If you’re a federal student loan borrower with a large balance, opting for student loan forgiveness may be a saving grace for you. Having the option to get your student loans forgiven after a certain period of time can make your repayment more manageable. Knowing there’s a light at the end of the tunnel can keep you going.
Currently, you can get 100% student loan forgiveness under Public Service Loan Forgiveness (PSLF) and income-driven repayment (IDR). If you’re a teacher, there’s Teacher Loan Forgiveness that can cover a portion of your debt, too.
But forgiveness doesn’t just happen. You need to be eligible and make sure you qualify to avoid surprises down the road. Here’s how to check your student loan forgiveness eligibility.
Public Service Loan Forgiveness
If you’ve read recent headlines about PSLF, the numbers don’t look so good. Only 1% of PSLF applicants had their loans forgiven. But then again, this was the first group of borrowers who were reviewed for PSLF eligibility. As time goes on, the kinks in the system will be worked out. Hopefully the process will become smoother and there will be more borrowers eligible for student loan forgiveness.
Step 1: Check the eligibility requirements
First, make sure you meet the eligibility requirements for PSLF. To qualify, you must work full time at a government agency or qualified nonprofit. You must also be on one of the four income-driven repayment plans, make 120 payments and serve for 10 years. Only Direct Loan borrowers are eligible for PSLF.
Step 2: Use the PSLF Help Tool
The Department of Education has a specific PSLF Help Tool that offers more information on eligibility and how to get started with PSLF. The tool can help you see if your employment and loans qualify for student loan forgiveness under PSLF. It can also get you the right forms to give to your employer and return to FedLoan Servicing.
Step 3: Submit the Employee Certification Form
If you meet the above qualifications, after using the PSLF Help Tool, submit the Employment Certification Form. Do this each year to ensure your employment is eligible for the program. Since PSLF is based on your employment, this part is crucial.
You can submit the form to:
U.S. Department of Education
P.O. Box 69184
Harrisburg, PA 17106-9184
You can also fax it to 717-720-1628 or use MyFedLoan.org/FileUpload to upload the form.
Step 4: Log into your FedLoan Servicing account
When submitting the Employment Certification Form, your loans are transferred to FedLoan Servicing. When you do this each year, FedLoan Servicing keeps track of how many qualifying payments you’ve made. To check the pacing of your payments, log into your FedLoan servicing account and look at your loan details.
When you’ve served for 10 years and made 120 payments, you’ll need to officially apply for student loan forgiveness by submitting an application.
Have more questions about your student loan forgiveness eligibility? Contact FedLoan Servicing at 1-855-265-4038.
Teacher Loan Forgiveness
If you’re a full-time teacher who works at a low-income school, you may be eligible for Teacher Loan Forgiveness. Under this program, you may be able to get $5,000 or $17,500 in student loan forgiveness after teaching for five years, depending on the subject you teach.
The Teacher Loan Forgiveness process for checking eligibility isn’t as formalized as the PSLF program, which is managed by FedLoan Servicing. But here are some things you can do to check eligibility.
Step 1: Check the eligibility requirements
To qualify for Teacher Loan Forgiveness, you must work full time at a low-income school or educational facility. Additionally, you must not have had any outstanding loans as of Oct. 1, 1998.
The five years you teach must be consecutive, and one of the years you teach must be after the 1997-98 school year.
- attained at least a bachelor’s degree;
- received full state certification as a teacher; and
- has not had certification or licensure requirements waived on an emergency, temporary or provisional basis.
Depending on the grade level, you may need to meet additional requirements, such as passing a subject test.
Step 2: Make sure your school is on the list
The Teacher Loan Forgiveness program has very specific requirements for where you teach. In order to have student loan forgiveness eligibility, your school must be on the Annual Directory of Designated Low-Income Schools for Teacher Cancellation Benefits (Low-Income School Directory). Make sure your school is on the list.
After the five years of service, you’ll submit the Teacher Loan Forgiveness Application to your loan servicer. As noted above, there’s no streamlined way of checking student loan forgiveness eligibility in this case, so it’s a good idea to read through the requirements, make sure your school qualifies and talk to your loan servicer.
There are four income-driven repayment plans, all of which cap your monthly payments as a percentage of your discretionary income. This number is between 10% and 20%, depending on the plan. Each of the plans offer student loan forgiveness if there’s a balance at the end of the repayment term.
Your repayment term is either 20 or 25 years, depending on the plan. All borrowers are eligible for the Income-Contingent Repayment (ICR) and the Revised Pay As You Earn (REPAYE) plans.
To qualify for the Pay As You Earn (PAYE) or Income-Based Repayment (IBR) plans, your payments must be less on these plans than they would be under the Standard Repayment Plan. For PAYE, you also must be considered a new borrower, with a disbursement on Oct. 1, 2011 or later.
Each year, you must recertify your income to stay in good standing. Currently, there’s no great way to track your student loan forgiveness eligibility with income-driven repayment. For now, it’s best to recertify your income each year and manually keep tabs on how long you’ve been paying your loans under your current repayment term.
We believe — and we’re hopeful — that there will be a more formal application process for this in the future to help borrowers see where they stand.
It’s important to note, though, that if you’re hoping for student loan forgiveness under an income-driven repayment plan, you’ll pay taxes on the forgiven amount. That’s why it’s wise to start investing money for taxes now with a tool like Betterment.
Student loan forgiveness is a great benefit for federal student loan borrowers. But you don’t want to be caught off-guard if you’re not eligible. Being proactive, taking action and talking with your loan servicer can help you verify your student loan forgiveness eligibility.