Lately I have been talking to a lot of folks who are heavily burdened by their student loan debts – some of whom have over $100,000 in student loan debt.
And while I believe, according to scripture, we are to pay back our debts, if they are forgiven by the lender then we are off the hook.
So all this led me to do some digging about some of the little known student loan forgiveness programs out there. It is amazing to me that these programs have seemingly been kept undercover. There are a large number of people out there who could really benefit from them.
They all have pretty specific and strict eligibility requirements, but hopefully this article will serve as a starting point for some of you who may be eligible for some of these programs.
But if you know anyone who works in a public service job, nurses, law enforcement officers, teachers, military, or any of the others listed below, definitely share this with them.
1. Public Service Loan Forgiveness (PSLF)
The PSLF Program is for individuals who work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance of their Direct Loans after they have made 120 qualifying payments on those loans while employed full time by certain public service employers.
The program forgives qualified federal student loans – by qualified they mean William D. Ford Direct Loans (including direct unsubsidized loans, direct subsidized loans, direct consolidation loans and direct PLUS loans).
- Before any of your loans will be forgiven, you must make 120 on-time, full amounts, monthly payments on your direct loans.
- Only payments made after 10/1/2007 qualify.
- You must have been working full-time at a qualifying public service organization when the payments were made.
2. Federal Perkins Loan Cancellation Program
This loan cancellation program is much more lenient in how much of your student loans it will cancel out. You can have up to 100% of your Federal Perkins loan forgiven in the following increments. For the first two years, you can have 15% cancelled each year. For years three and four, you can have 20% cancelled each year. For year five, you can have the final 30% of your loans cancelled. Perkins loans may be partially or completely canceled if the borrower meets one of the following conditions.
Full-time teachers or service providers meeting one of the following conditions may be eligible to have up to 100% of their loans canceled:
- Teachers in public or nonprofit elementary or secondary schools serving low-income families. Qualifying schools are approved by the US Department of Education.
- Teachers of handicapped students in a public or nonprofit elementary secondary school. The majority of the students must be handicapped.
- Special education teachers, including teachers of infants, toddlers, children, or youth with disabilities in a public or nonprofit elementary or secondary school system.
- Teachers of mathematics, science, foreign languages, bilingual education, or any other field of expertise that is determined to have a shortage of qualified teachers.
- Full-time qualified professional providers of early intervention services in a public or other nonprofit program under public supervision.
- Full-time employees of a public or private nonprofit child or family service agency who provide or supervise the provision of services to high risk children from low-income communities, and the families of such children.
- Full-time nurses or medical technicians providing health care services.
- Full-time law enforcement officers or corrections officers for a local, state, or federal law enforcement or corrections agency.
3. Teacher Loan Forgiveness
For Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans.
Under this program, if you teach full-time for five complete and consecutive academic years in certain elementary and secondary schools and educational service agencies that serve low-income families, and meet other qualifications, you may be eligible for forgiveness of up to a combined total of $17,500 on your Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Loans. (NOTE: If you have PLUS loans only, you are not eligible for this type of forgiveness.)
- You must not have had an outstanding balance on Direct Loans or Federal Family Education Loan (FFEL) Program loans as of Oct. 1, 1998, or on the date that you obtained a Direct Loan or FFEL Program loan after Oct. 1, 1998.
- If you are in default on a subsidized or unsubsidized loan, you are not eligible for forgiveness of that loan unless you have made satisfactory repayment arrangements with the holder of the defaulted loan.
- The loan(s) for which you are seeking forgiveness must have been made before the end of your five academic years of qualifying teaching service.
- Any time you spent teaching to receive benefits through AmeriCorps cannot be counted toward your required five years of teaching for Teacher Loan Forgiveness.
- You must have been employed as a full-time teacher for five complete and consecutive academic years, and at least one of those years must have been after the 1997–98 academic year.
- You must have been employed in an elementary or secondary school that is in a school district that qualifies for funds under Title I of the Elementary and Secondary Education Act of 1965.
4. Hardship Loan Forgiveness
The entire loan will be cancelled or forgiven based on the situation of the borrower or the student and these includes the following:
Total and Permanent Disability (TPD) Discharge
A TPD discharge relieves you from having to repay a William D. Ford Federal Direct Loan (Direct Loan) Program loan, Federal Family Education Loan (FFEL) Program loan, and/or Federal Perkins Loan (Perkins Loan) Program loan or complete a TEACH Grant service obligation on the basis of your total and permanent disability. Before your federal student loans or TEACH Grant service obligation can be discharged, you must provide information to the U.S. Department of Education (ED) to show that you are totally and permanently disabled. ED will evaluate the information and determine if you qualify for a TPD discharge.
