How to Qualify for Loan Forgiveness

In recent years the potential for student loan forgiveness has vastly improved, with a growth in both federal and state programs available. Additional programs are also available through the voluntary sector and the military. Forgiveness is only applicable for federal student loans and not to private loans. To qualify for loan forgiveness students and graduates must meet certain requirements.

Programs on offer vary and are either directed towards encouraging graduates to work in the public service sector or are based on earned income after graduation. Those considering state loan forgiveness programs should make inquiries with their State Department of Education. Outlined below are some of the available options and details of how to qualify for consideration.

Income Based Repayment Forgiveness

This is available through the federal student loan repayment program. Those who graduate into relatively low paying jobs are entitled to spread their loan repayments over 25 years, thus reducing the standard monthly repayment that is based on a 10 year plan. Family size is also taken into consideration. Average payments are capped and equate to less than 10 percent of income. IBRinfo states “If you earn below 150% of the poverty level for your family size, your required loan payment will be $0. If you earn more your loan payment will be capped at 15 percent of whatever you earn above that amount.” At the end of 25 years any remaining balances on the loans will be forgiven.

Public Service Loan Forgiveness Program

This program is also available under the federal student loan repayment. Graduates who work in certain public service sectors agree to repay their loans under the 10 year monthly repayment plan. After 120 consecutive monthly payments have been made and remaining balance will be forgiven. A full list of qualifying careers can be found here. To be eligible for forgiveness the employee must be employed full time within the public sector and cannot have gone into default at any stage on the loans. As the 10 year loan repayment plan is intended to clear student loans within that time frame the forgiveness will only really apply to those on low incomes.

Federal Perkins Loan Teacher Cancellation Program

Teachers who choose to teach in special education, in low income area schools, or teach a subject which has a state shortage of teachers, are eligible to have their Federal Perkins loans forgiven completely at the end of five years. Teachers must work in one of these areas and receive loan deferment during the period they continue to teach. Forgiveness is on a sliding scale. During years one and two teachers will have 15 percent of the loan cancelled; years three and four qualify for 20 percent cancellation; and in the fifth year the remaining 30 percent of the loan is cancelled.

Stafford Loan Forgiveness Program for Teachers

Qualifications and amounts of loan forgiveness vary under this program: full details can be found here. Forgiveness will be awarded to highly qualified teachers that teach in a designated low income school for five years. Those that also specialize in a special education or secondary school math or science may qualify for loan forgiveness of up to $17,500.

In addition to these options students can receive loan forgiveness through the following specialized programs. Some offer generous levels of student loan cancellation with shorter term requirements.

The Veterinary Medicine Loan Repayment Program from the National Institute of Food and Agriculture

The Nursing Education Loan Repayment Program from the U.S. Department of Health and Human Services

Law School Loan Repayment Assistant Programs

The National Health Corp’s Loan Repayment Program for Health Professionals from the U.S. Department of Health and Human Services

The Segal AmeriCorps Education Award from The Corporation for National and Community Service

The Peace Corps offers partial cancellation of Federal Perkins Loans

The Indian Health Service Loan Repayment Program from the Federal Health Program for American Indians and Alaska Natives.

Loan forgiveness is generally aimed at helping those who choose to work in public services where it is unlikely a fortune is to be made. Acknowledging that certain public sector careers such as teaching and nursing have less monetary potential than careers in the private sector, the programs are designed to encourage students to enter their profession of choice.

The programs enable those who qualify, to pursue a career close to their hearts, without the additional burden of shouldering the full weight of student loans. This allows the freedom to choose a vocational career rather than pursuing more lucrative employment in the private sector.