What is student loan relief and how do I apply?

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Student loan relief is the forgiveness, cancellation or discharge of your federal student loans due to a significant life event or a commitment to work in certain occupations for a number of years. Most student loan relief programs are restricted to federally held student loans, though some programs may be available with private lenders.

Here’s what you need to know about student loan relief and how you can apply.

Student loan relief 101

If you’ve held a certain job within the nonprofit or public service sector for a certain amount of time, or if you face a job loss, a disability or a school closure, you may be eligible for student loan relief. Student loan relief is the forgiveness, cancellation or discharge of your federal student loans.

While options like forbearance or deferment will pause your student loan payments for a short amount of time, cancellation, discharge and forgiveness typically entail wiping out some or all your student loans completely. The requirements to receive forgiveness are more strict than if you were to apply for a forbearance or deferment period.

How it works

With most types of student loan relief, you’ll have to continue making payments on your loan until the remaining amount is forgiven. For instance, Teacher Loan Forgiveness requires you to make payments for five years while working at an approved school. Once those five years are complete, you can submit the application for forgiveness and, if approved, see the remainder of your student loan debt removed.

Keep in mind that some forms of relief are taxable — namely, the forgiveness that comes after completing an income-driven repayment plan. This means that you could still receive a hefty bill once your loan is forgiven. Public Service Loan Forgiveness, however, does not have tax implications.

If you think you qualify for relief, you’ll need to contact your school or loan servicer to see if you meet the eligibility requirements. It’s also wise to check in with your servicer along the way to ensure that you’re making progress toward relief.

Difference between forgiveness, cancellation and discharge

While they have the same general function, forgiveness, cancellation and discharge are all different forms of relief. Cancellation and forgiveness are typically granted if you’ve served a certain amount of time in an eligible occupation. For example, the Public Service Loan Forgiveness Program will forgive the remaining balance on your federal student loans after you make 120 monthly payments while working full time at a qualifying public service employer.

Discharge is a more immediate cancellation of your student loan debt due to an unexpected or emergency circumstance. Only specific circumstances can warrant a student loan discharge, like a total and permanent disability, death, a school closure or, in some cases, bankruptcy.

Federal student loan forgiveness

Federal student loans come with options for student loan forgiveness that aren’t granted to private student loan borrowers. Here’s what you need to know about what you could qualify for and what that would mean for your monthly student loan payments.

Student loan forgiveness programs

Student loan forgiveness is available through many programs, each with a specific set of qualification requirements. Here are a some of the programs that could help you pay off your student loans faster:

Each program offers a different amount of forgiveness and requires a different level of commitment in exchange for forgiveness. PSLF, for instance, requires 10 years of payments before your balance is forgiven; Income-Driven Repayment Plans, on the other hand, take 20 to 25 years. Do your research before applying to ensure that you meet the requirements and that you have the proper documentation on hand.

Requirements for eligibility

The eligibility requirements for federal loan forgiveness are dependent upon your experience or tenure but can also be dependent upon the type of loan that you have. For example, most forgiveness plans only accept federal student loan debt. In order to be eligible for most of the forgiveness programs, you’ll also need to make on-time monthly payments on your student loans while you work to qualify for forgiveness.

Before you apply, make sure you’re 100 percent aware of the details of your program and what it takes to qualify. If you have any questions before applying, you can always reach out to a financial planner to make sure you’re making the right decision for your financial situation.

COVID-19 student loan relief

Due to the COVID-19 crisis, there is a temporary administrative forbearance set on student loan payments until Dec. 31, 2020. If you are working toward Public Service Loan Forgiveness or Temporary Expanded Public Service Loan Forgiveness, you will receive credit as though you made the full payments during this time.

If you are currently enrolled in an income-driven repayment plan for your federal student loans with the goal of forgiveness, the suspended payments will also count toward your income-driven repayment plan.

Alternative student loan relief options

If you have private student loans, or if you don’t qualify for a loan forgiveness program, there are other strategies that can help you pay off your loans. Here are a few to consider:

  • Refinance your student loans: If you have good credit, or have a trusted co-signer in mind, refinancing your student loans could help you save money by scoring a lower interest rate. Keep in mind, however, that you will lose your federal student loan protections when you refinance.
  • Deferment: Student loan deferment is a federal benefit that allows you to temporarily stop making your monthly payments without interest accruing. This doesn’t mean that you’re making any progress in paying down your loans, you’re just temporarily halting the payments.
  • Forbearance: Student loan forbearance is similar to deferment in that you can temporarily stop making the monthly payments. The primary difference is that interest will accrue during the forbearance period.

Programs to be wary of

If you apply for a federal forgiveness program, the application is always free and can be done online. If you get approached by a company that requires you to pay for assistance when it comes to the forgiveness of your student loans, steer clear. Here are a few examples of programs to be wary of:

  • Companies that promise immediate and total forgiveness of your balance.
  • Programs that have “limited-time offers” and pressure you into acting quickly.
  •  Companies that charge a fee to help you apply for student loan relief programs. These relief programs are free and can be applied for online or with the assistance of federal loan servicers.

It’s also imperative that you never give out your personal information online or over the phone unless you’re applying for a program, especially if the person calling is requesting money from you. If you’re not sure if a company is legitimate, you can check the Federal Student Aid website to see which companies work directly with the Department of Education.

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