If you, the borrower, die, then your federal student loans will be discharged. If you are a parent PLUS loan borrower, then the loan may be discharged if you die, or if the student on whose behalf you obtained the loan dies.
The loan will be discharged if a family member or other representative provides a certified copy of the death certificate to the school (for a Federal Perkins Loan) or to the loan servicer (for a Direct Loan or FFEL Program loan).
Discharge in Bankruptcy
This is not an automatic process—you must prove to the bankruptcy court that repaying your student loan would cause undue hardship.
The court uses this three-part test to determine hardship:
- If you are forced to repay the loan, you would not be able to maintain a minimal standard of living.
- There is evidence that this hardship will continue for a significant portion of the loan repayment period.
- You made good-faith efforts to repay the loan before filing bankruptcy (usually this means you have been in repayment for a minimum of five years).
Closed School Discharge
You may be eligible for discharge of your Direct Loans and FFEL Program loans under either of these circumstances:
- Your school closes while you’re enrolled, and you do not complete your program because of the closure. Any federal student loan obtained to pay your cost of attendance at that school could be discharged. If you were on an approved leave of absence, you are considered to have been enrolled at the school.
- Your school closes within 90 days after you withdraw.
- You are not eligible for discharge of your Direct Loans or FFEL Program loans if your school closes and any of the following is true:
- You withdraw more than 90 days before the school closes.
- You are completing a comparable educational program at another school. If you complete such a program at another school after your loan is discharged, you might have to pay back the amount of the discharge.
- You have completed all the coursework for the program, but you have not received a diploma or certificate.
False Certification of Student Eligibility or Unauthorized Payment Discharge
You may be eligible for a discharge of your Direct Loan or FFEL Program loan in these circumstances:
- Your school falsely certified your eligibility to receive the loan based on your ability to benefit from its training, and you did not meet the ability to benefit student eligibility requirements.
- The school signed your name on the application or promissory note without your authorization or the school endorsed your loan check or signed your authorization for electronic funds transfer without your knowledge, unless the proceeds of the loan were delivered to you or applied to charges owed by you to the school.
- Your loan was falsely certified because you were a victim of identity theft.
- The school certified your eligibility, but because of a physical or mental condition, age, criminal record, or other reason you are disqualified from employment in the occupation in which you were being trained.
Unpaid Refund Discharge
You may be eligible for a discharge of your Direct Loan or FFEL Program loan if you withdrew from school, but the school didn’t pay a refund that it owed to the U.S. Department of Education or to the lender, as appropriate. Check with the school to see how refund policies apply to federal aid at the school.
Only the amount of the unpaid refund will be discharged. You may qualify for this partial discharge whether the school is closed or open
5. State and City Sponsored Loan Forgiveness Programs
There are loads of state sponsored student loan forgiveness programs. In fact, there are way too many to list here. The good news is, the American Federation of Teachers (AFT) has compiled a searchable database of loan forgiveness programs, grants, awards and classroom donation programs. You can specify loan forgiveness, select your grade level, your subject area and state and you can see what student loan forgiveness and cancellation programs are available in your state. Your local school board should be able to provide you information on any county or city funded forgiveness programs.
Additional Student Loan Assistance Programs
AmeriCorps: This organization is the domestic arm of the Peace Corps, and it offers up to $7,400 in living stipends. Will pay approximately $4,725 in education awards upon completion of one year’s successful service.
Nurses: Repayment assistance (not a discharge) is available through the Nursing Education Loan Repayment Program (NELRP) to registered nurses in exchange for service in eligible facilities located in areas experiencing a shortage of nurses.
Peace Corps: Volunteers that have outstanding Perkins Loans can receive a 15% cancellation on the debt owed for each year of their first two-year service term and a 20% loan cancellation for their third and fourth years of service. Participants can receive up to a 70% cancellation on Perkins loans.
Military Service: The Student Loan Repayment Program (SLRP). Under the Student Loan Repayment Program, when you enlist the Army will pay back up to $65,000 in qualified education loans (up to $20,000 for reservists), the Navy up to $65,000 and the Air Force up to $10,000. The military services have unique student loan repayment programs designed to help recruit and retain active duty and reserve personnel, including both officers and enlisted.
If you know anyone burdened under student loan debt and may be eligible for these programs let them know!