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Understanding Student Loan Forgiveness, Cancellation, Discharge and Repayment Plans

Last Updated: 4/5/2022
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Student loan debt is higher than ever. Students are taking out federal and private loans to pay for college costs, which often take years to pay back. On average, they pay off their debt in 20 years. For some professional graduates, it takes more than 45 years to clear.

This kind of debt can weigh heavily on a person, especially if they aren’t making enough money to keep up with their monthly payments and rising interest. That’s why they may look into student loan forgiveness, cancellation, discharge and repayment plans.

If you are facing mounting student loan debt, you have options. By learning about them, you attempt to free yourself completely of this debt, or, at the very least, make it easier to pay.

Differences Between Forgiveness, Cancellation, Discharge and Repayment

Forgiveness, cancellation and discharge all mean that you don’t need to repay some or all of the loan. There are also such things as repayment plans. Find out what each one means so you can explore the different choices you may have.

  • Term
    What This Term Means
  • Forgiveness
    This is used interchangeably with cancellation. Essentially, you won’t be required to make payments on your loans because of your job.
  • Cancellation
    This is the same as forgiveness, where you will not have to make loan payments due to your job.
  • Discharge
    You are no longer required to make loan payments if you get a discharge due to other circumstances such as total or permanent disability.
  • Repayment Plans
    These are plans to repay your loans based on your income.
An illustration that reflects the current state of student loan debt in the U.S.

Current State of Student Loan Forgiveness

The U.S. government has been trying to address the student loan debt crisis — Americans owe $1.75 trillion in federal and private student loan debt. As of February 2022, the Biden Administration approved $415 million in a student loan forgiveness program for borrowers who were defrauded by their schools. These are usually for-profit schools that misrepresent themselves to students. This is called the Borrower Defense Program. Under it, 16,000 borrowers will receive student loan forgiveness.

Borrowers who qualify will be contacted, but if you believe you are eligible for this program, you can use the following resources.

  • StudentAid.gov: On this official government website, you can find out more about the program. Also, you can see if you qualify.
  • Borrower Defense Program Application: Do you think you are eligible? Then apply for the Borrower Defense Program on this site.
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YOUR LOANS ARE YOUR RESPONSIBILITY TO PAY BACK

While you may be eligible for forgiveness, cancellation and/or discharge programs, you are still held responsible for paying back your loans. By finding a flexible option that works for you, you can reduce student loan repayment stress and focus solely on decreasing the debt.

List of Loan Forgiveness, Cancellation and Discharge Options

If you’re struggling to cover the costs of your loan payments, loan forgiveness, cancellation and discharge programs may offer you a good solution. Learn more about what these options include below to help you determine which one is best for you.

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IS THERE A DIFFERENCE BETWEEN FORGIVENESS AND FORBEARANCE?

Yes, there’s a difference between student loan forgiveness and forbearance. While forgiveness means that you may not have to pay back some or all of your loan, forbearance allows you to lower or suspend your payments temporarily, usually for up to 12 months, while you are going through a financial hardship.

Federal

Different federal programs offer you student loan forgiveness or cancellation of your debt. You’ll need to look into the choices to see which ones you may qualify for. Please use the tables below and add in the programs in the appropriate table.

Forgiveness Programs
  • Condition for Cancellation or Forgiveness
    Eligibility Requirements and Additional Notes
    Loan Amount Discharged
  • Public service

    Qualifying nonprofit and
    government employees

    All, if you make 120 qualified
    payments

  • Income

    People with large balances when
    compared to their income

    The rest of your balance after you
    make payments for 20-25 years.
    You pay a percentage of your
    monthly income.

Cancellation Programs
  • Condition for Cancellation or Forgiveness
    Eligibility Requirements and Additional Notes
    Loan Amount Discharged
  • Perkins Loan

    Perkins student loan holders

    All, if you work in public
    service for five years

Discharge Programs
  • Condition for Cancellation or Forgiveness
    Eligibility Requirements and Additional Notes
    Loan Amount Discharged
  • Borrower Defense Program

    Those who were defrauded by
    schools, typically for-profit ones

    The rest of your loan

  • Closed school

    People who went to a school that
    closed and didn’t receive a degree

    All, and you may get refunds
    for payments made

Career-Based

You may be eligible for forgiveness, cancellation or discharge if you go into a certain profession. For example, if you become a medical professional, teacher or doctor, or you go into the military or public sector, you could become eligible. This is to encourage people to go into these fields.

