What Student Loan Forgiveness Programs Exist?

The statistics surrounding student loan debt in America are astounding. A quick look shows just how much of a burden student loans place on people who decide to pursue higher education. 

• Student loan debt affects over 14% of the U.S. population, which equals more than 45 million Americans. 
• The average American with student loan debt owes over $37,000. 
• Student loan debt in America has more than tripled since 2006. 
• Americans owe over $1.6 trillion in student loan debt.

One of the questions many Americans ask is whether there are any loan forgiveness programs.  The answer is yes, and we’re going to cover everything you need to know about loan forgiveness plans so you can make the best decision. We’ll also show you other student loan repayment options you may not have considered. 

Federal Forgiveness Programs

The federal government has put in place several loan forgiveness programs to help those affected by student loan debt. Also, some programs will discharge your loans under specific circumstances, like unforeseen school closures or for those who become permanently disabled. Understanding the specific qualifications for each program better prepares you for the future. We’ll cover how each one works.

• Public Service Loan Forgiveness (PSLF): PSLF is issued to individuals who:
  • Work for the government or a nonprofit as a full-time employee
  • Have made on-time payments for 120 consecutive months
  • Have Direct Loans; Perkins Loans and Federal Family Education Loans (FFEL) don’t qualify unless consolidated into a Direct Consolidation Loan
    
    If you meet all of the requirements, you could have your loans forgiven. Additionally, you are not responsible for any federal income tax associated with the amount forgiven because it’s not considered income by the IRS.

• Teacher Loan Forgiveness: This forgiveness program is directed at teachers. The eligibility requirements include:
  • You must not have an outstanding balance on Direct Loans or FFEL program loans as of Oct. 1, 1998. 
  • You must remain employed as a highly qualified teacher for five consecutive academic years in a school considered to be low-income.
  • The loans you are asking for forgiveness must have been incurred before the end of your five years of qualified teaching.
    
    Once you meet all of the requirements, you could be eligible for up to $17,500 of forgiveness, but the amount you receive is determined by the subject you teach. 
    
    Teachers of science, math, and special education typically receive the highest amount, while all other teachers are eligible for up to $5,000 of forgiveness toward their loans.

• Closed School Discharge: One way your loans can be discharged is when your school closes while you’re in attendance or soon after you graduate. This discharge is only for federal loans. Private loans must be addressed with your lender.
  

• Total and Permanent Disability (TPD) Discharge: People who become permanently disabled and can verify it through proper documentation may have their loans discharged. A physician, the Social Security Administration (SSA), or the U.S. Department of Veteran Affairs (VA) are all acceptable sources of documentation.

After you are approved, there is a three-year postdischarge monitoring period. During that time, you must follow specific guidelines to remain in discharged status. You may not receive new federal student loans, you must maintain an income below the poverty line, and you must remain considered disabled by the SSA. 

Furthermore, if you received your discharge before Jan. 1, 2018, the loan amount discharged may be considered taxable income by the IRS. If you received your discharge between Jan. 1, 2018, and Dec. 31, 2025, the amount would not be considered taxable income.

Other Forgiveness Programs

• Peace Corps: Their website suggests contacting your lender for any loan you have while serving in the Peace Corps. As a volunteer, you may qualify for a deferment, partial cancellation, income-driven repayment, or forgiveness. Becoming a volunteer with the Peace Corps also counts toward the PSLF program. While they can help with federal loans, all private loan forgiveness must be determined by your lender. Additionally, your service could cancel up to 70% of any Perkins Loans you have. 

• AmeriCorps: Similar to the Peace Corps, this program can count toward the PSLF program, since AmeriCorps partners with nonprofit community organizations and public agencies that help tutor those in need, assist in rebuilding communities after disasters, and even work in at-need areas to help battle poverty. Additionally, you receive an Education Award for each month of service, which maintains your ability to use your time toward your 10-year forgiveness plan. The award amount received is equivalent to the maximum value of the Pell Grant each fiscal year. Since this fluctuates, your potential Education Award also fluctuates. Whether you are full or part time also affects how much your award amount is. The amount you receive is federally taxable income according to the IRS.

• Areas in need: Many states offer forgiveness for people who provide necessary help in areas of need. Many of these jobs are in the public service realm, like teachers, doctors, and nurses. The availability of these programs and the amounts they forgive vary between states. Check with each state’s higher education department to see what programs are available and which areas are in need.

• Military service: The U.S. Army and U.S. Air Force both offer tuition reimbursement up to $65,000 in exchange for service. The Air Force program deals specifically with JAG officers, while the Army program deals more broadly with student loan debt. Both programs require at least a year of service before going into effect and require adherence to their eligibility regulations.
  

Employer Tuition Repayment

While only 3% of employers offer tuition repayment programs as of 2016, this trend is on a slow rise. In 2018, the Society For Human Resource Management found that the number of employers offering this type of employment benefit increased from the numbers seen in 2016. Employers like Chipotle, Home Depot, and UPS are leading the way in including student loan repayment as an employee benefit. For some, this could be the deciding factor when finding employment.

• Chipotle: Chipotle has become one of the industry leaders, providing employees with tuition assistance. For select degrees, the company covers 100% of tuition while reimbursing up to $5,250 per year for other degrees. Employees must meet specific requirements to participate in their Cultivate Education program.

• Home Depot offers tuition reimbursement for salaried, full-time, and part-time employees and partners with multiple educational providers. Home Depot doesn’t limit the courses employees are reimbursed for, as long as the course goes toward the completion of their degree. While the contribution amount varies between full- and part-time employees, both are offered this benefit.

• UPS: UPS offers $5,250 per year up to a total of $25,000 in tuition reimbursement for its employees, with eligibility starting the first day of employment. UPS also doesn’t restrict the courses it reimburses. Eligible employees are free to use their benefits toward any course of study.

Come Up With a Plan

Student loan debt continues to rise, but it doesn’t have to haunt you for the rest of your life. The best way to deal with the cost of higher education is to formulate a plan. At College Finance, our team of experts provides anyone interested in attending college with information about available scholarships, resources on taking out student loans, and creating a repayment plan. Even after you’ve graduated, our guides and articles can help guide you through your repayment options, so you can figure out which works best for you.

Whether you are able to take advantage of the available forgiveness programs, having a repayment plan and fully understanding your options will ensure your life isn’t controlled by student loan debt. Talk to your lenders, research available forgiveness programs, and even look for an employer who offers tuition reimbursement. You are in control of your student loan debt.