How To Apply for Student Loan Forgiveness and Find Out if You Are Eligible

Written By
Julija A.
Updated
May 11,2022

Student loan forgiveness is a hot topic right now. With student loan debt reaching an all-time high, more and more people are looking into ways to have their loans forgiven. In this blog post, we’ll discuss what student loan forgiveness is, who is eligible for it, and how to apply for student loan forgiveness. 

We’ll also talk about the benefits of student loan forgiveness and why it might be a good option for you.

What Is Student Loan Forgiveness?

A student loan forgiveness program is an initiative designed to help qualified borrowers reduce or eliminate their educational debt. 

Typically, this is achieved by providing certain benefits or incentives that can substantially reduce the amount of interest a borrower owes, lower their monthly payments, or forgive some or all of their outstanding balance altogether. 

There are many different types of student loan forgiveness programs, and they vary in terms of eligibility requirements, benefits provided, and other factors. Some common examples include federal employee student loan forgiveness, public service loan forgiveness programs, teacher loan forgiveness programs, and student loan forgiveness for volunteers. 

It’s important to carefully explore different student loan forgiveness options to find the right approach for your unique needs and financial situation.

Student Loan Forgiveness Programs

We’ve listed some of the most popular student loan forgiveness options below.

Income-Based Repayment Plan

This repayment plan is a way to lower your monthly student loan payment if you have a high debt-to-income ratio. Your payment is capped at a percentage of your income, and any remaining balance is forgiven after 25 years. 

This plan is best for low-income people or those who have experienced financial hardship. To qualify, you must be able to demonstrate at least partial financial hardship. This means that the standard 10-year repayment plan would leave you with a monthly payment that is more than 15% of your discretionary income. 

You can apply for this plan online, and you’ll need to provide information about your income and family size. 

Once you’re enrolled, your payments will be recalculated each year based on your updated income and family size. If your income goes down, your payment will also go down. And if you experience financial hardship, you can request a forbearance or deferment to temporarily postpone or lower your payments.

Public Service Loan Forgiveness

PSLF is a widely available program that allows borrowers to reduce their loan balances by working in certain public service professions. 

To be eligible for this program, borrowers must first make 120 full payments on their loans (usually 10 years’ worth of payments). After this period is up, borrowers can apply for forgiveness and have the remainder of their loan balance forgiven. While the specifics of PSLF vary from lender to lender, there are several common requirements that all borrowers need to meet. 

These include maintaining a good standing with their loan servicer, working in a qualifying public service position full-time, and making consistent income-contingent payments. 

Overall, PSLF can be an excellent option for anyone looking to pursue a career in public service while minimizing the cost of their student loans.

Federal Employee Student Loan Forgiveness

This is a program created to help ease the burden of student loan debt for public service employees who work in challenging positions. 

This program offers various types of relief, including loan support, interest rebates, and even full loan forgiveness, depending on certain factors such as employment status, length of employment, and amount owed. 

Overall, this program is designed to provide support and relief to those who dedicate their careers to helping others by working in the public service. 

Whether you’re a teacher, firefighter, or government employee of any other description, if you’re struggling with student loans and want to pursue a career path in public service, you may want to consider taking advantage of federal employee student loan forgiveness.

Teacher Loan Forgiveness Programs

These programs provide financial assistance to individuals who have dedicated their careers to working in education. 

Generally, these programs are offered by individual states or districts, and each program has its eligibility requirements and benefits. In general, most teacher loan forgiveness programs require that applicants work full-time as a teacher at an eligible school for a certain amount of time before being eligible for support. 

Additionally, the terms of each program can vary significantly, with some offering support over a shorter period, while others extend benefits over many years. Ultimately, anyone interested in pursuing teacher loan forgiveness should carefully research the specific options available in their area and determine which option is right for them.

Student Loan Forgiveness for Volunteers

This program is a federal initiative that offers student loan forgiveness to individuals who perform volunteer services. 

To be eligible, volunteers must complete at least 500 hours of service over a 12-month period. The hours can be completed all at once or spread out over multiple months. Volunteers can serve in various roles, including working with children, the elderly, the disabled, or the sick. 

Those interested in participating in the program should contact local volunteer networks to learn more about opportunities in their community. 

Once they have completed their service, volunteers must submit documentation verifying their hours to the program. Upon reviewing and verifying the hours, volunteers will have a portion of their student loans forgiven. 

This program is an excellent way to reduce your student loan debt while also giving back to your community.

How Does a Student Loan Forgiveness Work?

Student loan forgiveness programs are designed to encourage people to enter certain professions, such as teaching or the public service. These programs typically involve reducing or eliminating the debt burden for those who commit to working in these fields for a set period of time, usually 10 years. 

The exact terms of each program vary, but most require that the borrower make regular, on-time payments during the committed period. At the end of the term, the remaining balance on the loan is forgiven. 