Programs for Teachers
  • Condition for Cancellation or Forgiveness
    Eligibility Requirements and Additional Notes
    Loan Amount Discharged
  • Teacher loan forgiveness

  • Working in low-income elementary
    or secondary schools for five
    years
  • Only for loans taken out after 1998

Up to $17,500 in federal direct
or Stafford loans

  • State-sponsored repayment
    assistance

    Licensed teachers

    Depends on the state; check with
    your state’s department of higher
    education

  • Perkins loan

    Work as a teacher, full-time, in a
    public school or teach qualifying
    subjects such as math, foreign
    language, special education, or science

    100% of the loan

  • Programs for Medical and Health Professionals
    • Condition for Cancellation or Forgiveness
      Eligibility Requirements and Additional Notes
      Loan Amount Discharged
    • State-sponsored repayment
      assistance

      Nurses and doctors

      Depends on your state program;
      check on the department of
      higher education website

    • Public Service Loan Forgiveness
      program

      Medical professionals with
      federal direct loans

      Make 10 years’ worth, or 120,
      on-time payments

    • NURSE Corps Loan Repayment
      Program

      Nurses

      The program pays up to 85% of
      qualified nurses’ unpaid student
      loan debt.

    Programs for Military Members
    • Condition for Cancellation or Forgiveness
      Eligibility Requirements and Additional Notes
      Loan Amount Discharged
    • Military student loan forgiveness

      Members of the military
      with loans

      Depends on the branch of
      the military

    Programs for the Public Sector
    • Condition for Cancellation or Forgiveness
      Eligibility Requirements and Additional Notes
      Loan Amount Discharged
    • Public Service Loan Forgiveness

      Qualifying nonprofit and
      government employees

      All, if you make 120 qualified
      payments

    Programs for Other Careers
    • Condition for Cancellation or Forgiveness
      Eligibility Requirements and Additional Notes
      Loan Amount Discharged
    • State-sponsored repayment
      assistance

      Licensed lawyers

      Depends on your state

    • Federal student loan repayment
      assistance

      Federal employees who work
      at an agency for at least
      three years

      $10,000 per year per employee
      for federal loans

    • Volunteer organization forgiveness

      AmeriCorps, Peace Corps and
      other volunteer organization
      employees

      Depends on the terms of service

    • Loan repayment assistance
      programs

      Those working as dentists

      Depends on the state

    • U.S. Department of Agriculture
      assistance programs

      Vets who work in underserved
      areas

      $25,000 per year for three years
      in student loan repayment help

    Others

    You could also get your loan discharged, forgiven or canceled if you experience disability or bankruptcy or you pass away — then your family wouldn’t have to have to pay back your loan. It all depends on whether or not your disability prevents you from working or you qualify for discharge due to hardship under your bankruptcy filing.

    Death

    If you pass away with student loan death, your family can take the appropriate steps to get it discharged so they don’t have that extra burden on them.

    Available Programs Due to Death
    • Condition for Cancellation or Forgiveness
      Eligibility Requirements and Additional Notes
      Loan Amount Discharged
    • Death

      You must provide proof of death

      The rest of your loan, once a
      death certificate is sent to
      the loan servicer

    Disabilities

    If you have a disability and you are unable to work, then you could potentially qualify for a program for individuals with disabilities.

    Available Programs If You Are An Individual With Disabilities
    • Condition for Cancellation or Forgiveness
      Eligibility Requirements and Additional Notes
      Loan Amount Discharged
    • Veterans’ permanent and total
      disability

      This is for veterans who got
      injured and are now facing
      permanent and total disability

      All of the loan

    • Permanent and total disability

      This is for people who are
      permanently and totally
      disabled and can’t work
      anymore

      The rest of your loan

    Bankruptcy

    There is a myth that you cannot get student loan debt discharged. You can, but it certainly is going to be harder than trying to get other types of debt discharged. Filing for Chapter 7 or Chapter 13 is not enough; you will also have to file an adversary proceeding.

