The Truth About Student Loan Forgiveness

woodleywonderworks cc by Flickr

There is always talk about student loan forgiveness and as the conversation begins the student loan listeners eagerly embrace the prospect of no longer having to make loan payments. However with further research this prospect diminishes as the truth becomes apparent. Not everyone can qualify.

There is nothing more frustrating to learn that you cannot participate in a program that can help elevate a financial pressure. This is what happens too many who hear about student loan forgiveness but when they apply find out that they do not qualify. These programs are very narrow not to mention too restrictive to include a variety of college graduate.

In the hopes of preventing further disappointment and frustration here are some bullet points on the Public Service Loan Forgiveness (PSLF) options:

  • To quality for loan forgiveness 120 payments must be made for any loan consideration. That translates into 10 years of eligible payments.
  • Payments made should come from a plan that meets PSLF guidelines. Also consideration extends only to full-time workers, 30 hours or more per week, who work for the government, 501(c )(3) non-profit companies, and other non-profit companies that provide special public service.
  • Not all federal loans qualify for forgiveness; only loans under the program titled William D. Ford Federal Direct Loan will go under review.
  • If your loans are Federal Family Education Loan or Perkins Loan it qualifies when combined into a Direct Consolidation Loan. See below for other Perkins Loan program. No payments made before consolidation will count for the 120 required payments. Once all loans are combined the qualifying payment begins the day of the change of loan status. Any payments made before will not apply.
  • To uncover your loan type, go to and look for the word “Direct” in the name of your loan that usually means it qualifies.
  • Payments must be made before October 1, 2007, and within 15 days of due date. Loans cannot be in grace period, deferment, forbearance and cannot be under “in-school status”. Contrary to the preconceived notion, the 120 payments do not have to be consecutive. Only one payment per month will count under the program. Additional payments made in the same month will not apply.
  • AmeriCorps or Peace Corps volunteers are the exception to the rule and can make larger payments that can add up to 12 payments. Setting up auto debit is best way to ensure regulated payments are made.
  • Payments can quality only when they are income based, no other type of payments will be eligible.
  • When you switch jobs while in the PSLF program, be aware that it can impact your eligibility. When looking to make a job change, check with the FedLoan Servicing program.

To begin the progress of forgiveness a person must submit an employment of certification form, upon receipt these are the steps to follow:

  1. The program representative will review the form for completion and to ascertain employee qualification. It is at this stage applicants are turned down or additional information is requested as needed.
  2. The next stage is the reviewing of all student loans and their grouping together within the FedLoan Servicing program.
  3. Payment history gets scrutinized and decisions are made concerning the acceptance of payments made prior to the initial request. Applicants will also learn the amounts of payments left to complete the 120 monthly payments.
  4. Once all payments are made another request should be submitted for the conclusion of loan forgiveness. This application will be available October 2017. Once the loan is forgiven the grant program payoff amount should not affect your federal taxes since the amount was applied directly to the loan.

Loan Forgiveness For Teachers: Teachers have the wonderful opportunity to receive loan absolution for many types of loans – Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans. The program defines a teacher as anyone who teachers in the classroom or a setting outside the classroom. Here are the factors for loan cancellation:

  • The teacher must teach full-time for five uninterrupted years in low social-economical elementary, secondary or education agencies. In particular Title I schools under the Education Act of 1965 and AmeriCorps teaching positions are not eligible. The years working as a teacher must have one year after 1997.
  • Schools, such as elementary and secondary, ones under the management of the Bureau of Indian Education or on Indian reservations automatically qualify.
  • The total amount for forgiveness is from $5,000 to $17, 500 for Direct Subsidized and Unsubsidized Loans, as well as Subsidized and Unsubsidized Federal Stafford Loans. PLUS Loans do not quality.
  • A teacher meets the requirements for loan forgiveness if there is no unsettled balance on Direct Loans or Federal Family Education Loan Program from October 1, 1998.
  • Default loans must be cleared up before any consideration for loan cancellation.
  • Teacher cancellation applies only to Federal Perkins Loan Program. Contact the office of Federal Perkins Loan program to apply.

Other Programs: An additional category of loan forgiveness is the Total and Permanent Disability discharge (TPD). This clemency program applies to Direct Loans, Federal Family Loans, Perkins Loans, and Teacher Education Assistance for College and Higher Education obligation when disability is established.  The US Department of Education and Nelnet Total and Permanent Disability Servicer will look to receive VA, Social Security Disability Insurance, and Supplemental Security Income notification of disability.

Death of a borrower forgives all loans. Death certificate is mandatory.

Loan payments for schools that did not meet academic requirements or that committed fraud are eligible by law for forgiveness.  Submit your request to the US Department of Education.

There you have it the truth about loan forgiveness and as you can see it is an exclusive club filled with restrictions. Here’s hoping you become a member.