Stafford Loan Forgiveness
Student Loan Forgiveness is a repayment incentive program that allows a borrower's student loans to be forgiven after a certain number of qualifying payments. The main forgiveness programs that are available to Stafford Loan borrowers are Public Service Loan Forgiveness and Teacher Loan Forgiveness.
In addition to these federal loan forgiveness programs, borrowers may also be eligible for student loan discharge or other forgiveness options and Loan Repayment Programs (LRPs). LRPs are similar to forgiveness programs except borrowers receive a stipend to apply to their student loans, which may not cover the remaining balance.
Public Service Loan Forgiveness (PSLF)
This program was created to encourage individuals to work in public service fields. Qualifying borrowers can apply to have the remaining balance of their federal student loans forgiven after making 120 on-time payments.
To be eligible for PSLF, borrowers must-
- Make 120 on-time, scheduled, full, monthly payments (120 payments = 10 Years)
- Payments made before October 1, 2007 do not apply
- Make payments under a qualifying repayment plan
- Work full-time at a qualifying organization while making qualifying payments (note that the job function does not matter as long as the organization qualifies as public service).
Qualifying Repayment Plans
The Income-Based Repayment Plan and Income-Contingent Repayment Plan will provide the most benefit to borrowers applying for PSLF. This is because the lower monthly payment means that more of the loan balance will be forgiven after the 120 required payments.
Other repayment plans are available, however, under a 10-year repayment term, a borrower will have no remaining loan balance to be forgiven after making the 120 payments. Therefore, utilizing the IBR and ICR options are the best choice to maximize benefit.
Borrowers of Parent PLUS loans may also qualify for PSLF but must first consolidate through a Direct Consolidation Loan and select Income-Contingent Repayment.
How to Apply
The application is still being developed, but will be available before the first borrowers become eligible to apply in October 2017 (10 years after the program was created).
In the meantime, borrowers can prepare by completing the Employment Certification form provided by the Department of Education. For instructions on this process, see the section on tracking eligibility at StudentAid.ed.gov.
Teacher Loan Forgiveness
Similar to PSLF, this program is intended to encourage individuals to peruse a career in teaching. Under this plan, eligible borrowers can have up to $17,500 of their Federal Direct Stafford loans forgiven after 5 years of teaching full-time at an eligible elementary or secondary school. This includes both subsidized and unsubsidized loans but is not available for borrowers holding only PLUS loans.
To be eligible for the Teacher Loan Forgiveness Program, borrowers must-
- Have been employed as a teacher for 5 consecutive years (cannot include years spent teaching through AmeriCorps). At least one of these must have been after the 97-98 academic year.
- Not be in default on subsidized or unsubsidized student loans.
- Have loans that were originated prior to or during the 5-year qualifying term.
- Have been employed at an eligible school. An eligible school must meet the following requirements:
- The school is in a qualified, Title I district
- The school is listed in the Designated Low-Income Schools Directory
- More than 30% of the school's students qualify for Title I services
- Note: If a school qualifies as eligible for at least one year of a teacher's service, the teach may count it towards all 5 years of service
How to Apply
After completing the required 5 years of service, borrowers must submit a Teacher Loan Forgiveness Application to their loan holder or servicer. Servicer information can be found in the National Student Loan Data System (NSLDS.ed.gov).