    Available Programs Due to Bankruptcy
    • Condition for Cancellation or Forgiveness
      Eligibility Requirements and Additional Notes
      Loan Amount Discharged
    • Undue hardship on you

      Federal and private loans

      Depends on your situation

    An illustration of a woman applying to loan forgiveness programs.

    How Do You Apply for Forgiveness?

    You can apply for forgiveness through StudentAid.gov. It depends on the program you are applying for. Navigate to that official government website to find the specific application you need. You will need to prove how you qualify. There is no average timeframe for when you will hear a reply.

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    MAKING PAYMENTS DURING APPLICATION PROCESS

    You should continue making payments on your student loans during the application process, just in case you don’t get approved. You don’t want to accidentally default on your loans.

    Next Steps If You’re Approved

    If you get approved for student loan forgiveness, there are a few different things that will occur.

    1

    Notification of approval

    You will be notified about which program you have qualified for under student loan forgiveness, cancellation or discharge. You’ll find out if you qualified for full or partial forgiveness. If you were approved for the former, when you log into your loan account, your debt will be down to $0. If you were approved for the latter, you’ll determine how much you still need to pay back and the terms of your repayment.

    2

    Refunding of payments

    In some cases, you will receive a refund for payments you already made. For example, if you were approved for the Public Service Loan Forgiveness and you made more than 120 qualifying payments, those would be counted as overpayments and you’d get a refund.

    3

    Credit history change

    If you had negative marks on your credit report due to your student loans, these could go away, depending on the type of program you qualified for. This means that your credit report could improve, which will make it easier for you to get approved for future loans. If your cancellation erases your default, then you could once again become eligible for federal student loan aid.

    4

    You could get taxed.

    Right now, under the Biden Administration, all student loan forgiveness will stay tax-free until the end of 2025. But if this policy is not renewed, then income repayment forgiveness is going to be taxed as income. If you receive notification that your student loans are forgiven, you’ll get a cancellation of debt form (1099-C) in the mail to file when doing your taxes.

    Next Steps If You’re Denied

    There is the possibility that you will be denied for student loan forgiveness. Here are some steps you should take if that occurs.

    1

    Review your application

    You can make sure that you properly filled out your application by contacting a representative in the U.S. Department of Education's office of Federal Student Aid to ensure it details all the necessary information.

    2

    Try to appeal the denial

    In some instances, you may be able to appeal the denial and get your application reexamined. For example, if you are applying for the ​​Total and Permanent Disability (TPD) discharge program, you could have the chance to appeal within one year of your denial date. If your condition has worsened, you may be able to reapply and try again.

    3

    Look into other programs

    There is the possibility that you could qualify for another program. Go on StudentAid.gov to see if there are alternative programs you might be able to apply to based on your career, disability, or bankruptcy status, or your income.

    An illustration of a woman receiving a letter that she did not qualify for a loan forgiveness program.

    What Happens If You Don’t Qualify: Repayment and Other Alternatives

    If you don’t qualify for forgiveness, cancellation or discharge, it can be disheartening. But there are other options you can go after depending on your specific situation. You don’t need to give up at this point. It may take some time and creative thinking, but there are alternative solutions.

    Repayment Plans

    Available Repayment Plans and Options
    • Condition for Repayment Plan
      Eligibility Requirements and Additional Notes
      Loan Amount Discharged
    • Standard Repayment Plan, with
      a set timeframe

      All borrowers of federal student
      loans

      Depends; payments are on a
      fixed amount and your loan
      will be paid off within 10 years,
      or 10 to 30 years for
      consolidation loans

    • Graduated Repayment Plan,
      with a set timeframe

      All borrowers of federal student
      loans

      Depends; payments are on a
      fixed amount and your loan
      will be paid off within 10 years,
      or 10 to 30 years for
      consolidation loans

    • Extended Repayment Plan,
      with a set timeframe

      Direct loan borrower

      More than $30,000 in outstanding
      direct loans and the loan will
      be paid off within 25 years

    • Revised Pay As You
      Earn Repayment Plan (REPAYE),
      with a set timeframe

      Direct loan borrower with eligible
      loan type

      Any outstanding balance on
      your loan is going to be
      forgiven if you haven't repaid
      your loan in full after
      20 years for undergrad, or
      25 years for graduate or
      professional study

    • Pay As You Earn Repayment
      Plan (PAYE)

