What is student loan relief and how do you apply?
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.
How to get student loan relief
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.
While options like forbearance or deferment will pause your student loan payments for a short amount of time, student loan relief typically entails 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.
Some forms of student loan relief are usually taxable, though President Biden’s American Rescue Plan included a provision waiving this requirement through 2025. If your federal loans are forgiven before then, the forgiven amount will not be taxed — and many experts believe that the provision will become permanent.
How to apply
If you think that 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.
You can also apply for relief on the Federal Student Aid website, which provides resources for each form of relief.
COVID-19 student loan relief
Due to the COVID-19 crisis, there is a temporary payment pause set on student loan payments through May 1, 2022. If you’re working toward Public Service Loan Forgiveness or Temporary Expanded Public Service Loan Forgiveness, you will receive credit during this time as long as you’re working full time for a qualifying employer, even if you haven’t been making the payments.
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.
If you aren’t sure whether you’ve been receiving credit towards your plan during this time, contact your loan servicer.
Student loan forgiveness vs. discharge
While they have the same general function, forgiveness, cancellation and discharge are all different forms of relief.
Student loan cancellation and forgiveness
Cancellation or forgiveness of your federal student loans is 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.
While unlikely, any action by the administration to wipe out student debt would also be considered student loan forgiveness.
Student loan discharge
Discharge is a more immediate removal of your student loan debt due to an unexpected situation or emergency. 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 details
Federal student loans come with options for student loan forgiveness that aren’t granted to private student loan borrowers.
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 cut down your balance:
- Public Service Loan Forgiveness (PSLF).
- Teacher Loan Forgiveness.
- Nurse Corps Loan Repayment Program.
- Income-driven repayment plans.
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. If you have questions about your eligibility, your loan servicer can help.
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 getting you 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 benefit that allows you to temporarily stop making your monthly payments when you return to school, enlist in the military or become unemployed. In some cases, interest will not accrue.
- Forbearance: Student loan forbearance is similar to deferment in that you can temporarily stop making your monthly payments. The primary difference is that interest will accrue during all forbearance periods. Forbearance is typically designed for borrowers experiencing major financial hardship.
How to spot student loan relief scams
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.
- Companies that promise to forgive private student loans.
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.
- 8 student loan forgiveness programs that could erase your debt
- Student loan forgiveness for teachers: What you need to know
- Misconceptions about student loan cancellation