With outstanding student loan debt estimated at $1 trillion, and individual students owing an average of approximately $24,000 each, it’s clear that something must be done about mounting student loan debt. Fortunately, students with federal loans can take advantage of federal programs to relieve their debt under certain conditions. If you’re looking to reduce or eliminate your student debt, see if any of the following programs are right for you.
1. Teacher Loan Forgiveness
- Loans eligible for forgiveness: Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, Unsubsidized Federal Stafford Loans. (Individuals with PLUS loans only are not eligible.)
- Amount eligible for forgiveness: A combined total of $17,500
- Summary of program: You must be a “highly qualified teacher” and you must teach full-time for five consecutive years in select schools and agencies that service low-income families.
Read more about eligibility requirements and how to apply for Teacher Loan Forgiveness.
2. Teacher Cancellation
- Loans eligible for forgiveness: Federal Perkins Loans
- Amount eligible for forgiveness: 100% of the loan, in increments by year
- Summary of program: You may qualify if you have taught full-time in certain schools or have taught certain subjects for a full academic year
Read more about eligibility requirements and how to apply for Teacher Cancellation.
3. Public Service Loan Forgiveness Program (PSLF)
- Loans eligible for forgiveness: Loans under the William D. Ford Federal Direct Loan (Direct Loan) Program. (Federal Family Education Loans and Federal Perkins Loans are not eligible, but they may be consolidated into a Direct Consolidation Loan, which would be eligible, under some conditions.)
- Amount eligible for forgiveness: The remaining balance of the Direct Loans after the 120 qualifying payments have been made
- Summary of program: You must work full-time at a qualified organization in public service, including jobs at non-profit organizations that are IRS-designated tax-exempt 501(c)(3) organizations. (Note that this program is available to members of the military.) You must make 120 monthly, on-time, scheduled payments under a qualifying repayment plan (and only payments made after Oct. 1, 2007 qualify) while working in that capacity.
Read more about eligibility requirements and how to apply for Public Service Loan Forgiveness Program.
4. Income-Based Repayment Plan (IBR)
- Loans eligible for forgiveness: Various loans under the William D. Federal Direct Loan (Direct Loan) Program and the Federal Family Education Loan (FFEL) Program, including some Federal Stafford Loans and PLUS Loans made to students (PLUS Loans made to parents are not eligible)
- Amount eligible for forgiveness: Remaining balance of the loan after 25 years of qualifying repayments
- Summary of program: As the name suggests, it’s based on your income, and you must have “partial financial hardship” (meaning that the amount you’d pay on a 10-year Standard Repayment Plan is higher than you’d pay under this program). Your monthly payments will be adjusted (reduced) to no more than 15% of discretionary income.
Read more about eligibility requirements and how to apply for Income-Based Repayment Plan.
5. Pay As You Earn Repayment Plan
- Loans eligible for forgiveness: William D. Federal Direct Loans (Direct Loan), PLUS Loans made to students, and Direct Consolidation Loans (as long as they do not contain PLUS loans made to parents)
- Amount eligible for forgiveness: Remaining balance of the loan after 20 years of qualifying repayments
- Summary of program: Similar to the IBR program (above), this program is based on your income, and you must have “partial financial hardship” (meaning that the amount you’d pay on a 10-year Standard Repayment Plan is higher than you’d pay under this program). Your monthly payments will be adjusted (reduced) to no more than 10% of discretionary income. You must be a “new borrower,” meaning your loans were taken out after Oct. 1, 2007.
Read more about eligibility requirements and how to apply for Pay As You Earn Repayment Plan.
More Options for Military and for Private Loans
In addition to being eligible for the PSLF (above), members of military have several options for postponement, deferment, and outright forgiveness through various programs and through each individual branch of the military. If you are considering joining the military and have student loan debt, that is something to talk to your recruiter about.
What about individuals with private student loan debt? Dozens of other programs, described in this free PDF, some of them through the state rather than the federal government, can help students relieve some of their student loan debt.
Finally, if you’re a recent graduate or expect to graduate soon, discuss student loan debt with the HR department when you’re looking for a new job. Many companies help their employees pay these debts down.
