Two-thirds of college graduates leave school with student loans averaging $29,000, and many are struggling to pay off that debt. But while millions of borrowers may qualify for loan forgiveness programs to erase some or all of what they owe, only a fraction of those eligible take advantage of them.
Too many students “don’t know these programs exist,” says Betsy Mayotte, president of The Institute of Student Loan Advisors (TISLA), a nonprofit organization that provides free personal advice to student loan borrowers.
The federal Public Service Loan Forgiveness (PSLF) program is one of the largest programs. Under PSLF, you can eliminate your remaining student debt after making 10 years of on-time payments if you work in a qualifying position in the public sector.
But there are more than 100 smaller or more targeted federal and state programs that can help you get out of debt faster. There are also a series of special situations in which you can obtain the cancellation of your loans without penalties.
Warnings first. Most loan forgiveness programs have very specific requirements. Of those that are open to all borrowers, most apply to those experiencing financial hardship. Forgiveness programs are generally only for federal loans, although some are awarded based on where you live and cover private loans as well. In some situations, the forgiven amount is considered income, so you could owe a large tax bill.
Despite those potential limitations, it’s worth investigating if you’re eligible. New programs appear frequently.
Last month, the National Health Services Corps unveiled an initiative to pay back up to $75,000 in loans for individuals who are private or public sector health workers who spend 3 years in employment to combat drug abuse. substances linked to the opioid crisis.
Almost every state offers a waiver program, and many have several, usually to work in an underserved community or profession, requiring you to work for only a few years. The programs aren’t mutually exclusive, either. You could be in a state or federal loan forgiveness program as long as you meet the requirements. You can even volunteer for payments that go directly to reducing your student debt.
According to an estimate by the Consumer Financial Protection Bureau, approximately 35 million American workers are employed in the public sector and may be eligible for PSLF. However, less than a million people have applied so far. To help students find these programs, TISLA created a database that lists more than 100 loan forgiveness programs.
Still, you shouldn’t choose a profession or take on a large amount of debt based on the possibility that your loans could be wiped out in the future, says Mayotte.
“Programs change all the time, and if state and federal budgets are tight, funding for these can easily be cut,” he explains.
That could be a problem if you leave school with a lot of loans and the program you’re counting on no longer exists.
There are also advantages and disadvantages. While you may be forgiven thousands of dollars of debt, you may be required to work in a rural area or with an organization that pays less than you could earn elsewhere. You should assess whether having a higher-paid salary would allow you to pay off your debt faster, says Mayotte.
A Guide to Student Loan Forgiveness
However, if you’re struggling with debt, it’s worth finding ways to get relief from your loans. Here is a guide.
There are many programs based on the type of work you do or the type of organization that employs you. Under the federal PSLF program, people who have made on-time payments for 10 years while working full-time in the public sector can have their loan balance erased.
Public sector work is broadly defined. Includes any employment with a federal, state, or local government agency or nonprofit organization. The type of work you do for the organization does not matter. It could be as an accountant or in marketing and have your loans forgiven under PSLF.
In addition to PSLF, there are many programs for people in health and education careers that require far fewer years of service. For example, the federal Teacher Loan Forgiveness program will forgive up to $17,500 in federal loans to teachers employed full-time in low-income public elementary or secondary schools for 5 consecutive years.
Many states offer teacher loan forgiveness programs, especially if you teach in a high-need area. The American Federation of Teachers has a searchable database for state and local programs.
The NURSE Corps Loan Repayment Program pays up to 85% of qualified nurses’ college debt. The Department of Justice’s Student Loan Repayment Program awards $6,000 to attorneys who have at least $10,000 in loans and work in the Department of Justice for 3 years.
Public defenders can get up to $60,000 under the John R. Justice Grant Student Loan Repayment Program. The USDA Veterinary Medicine Loan Repayment Program provides veterinarians who work for 3 years in an area where there is a veterinary shortage of $25,000 a year.
Almost every state has a loan forgiveness program to attract people in certain professions to work in underserved or low-income areas. To find programs in your state, contact your state Department of Education or talk to someone at the financial aid office at your college or an association related to your profession.
Where you live
A growing number of states and cities are trying to attract a younger, more educated population with programs to erase or pay off their college debt.
The Talent Attraction Program (TAP) scholarship in the city of Hamilton, Ohio, about 40 minutes from Cincinnati, offers up to $5,000 over 25 months to pay off your student loans. Although not limited to a specific profession, the TAP foundation says that it prefers people who have graduated in the last 7 years with what they call a STEAM degree: science, technology, engineering, arts, or mathematics.
There are similar programs in several Midwestern cities, from Marquette, Kansas, to St. Clair, Michigan.
In the Northeast, the Move to Maine program has a different incentive. When you move to Maine, the money you spend to pay off your student debt each year is subtracted from your state income taxes. For example, if you pay $1,800 toward your loan and owe the state $2,000 in taxes, you’ll end up paying Maine only $200.
Some states will only give college graduates money to move there. For example, Remote Worker Grants in Vermont offer Vermont Remote Worker Grants, awarding up to $10,000 over two years to people who live in Vermont but work remotely from home or in a co-working space for a business located outside Vermont. from Vermont. You must have earned an associate’s or bachelor’s degree in 2015 or later.
If you serve in the military
Each branch of the military offers a Military College Loan Repayment Program as an incentive to enroll. Qualified borrowers can receive up to $65,000 in loan forgiveness during their time in the military. But the exact amounts and requirements differ between branches and whether you’re on active duty or in the reserves.
To be volunteer
Several federal volunteer organizations give you money for your student loans. VISTA and Americorps volunteers, which work with nonprofits focused on reducing poverty and illiteracy, can get up to $6,000 to pay off student loans in addition to living expenses.
Then there are startups like the Shared Harvest Fund, which has a “debt-free agent” concept: Finish volunteer projects and earn credits that go toward your student loan debt. They call it a “mindful side hustle” that you can do while working another full-time job.
if you become disabled
If you become disabled and cannot work, your federal loans will be erased under the Total and Permanent Disability (TPD) release program. You can stop making payments as soon as your application is approved, but you are subject to a 5-year follow-up period to check that you really can’t work.
This is not a good situation, since the loans are forgiven only if you have not been able to pay them in 20 to 25 years, depending on the type of loan you have taken out and the payment plan you have received. At that point, the government will cancel the loan, but there are tax consequences because the amount forgiven is usually subject to income tax.
There are several unusual circumstances in which you can have your loans canceled. They include if your school is closed while you are enrolled, if your college has defrauded you in any way, or if the school certifies your eligibility to work in an occupation for which you were trained but are unable to do so due to physical or mental disability, or criminal record. More information on how to qualify and apply can be found at the Department of Education.