If you’re one of the 43 million Americans who are saddled with student loan debt, you should know that there are a variety of student loan forgiveness programs available.
Although the general consensus among Americans seems to be that student loan forgiveness is completely unattainable, however, the tide seems to be turning among a new generation of judges and lawmakers.
However, you should also note that when it comes to student loan debt forgiveness, the process is not typically quick or easy.
Read on to learn about the different types of student loan forgiveness plans available, and take our assessment to see how difficult it may be for you to qualify.
Until very recently, student loans were one type of debt that bankruptcy couldn’t pause or block from collectors. But on January 7th, 2020 the United States bankruptcy court of the southern district of New York made a watershed decision that could potentially change the way courts view student loan debt in bankruptcy court moving forward.
The ruling stated that U.S. Navy Veteran Kevin Rosenberg’s $221,385.49 in student loan debt is in fact dischargeable under chapter 7 bankruptcy.
This single court decision is giving thousands of student-debt sufferers hope, and unquestionably changed the life of one man. “I have a chance now to have a life,” Rosenberg declared in an interview with Yahoo Finance.
Rosenberg’s road to student loan forgiveness was somewhat unorthodox. After filing for bankruptcy, he also filed what’s referred to as an “adversary proceeding”, which is basically a civil lawsuit against his creditor, New York State Higher Education Services Corporation.
This hearing gave Rosenberg the opportunity to have a judge look closer at his case in order to make a determination, and is considered the “X factor” for his success story.
If the adversary proceeding is so effective, why don’t people use it more often? Simply put, it’s expensive. Attorney’s fees add up in a hurry, and just filing this type of proceeding can cost $5,000 - $10,000 upfront. As you can imagine, most people filing for bankruptcy don’t have that kind of cash laying around.
However, if you can afford to go this route, you’ll want to make sure you meet the requirements set forth by the Brunner test.
What is the Brunner Test?
How do you know whether or not you’re eligible to have your student loans erased in a bankruptcy case? Take the Brunner test. This test is used in bankruptcy court to determine if you are eligible to get your student loans discharged.
Answer the following 3 questions to determine your bankruptcy eligibility under the Brunner Test:
- If you are forced to repay your loans, can you maintain a minimal standard of living for yourself and your dependents based upon your current income and expenses?
- Is your current financial status likely to continue for a substantial part of the repayment period?
- Have you made a good faith effort to repay your loan debt?
In recent history, experts have strongly advised against attempting to discharge student loans through bankruptcy, but we may see a huge change in that regard following the decision in the case of Kevin Jared Rosenberg v. N.Y. State Higher Education Services Corp.
Income Driven Repayment Programs
Income based repayment programs–IBRs–and Income Driven Repayment Plans–IDRPs--are plans featuring payments totaling about 10-15% of your discretionary income, divided into monthly installments throughout the year. Requirements vary significantly from one program to another; however, many borrowers qualify for these plans. It is not necessary to be employed in a specific field, and in some cases, making timely payments for 20-25 years is all you must do to have the rest of the loan balance cancelled. Below are the three main programs in these categories:
The Pay As You Earn Repayment Plan–PAYE Program–qualifies you for loan forgiveness after you’ve made payments on time for 20 years. This plan is typically associated with a very low monthly payment–usually 10-15% of your discretionary income–but you must demonstrate financial hardship to qualify.
There is also a revised version of the PAYE plan, called Revised Pay as You Earn–REPAYE. This program is very similar to PAYE, but demonstrating financial hardship is not one of the requirements. In addition, the monthly payment amount is based on more than just one factor, and these qualifications include family size, gross income, and the total loan balance owed. With REPAYE, the payment never exceeds 10% of your income.
3. Income Contingent Repayment
Income contingent repayment plans–ICRs–are based on monthly payments that are no more than 20% of your discretionary income divided by 12 or the lesser of what would be owed on a fixed monthly repayment plan over 12 years. This program is the sole income driven repayment alternative for Parent PLUS loan enrollees.
Public Service Loan Forgiveness
Public Service Loan Forgiveness is available to qualified nonprofit employees and government workers with federal student loans. If you are eligible, you may have your loans forgiven after successfully making 120 timely payments. However, to benefit from Public Service Loan Forgiveness, payments must be made while you’re enrolled in an IDRP/IBR (see above). Additionally, you must be employed in a public service job for at least 30 hours per week. Qualifying jobs for such programs include the following:
- Full-time Peace Corps and AmeriCorps volunteers
- Any type of government employment at the federal, state, local or tribal level
- Designated tax-exempt nonprofit organization’s under Section 501(c)(3)
- Non-profit foundations that are not tax-exempt but offer a specific service to the public
Common qualifying civil service careers include public law, health, law enforcement, education, and veterinary medicine.