While student loan forgiveness programs can be beneficial for those who qualify, it's important to remember that they will still need to repay any outstanding balance if they leave their job before the end of the committed period. As such, these programs should be considered carefully before taking out a loan.

Who Qualifies for Student Loan Forgiveness?

There are several different ways to qualify for student loan forgiveness. 

One common way is to work in public service or government jobs. Many programs exist that offer student loan forgiveness for those who work in these fields, as such work is considered a valuable contribution to society. 

Another way to qualify is by making regular payments on an income-based repayment plan. After a certain number of years, the remaining balance on the loan may be forgiven. There are also some private employers that offer student loan repayment assistance as part of their employee benefits package. 

Finally, borrowers may be able to qualify if they can prove that repayment would cause undue hardship. If you think you might qualify for this type of loan, be sure to research all available programs and see if you meet the eligibility requirements.

How Is Student Loan Forgiveness Taxed?

The student loan forgiveness program is a great way to get out of debt, but it's important to understand how it works before you apply. One of the most common queries we get is how taxes on student loan forgiveness work.

Here's the short answer: any forgiven debt is considered taxable income by the IRS. So, if you have $50,000 in student loans forgiven, you’ll be taxed on that $50,000 as if it were income.

Now, there are some exceptions to this rule. If you are married and file separately, the forgiven debt will only be taxed on your return. And if you’re insolvent (that is, your debts exceed your assets), the forgiven debt may not be taxed at all.

Another exception is if the forgiven debt is due to death or disability. In these cases, the forgiven debt will not be taxed.

If you’re considering student loan forgiveness, it's important to speak with a tax professional to understand how it will affect your taxes.

Applying for Student Loan Forgiveness

When it comes to student loan debt, there may come a time when you consider pursuing loan forgiveness as an option. This is typically done through a program that forgives the outstanding balance after meeting specific requirements over a certain period of time. There are several steps involved in the application process, including:

  1. Researching and qualifying for specific loan forgiveness programs. There are many different types of student loan forgiveness programs available, so it’s vital to thoroughly research the options that best fit your specific needs and financial situation. Some popular programs include teaching or public service loan forgiveness, income-driven repayment plans, and state reinstatement programs.
  2. Gathering the required documents and information to submit a student loan forgiveness application. You will typically need to provide proof of income and other documentation regarding your student loans and your work history. Depending on the type of program you’re applying for, additional information may be needed as well, such as certificates, licenses, or proof of enrollment in continuing education courses or training programs.
  3. Completing and submitting the application according to the program guidelines and requirements. Once you’ve collected all the necessary information and documents, you can begin filling out the official application form for your chosen program(s).

Final Thoughts

Student loan forgiveness can be a great way to get out of debt, but it's essential to understand how it works before you apply. Be sure to research the different types of programs available and see if you meet the eligibility requirements before you apply for student loan forgiveness.

And remember, any forgiven debt is considered taxable income by the IRS, so be sure to speak with a financial expert to understand how it will impact your taxes. If you think student loan forgiveness is the right option for you, follow the steps outlined above to begin the application process.

FAQ

Can a private student loan be forgiven?

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Private student loans are not eligible for forgiveness. However, there may be other options to help you repay your loans, such as income-driven repayment plans or refinancing. Be sure to speak with your lender about all available repayment options and choose the one that best fits your needs.

Do government contractors qualify for student loan forgiveness?

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It depends on the type of contract. If you have a service contract with the federal government, you may not be eligible for student loan forgiveness through the Public Service Loan Forgiveness Program.

However,  if you have a procurement contract with the federal government, you may be eligible for student loan forgiveness through the Federal Employee Student Loan Forgiveness Program.

How do you check if the employer qualifies for PSLF?

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To check if your employer qualifies for PSLF, you can visit the Employment Certification for Public Service Loan Forgiveness form on the StudentLoans.gov website.

Besides this, you can also contact your loan servicer to ask if your employer qualifies for PSLF. 

What is considered a qualifying payment for loan forgiveness?

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A qualifying payment is a monthly student loan payment that is made while you are employed full-time by a qualifying employer. 

To be eligible for loan forgiveness, you must make 120 qualifying payments and meet all other program requirements. 

Now that you know how to apply for student loan forgiveness, all that's left to do is research the different types of programs available and see if you qualify. 

About author

Albert Einstein is said to have identified compound interest as mankind’s greatest invention. That story’s probably apocryphal, but it conveys a deep truth about the power of fiscal policy to change the world along with our daily lives. Civilization became possible only when Sumerians of the Bronze Age invented money. Today, economic issues influence every aspect of daily life. My job at Fortunly is an opportunity to analyze government policies and banking practices, sharing the results of my research in articles that can help you make better, smarter decisions for yourself and your family.

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