      New borrower on or after
      10/1/2007, and must have
      received a disbursement of
      a Direct Loan on or after
      10/1/2011

      Your monthly payments will
      be 10% of discretionary income

    • Income-Based Repayment
      Plan (IBR)

      Borrowers with high debt
      relative to their income

      Your monthly payments will
      be either 10% or 15% of
      discretionary income, and any
      outstanding balance on your loan
      is going to be forgiven if
      you haven't repaid your loan
      in full after 20 or 25 years

    • Income-Contingent Repayment
      Plan (ICR)

      Direct Loan borrowers with
      an eligible loan type

      Your monthly payment will be
      the lesser of 20% of discretionary
      income. Or, it will be the
      amount you would pay on a
      repayment plan with a fixed
      payment over 12 years,
      which will be adjusted according
      to your income. Your
      outstanding loan balance will
      be forgiven after 25 years

    • Income-Sensitive Repayment
      Plan

      FFEL Program loans

      Your monthly payment is based
      on your annual income, and
      your loan will be paid in
      full within 15 years

    Other Alternatives

    If you are not a candidate for forgiveness, cancellation, discharge or repayment, then there are other roads you can go down. They include debt strategy plans, refinancing, budgeting and more. With a plan of action in place, you can pay off your student loan debt sooner and hopefully relieve yourself of this burden once and for all. Then, you can start to save for your future and fulfill your financial goals.

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      Use the debt avalanche or debt snowball method

      With these options, you can pay off your student loan debt. With the debt avalanche method, you make minimum payments on all your debt and then pay off your debt with the highest interest first. With the debt snowball method, you pay off your smallest debts first and move onto the larger debts. While the former works out better mathematically, the latter works out better from a psychological standpoint. Why? You may be encouraged to keep going by accomplishing smaller, more attainable goals.

    • This is an icon

      Try budgeting

      By budgeting, you will be able to see where you’re spending money and where you could cut back on your expenses. With the 70/20/10 rule, 70% of your money will go towards your necessities and everyday spending, 20% will go towards savings, and 10% will go towards your debt and donations. However, this approach doesn’t work for everyone, so use a plan you’ll actually follow.

    • This is an icon

      Refinance your loans

      If your interest is way too high on your student loans, then you could always try to refinance them to lower the interest rates. You will have a higher chance of being able to refinance if you have improved your credit score overtime. You’re showing your student loan servicer that you are capable of paying back your debts, so they will be more likely to give you an attractive interest rate.

    • This is an icon

      Negotiate with your student loan provider

      If you have private student loans, you could call up your student loan lender and agree to pay a lump-sum settlement. This will only work if your loans are in default already, since your lender will be desperate to get their money back. It isn’t easy to negotiate a lump-sum settlement, but it may be possible in your situation.

    • This is an icon

      Use extra money to pay back loans

      Whenever you receive birthday money, a tax refund, a bonus from your job, or other extra money, you can put it towards your student loans. The faster you pay off the loan, the better, because you can avoid paying tons of interest on your loans. The longer you wait, the harder it will become to pay them off.

    Expert Insight on Student Loan Forgiveness

    MoneyGeek spoke with industry leaders and financial experts to provide expert insight on paying back student loans. They include the following.

    1. What are some good reasons for seeking out student loan forgiveness?
    2. What other steps do you recommend taking if you’re rejected from a student loan forgiveness program?
    Ahren Tiller
    Ahren Tiller

    Supervising Attorney at The Bankruptcy Law Center

    Will Geiger
    Will Geiger

    Founder of Scholarships360.org

    Chaim Geller
    Chaim Geller

    Financial Advisor and Founder of HelpMeBuildCredit.com

    Resources for Student Loan Forgiveness

    There are many resources available to help when it comes to student loan forgiveness. Here are some places to start.

    About the Author


    expert-profile

    Kylie Ora Lobell is a freelance copywriter, editor, marketer, and publicist. She has over 10 years of experience writing in the personal finance, legal, and business space for publications and brands like Legal Management Magazine, LegalZoom, Forbes, EMC, IBM, Dell, Mastercard, Visa, and NCR. Her bylines include The Washington Post, The Los Angeles Times, The Jewish Journal of Los Angeles, New York Magazine, and Time Out NY/LA. Her website is KylieOraLobell.com.


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