Military Student Loan Forgiveness and Assistance
Military members of the Army, Air Force, Navy, Coast Guard, and National Guard may qualify for specific loan forgiveness programs. For instance, if you are in the National Guard, you may be eligible for up to $50,000 to offset student loans through the Federal Student Loan Repayment Program. Each military branch has programs to assist qualified members to pay off student loans, but requirements vary significantly from one plan to the next. More detailed information can be found at https://studentaid.gov/.
Perkins Loan Cancellation
You may also have the option of the Perkins Loan Cancellation program, which is based on eligible employment or eligible volunteer service. In some cases, for instance, if you work in a public service job for five years, you can qualify for cancellation of up to 100% of your loan under this program. You may also be eligible to have it broken down over a five-year period. Some qualifying jobs for the Perkins Loan Forgiveness Program include the following:
- Staff member for educational component of a Head Start program
- Attorney employed by a community defender organization or public defender
- Speech pathologists with a Masters degree
- Special education teacher
- Faculty member at a tribal university or college
- VISTA or Peace Corps Volunteer
- Librarian with a Masters degree
- Medical technician or nurse
- Teacher at a low-income public school or educator who teaches a qualifying subject
- Professional provider of early intervention services for the disabled
- Soldier in an imminent danger or hostile fire pay area
You can visit this website for a full list of qualifying occupations: https://studentaid.gov/manage-loans/forgiveness-cancellation/perkins
Forgiveness Programs Based on Occupation
In addition to the programs outlined above, there are some specific niche plans available through state or federal programs. Eligibility usually depends on where you work and your profession:
Loan Forgiveness for Teachers
Created in 1998, the Teacher Loan Forgiveness Program was designed to inspire educators to seek employment at secondary schools, elementary schools, and educational service agencies that provide assistance to low income families. To be eligible to receive $5000-$17,500 in loan forgiveness, you must teach full time for five full, consecutive years at a qualifying school and fill out the appropriate application.
Notably, TeachForAmerica Corps members pursue student loan forgiveness after completing their 2 years service.
Loan Forgiveness for Health Care Professionals
Loan forgiveness programs are available for doctors, nurses, pharmacists, and other jobs in the healthcare field. Some examples include The National Institutes of Health and the Nurse Corps Loan Repayment Program–NCLRP. The National Institutes of Health offers $35,000 in debt assistance on a yearly basis if they hire you to conduct research, and the NCLRP may absorb up to 60% of your student loan if you are practicing nursing in an underserved area.
Attorney Loan Forgiveness Programs
Similar to other professions, financial incentives are provided for attorneys who are willing to spend several years practicing in government offices or as public servants. For instance, according to the Department of Justice, attorneys who work there for at least three years may qualify for as much as $60,000 in loan forgiveness.
However, if you are an attorney, the best place to begin searching for loan forgiveness may be the school you attended. Some schools forgive all or part of loans for students earning less than $60,000 annually.
Additional Student Debt Relief Programs
Individual state-sponsored student loan repayment programs are available as well, particularly for lawyers, doctors, nurses and teachers. Requirements vary, but as of 2020, 13 states offer some kind of teacher loan forgiveness and the American Bar Association has provided a list of state loan forgiveness programs for attorneys.
An extended list of state loan repayment assistance programs can be found here: https://studentloanhero.com/student-loan-repayment-assistance-programs/
Loan Discharge Due to Special Circumstance
Loan discharge is somewhat of a long shot, but may be granted if you cannot repay your loan for a specific reason. In addition to student loan discharge for veterans, or in very rare circumstances, those who claim bankruptcy, other circumstances, such as identity theft, disability, or fraud, may be grounds for alleviating student debt partially or altogether.
A Word About Scams
There are various businesses that refer to themselves as “debt relief companies” and claim they can help clients eliminate student debt; a promise they can rarely, if ever, keep. Rather, they typically charge high upfront fees to borrowers who are already underwater financially. Also beware of any company referring to “Obama Loan Forgiveness.” This phrase is simply a catchall term for numerous legitimate government programs, and there is no fee associated with these plans. A third-party asking you for money to complete such forms is a big red flag.
Summing it Up
The concept of student loan forgiveness is no longer a myth. We’ve established that it is not quick, and it’s not easy, but we recommend exhausting all resources for student loan forgiveness as part of your zero debt journey.
Do you have a student loan forgiveness method that we missed? Do you have a story about student loan forgiveness that you’d like to share with the zero debt community? Drop us a line at firstname.lastname@example.org!