disappear into thin air after you graduate, this loan debt can stay with you for decades as you slowly pay it off.
But take heart! There are four major different federal student loan forgiveness programs that can help you get free of your student loans sooner. Especially if you’re a public servant, and a teacher in particular, you’ll definitely want to read on to see if you’re eligible for federal student loan forgiveness.
Note that these particular programs are not for private student loans. You should ask your loan servicer if they have their own programs, such as being able to pay only the interest, or temporarily reducing the interest rate.
There are other state-based student loan forgiveness programs for teachers, nurses, lawyers, and doctors. A web search for your state plus “student loan forgiveness program” (e.g. New York student loan forgiveness program) can also give you additional resources and assistance in the area of loan forgiveness.
Public Student Loan Forgiveness
The Public Student Loan Forgiveness program (PSLF), which began on October 1, 2007, is for those full-time workers at a nonprofit or a local, state, or federal government agency for 10 years or more and have made 120 on-time payments. These payments do not need to be consecutive, but they do need to be made within a repayment program. Total forgiveness of the remaining amount will be granted for the following eligible loans:
• Direct Subsidized Loans
• Direct Unsubsidized Loans
• Federal Direct PLUS Loans
• Federal Direct Consolidations Loans
Note that the Federal Perkins loan is not eligible. Due to the time intensive nature of this particular loan forgiveness program, the PSLF is best for those who plan to commit to, or will switch into, a long-term public service career.
Qualifying payments cannot be made under the following loan conditions:
• a default
• a forbearance
• a deferment
• an in-school status
• a grace period
To apply:
1. Complete the Employment Certification Form annually, or after each job change.
2. Submit the form to FedLoan Servicing.
3. FedLoan Servicing will review your information and will notify you whether you qualify. You may be asked to send more information (i.e., paystubs, W-2s, etc.) to confirm your qualifications.
4. FedLoan Servicing will then inform you on the number of qualified payments that have been been, as well as the number of payments remaining in order to qualify for loan forgiveness.
5. When you reach eligibility, complete and submit a PSLF application. Since this program began on October 1, 2007, the application for forgiveness will be made available by October 2017.
Teacher Loan Forgiveness
Highly qualified teachers (i.e., state certified and licensed) who work in low-income public schools for five consecutive years and have current federal student loans (Direct and Federal Stafford loans) starting in October 1, 1998 are eligible for loan forgiveness. Look for your school in the Annual Directory of Designated Low-Income Schools for Teacher Cancellation Benefits
If you teach math, science, or special education, then you can receive up to $17,500 in student loan forgiveness. Otherwise, it’s up to $5,000.
Note that if you have only PLUS loans, you will be ineligible for this program.
To apply, complete the Teacher Loan Forgiveness Application and return it to your loan servicer.
Teacher Cancellation for Federal Perkins Loans
This loan forgiveness program is for the Federal Perkins loan only and is open to those teachers who work full-time in low-income schools or teachers who specialize in subjects such as science, math, or special education.
Other circumstances include:
• Private schools with a nonprofit status
• Educational service agency
• Teaching in a designated subject shortage area
The loan cancellation follows this schedule over five years of service:
• 15 percent of loans cancelled for the first and second years
• 20 percent of loans cancelled for the third and fourth years
• 30 percent of loans cancelled for the fifth year
You can borrow up to $27,500 as an undergraduate student and then an additional $32,500 as a graduate student.
In order to apply, you’ll need to contact your alma mater’s financial aid office for a loan cancellation application, since Perkins loans are directly distributed by a university.
Income-Driven Repayment
There are four main repayment programs under this umbrella, meant to help those who have higher loan balances in contrast to their incomes.
• Income-Based Repayment (IBR Plan)
• Income-Contingent Repayment (ICR Plan)
• Pay As You Earn (PAYE Plan)
• Revised Pay As You Earn (REPAYE Plan)
With each of these programs, loan forgiveness of the remaining amount is granted after 20 or 25 years. Loan eligibility depends on the repayment plan, but all loans that are consolidated into a Direct Consolidation loan will then become eligible.
To apply, you will first need to complete an Income-Driven Repayment Plan request and then return it to your loan servicer. You will need to recertify annually. Forgiveness is automatically given after 20 or 25 years, depending on the program.
It’s very important to note that any amount forgiven will be seen as taxable income. You will want to plan accordingly with a tax professional so you’re not caught off guard with a high tax bill.
For any of these student loan forgiveness programs, you should keep informed about how they are funded because the terms may change.
As long as you keep track of your student loans, as well as how the state and federal governments are currently viewing government financial aid, you’ll be able to capitalize on the free money that’s available to you. If you’re under financial strain, then consider a loan deferment or forbearance as a temporary help.
With these four federal student loan forgiveness programs, you’ll be well on your way to having your student loans becoming only a distant memory.