What Are Student Loan Forgiveness Programmes?

Higher education can be expensive, which is why many students around the globe opt for student loans to get their dream education and step into a world full of opportunities. However, after graduating, many people may even struggle with repaying their student loans. Borrowers graduating with high amounts of debt, including science and healthcare majors, may have to put in the extra effort to repay the loans while also trying the intricacies of their jobs. To alleviate individuals and empower them throughout, student loan forgiveness programs play a significant role. 

So, what are these student loan forgiveness programs, what are their eligibility criteria, and how do they work? Let’s find out in detail in this blog! 

What is Student Loan Forgiveness?

Student loan forgiveness is a unique situation where the borrower is freed from the obligation to repay their student loan. Student loans taken out for higher education are usually eligible for student loan forgiveness programs. However, it is essential to remember that only federal loans can be forgiven. The occasional cases of private student loans being forgiven come under extremely special circumstances, i.e., if the borrower dies, becomes permanently disabled or declares bankruptcy. 

Student loans are one of the most favourable loans to be forgiven. Aside from student loans, some other types of loans allow the borrower to apply for forgiveness. Still, those are mostly reserved for specific professions like military service and healthcare. 

How Does Student Loan Forgiveness Work? 

Before getting to know about loan forgiveness programs, it is essential to understand how the process of student loan forgiveness works. Here’s how! 

Background of Student Loan Forgiveness Programs 

Federal student loans or loans the government backs up are the only ones that are usually forgiven. Technically, any student loan can be forgiven, but most private banks do not have the financial backing to do so and thus are bound to repayments. However, some private banks may help you refinance your student loan for lower interest payments or even forgive student loans partly. On the other hand, federal loans can be fully pardoned, thus relieving the borrowers from their student loan repayment. 

So, if the borrower has a federal student loan that is eligible for forgiveness, student loan forgiveness programs are a great choice. Usually, the borrower is required to apply for loan forgiveness and wait until the application is approved. However, the borrower is supposed to continue their repayment during this waiting period.

Eligibility for Student Loan Forgiveness Programs 

Imagine getting your student loan forgiven and not paying back a penny! Sounds impressive. As much as every student would like that, the strict eligibility criteria the borrower must meet make the student loan forgiveness programs so rare and significant. The criteria and requirements may differ according to the type of loan you are trying to get forgiven. Usually, student loan forgiveness programs give preference to candidates who are in specific occupations like the military, education sector, healthcare, and specific non-profit organisations. Income-based loan forgiveness programs and private student loan forgiveness schemes are still a debated topic. 

6 Types of Loan Forgiveness Programs

Based on their niche criteria of eligibility, one can apply for different types of student loan forgiveness programs. Here is the general categorisation: 

1. PSLF or Public Service Loan Forgiveness

One of the most widely applied programs, PSLF or the public service loan forgiveness program, helps borrowers get their loans forgiven if they work in the public service sector or a non-profit organisation. Here are the eligibility criteria: 

• The loan must be a federal direct loan. 
• The borrower must work in public service, i.e. the employer must be a government agency, public service entity or a non-profit organisation. 
• The borrower must have made at least 120 qualifying repayments. 

After 120 qualifying payments, the borrower's student loan is forgiven under the PSLF student loan forgiveness program. You may be required to keep records of your public service employment and initial qualifying repayments. You can utilise debt consolidation to convert your other federal loans into a direct federal loan. 

2. Teacher Loan Forgiveness

If you work in the education sector, especially as a teacher, you can qualify for a student loan forgiveness program. Teachers who have dedicated their lives to teaching in schools with low-income or public education agencies can get their loans forgiven under the teacher loan forgiveness program. The eligibility criteria may include 

• 5 years of continuous employment in a low-income school. 
• The employer school must be registered with the teacher cancellation low-income directory. 
• The loan must be categorised under a federal direct secure or unsecured loan. 

Teacher loan forgiveness programs can help borrowers get their loans forgiven up to a very significant amount of $17,500. Make sure to track the verification of low-income verification records of the school you work in as a teacher. Check if your loan type is eligible for this specific student loan forgiveness program and, most importantly, meet the necessary teacher criteria for five consecutive years. 

3. Repayment Loan Forgiveness Programs

For people who aren’t working in the public sector or any other eligible sectors for that matter, qualifying for student loan forgiveness programs can be very difficult, especially for total forgiveness. However, they can still qualify for partial loan forgiveness under the repayment loan forgiveness programs. The programs include: 

IBR: Income-based repayment, or the IBR program, requires an initial 20-25 years of qualifying repayments. The maximum monthly repayments are 10-15% of the monthly income.  

ICR: Income contingent repayment programs or ICR are similar to IBR, but the repayment amount is recalculated yearly based on certain factors, i.e. total income, number of dependents, federal loan balance, etc. The repayments are usually 20% of the income. 

PAYE and REPAYE: Pay as you earn and repay as you earn programs offer a 10% maximum payment of the monthly income. With a 20-year qualifying payment period, the government might even cover some of your interest if you are eligible.  

4. Forgiveness for Healthcare Workers

Doctors, nurses, and dentists are usually among the people who graduate from college with high amounts of student loans. Healthcare workers can be eligible for student loan forgiveness programs to make things easier for them, especially those serving the undeserving communities and facilities. 

5. Military Student Loan Forgiveness Programs 

To recognise the commitment of army personnel and veterans, military student loan forgiveness programs offer to forgive student loans taken by people who are a part of the armed forces. Active-duty services count as public service, making the borrower eligible for PSLF, while different branches of the military may even offer their own student loan forgiveness programs.  

6. Borrower Defence Loan Forgiveness

To protect the rights of students from for-profit and private educational institutions that may engage in questionable activities, borrower defence student loan forgiveness programs play a vital role in loan forgiveness. Initially, the program was designed to forgive all the federal loans the applicant might have, but it has been modified to forgive a part of the loan. 

Alternatives to Student Loan Forgiveness

1. Income-Driven Repayment Plans (IDRs)

You see unlike most student loan forgiveness programs, IDRs allow flexibility by adjusting your payments based on your income and family size. And this ensures that your repayments go well with your finances, making it an ideal option for managing your student loans.

2. Refinancing and Consolidation

You can also explore refinancing or consolidating your student loans to benefit from lower interest rates; this not only simplifies your repayments but also results in a considerable amount of savings over the lifetime of a loan.

3. Employer Assistance Programs

Another effective option apart from student loan forgiveness programs is looking for employers who assist with the repayment of the loan, and luckily for you, there are many. You see, this method can aid you in both alleviating your financial burden and kickstarting your career.

To make sure that the struggle with student loans is not a significant obstacle in the path of higher education, student loan forgiveness programs appear to be a ray of hope. With the right information, knowledge and student essentials, navigating through the strict criteria of the student loan forgiveness programs becomes easier, thus empowering professionals financially.