How Do You Qualify For Student Loan Forgiveness?

Federal student loans offer several benefits that private student loans don’t offer. One of these benefits is being able to qualify for student loan forgiveness. The student loan forgiveness program is a special type of benefit established by the federal government. It is only applicable to federal student loans, and that too, only certain types of loans.

Under this program, the federal government may forgive part or all of your federal student loans if you meet the requirements. The last part is especially important. In order to get your loan partly or fully forgiven, you must meet the program’s qualifying requirements.

A look at the criteria that qualify you for student loan forgiveness:

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#1 – Who You Work For

To be eligible for student loan forgiveness, who you work for is more of a factor than the career you choose. For example, teaching in a private university will not qualify you for forgiveness, but teaching in a school serving low-income families will.

Working or volunteering in any of the following will qualify you for forgiveness:

  • A government organization at any level – local, state, federal, or tribal
  • Not-for-profit organizations that are designated tax-exempt under Section 501(c)(3)
  • Any not-for-profit organization that provides a qualifying public service regardless of whether or not it is tax-exempt
  • Full-time AmeriCorps and Peace Corps volunteers

#2 — You Must Be Employed Full Time

You are considered a full-time worker if your employer considers you a full-time employee or if you work a minimum of 30 hours per week, whichever is greater. You must also be paying in an income-driven repayment plan to qualify.

The Public Service Loan Forgiveness program forgives any non-defaulted loan borrowed under the William D. Ford Federal Direct Loan Program. Other loans like Federal Perkins Loans or Federal Family Education can become eligible for PSLF if you consolidate them into a Direct Consolidated Loan.

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#3 – Your Repayment History

You may also qualify for loan forgiveness based on your history of making on-time payments under a qualifying repayment term. In general, all your loan payments must be made on time for 20 or 25 years, depending on your repayment plan. The outstanding balance on the loan is then forgiven after this time.

A look at the qualifying repayment terms:

Income-Based Repayment Plan

With this plan, your payment is based on your monthly income. You qualify for loan forgiveness after 25 years of on-time payments.

Pay As You Earn Repayment Plan

With this plan, you may qualify for forgiveness after 20 years of on-time payments. This repayment plan has the lowest monthly payments but you need to demonstrate financial hardship to enroll in it.

Revised Pay As You Earn Repayment Plan

REPAYE is similar to the Pay As You Earn Plan and also offers the lowest monthly payments. The one big difference is that you don’t need to demonstrate financial hardship to enroll in it.

Income-Contingent Repayment Plan

With this plan, you may be able to apply for loan forgiveness after 25 years of on-time payments.

4 things you should know about applying for forgiveness under this plan:

  1. Qualifying under this category is independent of your specific career field.
  2. The amount forgiven is not tax-free. It is considered as your taxable income.
  3. Each and every one of your loan payments must be made on time during the qualifying period.
  4. The 10-year Standard Repayment Plan is also a qualifying plan. However, the way this plan is scheduled, you won’t have any outstanding debt to be forgiven. If you want to avail of the forgiveness benefit, you must enroll in a repayment plan that extends your loan term beyond 10 years.

Don’t assume that your job or your repayment plan automatically qualifies you for forgiveness. It’s advisable to contact the U.S. Department of Education to determine whether or not you are eligible. This will help you set better financial goals. 

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