How Forgiveness Works

Student loan forgiveness is a government process that qualifies some borrowers for forgiveness (i.e. as in… you no longer owe money and no longer need to make payments) for a portion of your student debt.

But before you race out to buy that mansion in Maui, keep in mind that there are very specific rules in place to qualify. Here are the basics behind the 3 main forgiveness programs offered.

1.) Public Service Loan Forgiveness

Are you a nurse, police officer or working in a similar public servant categorized career? If so, this forgiveness program might be for you! Created by the College Cost Reduction and Access Act of 2007, this Public Service Loan Forgiveness option was designed to persuade gifted graduates in choosing a career in the public service sector of their community in exchange for a reduction in the amount of debt they owe for their college education.

To qualify you must:

• Work in public service (i.e. public law, health, a qualified non-profit or law enforcement). There is a 30 hours/per week minimum requirement.
• Make and complete ten full years of qualified payments.

Only federal student loans obtained under the William D. Ford Federal Direct Loan Program qualify for this particular option of loan forgiveness. However, it is possible to consolidate your Federal Perkins Loans into a Direct Consolidation Loan in order to meet the necessary requirements. With that said, you must still make 120 qualified payments on this new loan, and previous payments generally don’t count towards pslf after consolidation, but there are exceptions.

2.) Teacher Loan Forgiveness

The Teacher Loan Forgiveness option was also created by the College Cost Reduction and Access Act of 2007. This program has two prongs, one offers loan cancellation for Federal Perkins Loans and the other provides forgiveness for Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans.

To qualify you must:

• Complete 5 full consecutive years of teaching in a low-income community.
• Have no existing defaults on your loans.
• Have obtained all loans that you are asking forgiveness on prior to the completion of your full five years of teaching.
• Have taught at a school that is listed on the Annual Directory of Designated Low-Income Schools for Teacher Cancellation Benefits.

3.) Don’t work in public service? Not a teacher?

That’s ok! If make your payments in-full, on-time, and are enrolled in an income-driven repayment plan – you may still qualify!

The last main method of forgiveness is offered to those borrowers who may not fit into the other career-based programs, BUT have completed 20 or 25 years of timely, qualified payments on their direct student loans and are typically enrolled in some type of income-based repayment plan.

To qualify after 20 years:

• Your repayment plan status must be active and your payments must be current.
• Be enrolled in either the PAYE or REPAYE repayment plan.

To qualify after 25 years:

• Your repayment plan status must be active and your payments must be current.
• Be enrolled in the income-based or income-contingent repayment plan for the duration of loan payback term.

Student Loan Discharge

Lastly, in rare instances, it is possible to obtain loan forgiveness through what is known as a student loan discharge. This type of relief is granted when a permanent disability or death occurs.

There are other types of discharge as well. This information may not be complete, there may be other requirements for each program, and additional forgiveness programs may also be available. For more information, visit the Department of Education website.

If you still have questions or want to see if you qualify for any of the forgiveness options above, get started today and let DocuPop help!