You’ve been working toward student loan forgiveness, trying to do everything right. Now what? Will your loans magically disappear? Unfortunately, no.
Your student loans aren’t forgiven automatically. There are many things you need to do to qualify and then work toward applying for student loan forgiveness. In this quick guide, we’ll break down how it works and how to apply for student loan forgiveness.
Student loan forgiveness options
Student loan forgiveness refers to your student loans being forgiven so you no longer have to make payments. Unfortunately, student loan forgiveness is only available to federal student loan borrowers.
Three popular ways to get student loan forgiveness for federal loans include:
For the purposes of this article, we’ll talk about PSLF and IDR. These two programs offer forgiveness on all of your remaining student loans, whereas Teacher Loan Forgiveness only provides up to $17,500.
Public Service Loan Forgiveness
Under PSLF, borrowers must work in the public sector, at a nonprofit, government agency or other qualifying organization.
You must work for 10 years at an eligible organization (you can change jobs, but still must be in public sector) and make 120 payments before applying for student loan forgiveness. This program has the added bonus of having zero tax liability on the amount discharged.
How to stay on track for PSLF
To stay on top of your eligibility to pursue student loan forgiveness through PSLF, submit the Public Service Loan Forgiveness Employment Certification Form once per year.
When submitting this form, your loans go to FedLoan Servicing, the loan servicer that processes all things PSLF. You will be notified of how many qualifying payments you have made, and can see your payment history in your FedLoan Servicing account.
You’ll want to submit the Public Service Loan Forgiveness Employment Certification Form each year so that your payment history can be updated and you can stay on track for the 120 payments.
Income-driven repayment plan
Although this forgiveness option takes a bit longer, it might be a way to come out from under student loan debt. IDR is made up of four plans:
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
Under these plans, you’d pay up to 10 to 20 percent of your discretionary income for 20 to 25 years. The specifics depend on the plan you choose, but all four options offer student loan forgiveness at the end of your repayment term. So if you have a balance after 20 to 25 years, your remaining loan balance is forgiven.
The downside is that current laws state you’ll be taxed on that forgiven amount. If you’re going along this student loan forgiveness route, it’s key to prepare for taxes by saving money now. You can do this by investing with a tool, such as Betterment.
How to stay on track for IDR
Each year you must recertify to stay on one of the IDR plans. If you’re striving for student loan forgiveness under one of the IDR plans, be sure to read the emails and messages from your loan servicer.
You don’t want to miss the chance to recertify and provide updated info about your income and family size. When you recertify, your payments may be updated, but it’s always still based on the 10 to 20% range, depending on your plan.
If you don’t recertify, you may be kicked off your plan or have to make monthly payments based on the Standard Repayment Plan, effectively skyrocketing your monthly payment. To recertify, submit another income-driven repayment plan application.
How to apply for student loan forgiveness
Applying for student loan forgiveness is all about timing. You can’t technically apply for forgiveness until after you’ve satisfied all of the eligibility requirements.
Student loan forgiveness doesn’t happen automatically, nor is it 100% guaranteed. After submitting an application, you’ll need to be approved.
According to The Institute for College Access & Success, only four borrowers have received forgiveness under income-driven repayment plans. Just last year, the first group of borrowers became eligible for student loan forgiveness through PSLF. But the result wasn’t inspiring, with only 1% of borrowers actually receiving student loan forgiveness.
We’re certain success rates will improve over the years as more and more borrowers apply and the process is streamlined. For now, here’s what you should know about applying for student loan forgiveness.
Applying for student loan forgiveness through PSLF
To apply for student loan forgiveness through PSLF, you must have made 120 payments. These payments don’t have to be consecutive.
When you’ve satisfied that requirement, submit the official Public Service Loan Forgiveness form. You must still be employed at an eligible organization, so don’t bounce on your public sector job just yet.
When completing the Public Service Loan Forgiveness form, send it to FedLoan Servicing, the official loan servicer of the PSLF program.
You have a few options to submit the PSLF student loan forgiveness form:
U.S. Department of Education
P.O. Box 69184
Harrisburg, PA 17106-9184
Upload your application to MyFedLoan.org, if FedLoan Servicing is already your current loan servicer.
On top of the Public Service Loan Forgiveness form, you may need to also submit the Public Service Loan Forgiveness Employment Certification Form. If you hadn’t submitted that form over the years, you’ll need to include it to show proof that you did indeed work at a qualifying location.
How long it takes to hear back about your student loan forgiveness varies depending on timing, documentation provided and more. Hold tight and keep in touch with your loan servicer to follow up, if needed.
If your PSLF application gets the green light, your loans will be forgiven, including all interest and principal. If it’s denied, you’ll receive an explanation of why, and you’ll have to continue making payments on your repayment plan. However, if you were denied for PSLF, you could qualify for Temporary Expanded Public Service Loan Forgiveness. Find out more details here.
Applying for student loan forgiveness through IDR
Forgiveness through the IDR plans are available, but it will be a long process due to the extended repayment term. You’ll need to stay on an IDR plan for the entire repayment period and recertify your income every year.
Only at the end of your repayment period — if there is still a balance — are your loans forgiven. Just remember, you’ll have to pay taxes on that amount.
The process of applying for student loan forgiveness under IDR isn’t well established compared to PSLF. Work closely with your loan servicer on getting student loan forgiveness through this option.
How to apply for student loan forgiveness moving forward
Student loan forgiveness is a great perk for federal student loan borrowers, but since it’s pretty new, there are still kinks to work out. Your best bet is to stay vigilant, follow up with your loan servicer, submit your certification forms and try to keep track on your own.
If you feel confused or stressed about the process, Student Loan Planner can help. We can guide you toward the right option and be there to support you in the process.