Student Loan Forgiveness: Understanding Your Current Options For Paying Off Your Student Loans

The new administration is debating whether to forgive a portion of student loans for everyone or to expand the terms of current student loan forgiveness programs. Know that regardless of what action the administration ultimately takes, there are methods currently in place for you to get some or most of your student loan debt forgiven or to delay or reduce your monthly student loan payments in cases of financial hardship.

This information comes from the office of noted Bryn Mawr bankruptcy attorney David Offen.

Public Service Student Loan Forgiveness (PSLF)

If you work full-time for the government or for a non-profit or not-for-profit organization, you may qualify for forgiveness of the balance of your Direct Loans after you’ve made 120 qualifying payments (ten years of payments) under an income-driven repayment program.

Teacher Student Loan Forgiveness

If you teach full-time for five complete and consecutive academic years in a “low-income school or educational service agency” after the 1997-98 school year, you may be eligible for forgiveness of up to a combined total of $17,500 in eligible federal student loans.

A “low-income school or educational service agency” is a school district or other educational service agency that serves low-income families. You must take out the loans that you seek to have forgiven before the end of the five-year teaching term.

Income-Driven Repayment Student Loan Forgiveness

Also called IDR, under an Income-Driven Repayment plan your loan balance is forgiven if you make a certain number of payments over a certain period of time, usually 20 or 25 years. There are several forms of IDR:

Pay As You Earn Repayment Plan (PAYE) and Revised Pay As You Earn Repayment Plan (REPAYE)               

For Direct Loans only, PAYE and REPAYE provide a repayment plan with monthly payments of 10% of your annual discretionary income divided by 12. Your discretionary income is calculated by adjusted gross income, family size, and total eligible federal student loan balance.           

Income-Based Repayment Plan (IBR)    

For both FFEL Program and Direct Loans, IBR provides a repayment plan with monthly payments of 15% (10% if you are a new borrower) of your annual discretionary income divided by 12.

Income-Contingent Repayment Plan (ICR)   

ICR provides a repayment plan with monthly payments that are the lesser of what you would pay on a repayment plan with a fixed monthly payment over 12 years, adjusted based on your income or 20% of your annual discretionary income divided by 12.

Military Service Student Loan Forgiveness

Special benefits and repayment options for service members’ student loans are available from the U.S. Department of Education and the U.S. Department of Defense. Benefits include interest rate caps under the Servicemembers Civil Relief Act, Department of Defense student loan repayment programs, military service deferment, deferments after active duty, Veterans Total and Permanent Disability Discharge, and Public Service Loan Forgiveness.

AmeriCorps Award

Those who complete a term of national service in an approved AmeriCorps program are eligible for the Segal AmeriCorps Education Award which can be used to repay certain student loans. Approved AmeriCorps programs include AmeriCorps VISTA, AmeriCorps NCCC, and AmeriCorps State and National.

If you are not eligible for any of these student loan forgiveness programs but are experiencing financial hardship for any reason, contact your student loan servicer. They will advise you as to your options for delaying payments or reducing your payments under forbearance and deferment programs.

About the Author

Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy bankruptcy lawyer in Pennsylvania.


The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.