Student Loan Cancellation: Your Options

Last updated 2 months ago. Our resources are updated regularly but please keep in mind that links, programs, policies, and contact information do change.

The burden of student loan debt in the United States can be a significant financial challenge, making it harder to achieve financial goals such as purchasing a home, starting a family, or saving for retirement. Student loan cancellation, forgiveness, or discharge offer potential pathways to financial relief.

This article provides a thorough overview of options available to US borrowers seeking to cancel their federal student loan debt, including several state-level initiatives and alternative strategies for managing student loans.

Understanding Federal Student Loan Forgiveness Programs

For borrowers with federal student loans, several forgiveness programs administered by the U.S. Department of Education offer the possibility of having remaining loan balances canceled under specific circumstances.

Public Service Loan Forgiveness (PSLF)

The Public Service Loan Forgiveness Program offers eligible borrowers who work in public service the opportunity to have their remaining federal student loan balance forgiven tax-free. This program encourages individuals to enter and continue working in full-time public service jobs.

To qualify for PSLF, borrowers must meet several criteria:

• Employment full-time by a U.S. federal, state, local, or tribal government or a qualifying non-profit organization
• Qualifying non-profit organizations include those tax-exempt under Section 501(c)(3) of the Internal Revenue Code and other non-profits that provide qualifying public services
• Service in the U.S. military and as a full-time AmeriCorps or Peace Corps volunteer also counts as qualifying employment
• Employment with for-profit organizations, even if they contract with government agencies, does not qualify

Borrowers must have Federal Direct Loans received under the William D. Ford Federal Direct Loan Program. Those with other types of federal student loans, such as Federal Family Education Loan (FFEL) Program loans or Federal Perkins Loans, can become eligible by consolidating these loans into a Direct Consolidation Loan. Private student loans are not eligible.

Repayment must be under an income-driven repayment (IDR) plan, such as:

• Saving on a Valuable Education (SAVE) Plan
• Pay As You Earn (PAYE) Repayment Plan
• Income-Based Repayment (IBR) Plan
• Income-Contingent Repayment (ICR) Plan
• 10-year Standard Repayment Plan

Borrowers must make 120 qualifying monthly payments while working full-time for a qualifying employer. Some deferment and forbearance periods may now qualify as qualifying payments.

To apply for PSLF, complete and submit the Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application (PSLF form) annually or when changing employers. The PSLF Help Tool can assist in determining eligibility and completing the form.

The form requires certification of employment by an authorized official at the qualifying employer, using the employer’s Federal Employer Identification Number (EIN). The completed form can be submitted electronically through StudentAid.gov, which is generally the fastest method, or by mail or fax.

The primary benefit of PSLF is the tax-free forgiveness of the remaining balance on Direct Loans under federal law. While federal forgiveness is tax-free, state tax treatment may vary. Some borrowers may be eligible for a refund of payments made after reaching the 120 qualifying payments.

Income-Driven Repayment (IDR) Plan Forgiveness

Income-Driven Repayment plans offer a way for borrowers to manage their federal student loan payments based on income and family size. These plans can result in monthly payments as low as $0 and provide a pathway to potential forgiveness of the remaining loan balance after a specified period, typically 20 or 25 years, although it can be as short as 10 years under the SAVE plan for borrowers with low initial loan balances.

The four main IDR plans available are:

• Saving on a Valuable Education (SAVE) Plan (formerly REPAYE)
• Pay As You Earn (PAYE) Repayment Plan
• Income-Based Repayment (IBR) Plan
• Income-Contingent Repayment (ICR) Plan

Eligibility for each IDR plan varies but often involves demonstrating a “partial financial hardship,” where the monthly payment under the Standard Repayment Plan would be higher than what would be paid under the IDR plan. Specific eligibility can also depend on when the borrower first took out federal student loans.

Parent PLUS loans can only be repaid under the ICR plan and typically require consolidation into a Direct Consolidation Loan to become eligible.

To apply for an IDR plan, complete and submit the Income-Driven Repayment Plan Request online at StudentAid.gov or submit a paper application to your loan servicer. The online application allows for direct retrieval of income information from the IRS, simplifying the process.

You’ll need to provide:

• Personal information
• Financial details including income and tax returns
• Family size

It’s crucial to recertify income and family size annually to remain on an IDR plan. Failure to do so can lead to increased monthly payments and potential interest capitalization.

The primary benefits of IDR plans are lower, more manageable monthly payments and potential loan forgiveness after the set repayment period. The length of the repayment period varies depending on the specific IDR plan and the type of loans (undergraduate or graduate). Periods of economic hardship deferment and certain other repayment periods can also count towards IDR forgiveness.

Tax implications of IDR forgiveness are important to consider. Generally, the amount of student loan debt forgiven under an IDR plan may be considered taxable income at the federal level starting in 2026, unless Congress extends the current exemption. The American Rescue Plan Act (ARPA) made IDR forgiveness tax-free at the federal level through the end of 2025. State tax treatment of forgiven student loans can vary.

The SAVE plan is the newest IDR plan and offers potentially the lowest monthly payments and the possibility of faster forgiveness, particularly for borrowers with original loan balances of $12,000 or less. This plan calculates discretionary income using a higher threshold (225% of the federal poverty guideline), which can result in $0 payments for many borrowers with lower incomes. It also includes an interest subsidy, preventing loan balances from growing due to unpaid interest.

Forgiveness for Educators

Several federal programs specifically offer student loan forgiveness for individuals working in education and nursing.

Teacher Loan Forgiveness

Teacher Loan Forgiveness (TLF) is available to teachers who have been employed as full-time, highly qualified teachers for five complete and consecutive academic years in a low-income elementary or secondary school or educational service agency. At least one of those years must have been after the 1997–98 academic year, and the borrower must have been new to federal student loans on or after October 1, 1998.

Teachers in private schools may also qualify if their school meets certain criteria for non-profit status and provides elementary and/or secondary education according to state law. However, certain types of federal loans, such as Direct PLUS Loans, FFEL PLUS Loans, and Perkins Loans, are not eligible for TLF.

Eligible teachers may receive forgiveness of up to $17,500 on their Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford Loans. Highly qualified special education teachers and secondary mathematics or science teachers may qualify for the higher amount, while other eligible teachers can receive up to $5,000 in forgiveness.

To apply, teachers must submit the Teacher Loan Forgiveness Application to their loan servicer after completing the required five years of qualifying teaching. The time spent teaching to qualify for TLF cannot be counted towards the 120 qualifying payments needed for Public Service Loan Forgiveness (PSLF).

Nurse Corps Loan Repayment Program

The Nurse Corps Loan Repayment Program offers loan repayment assistance to Registered Nurses (RN) and Advanced Practice Registered Nurses (APRN) working full-time (at least 32 hours per week) at eligible Critical Shortage Facilities (CSFs) or as nurse faculty employed at eligible schools of nursing.

Applicants must be U.S. citizens, U.S. nationals, or lawful permanent residents with a current, full, permanent, unencumbered, and unrestricted nursing license.

The program provides payments totaling 60% of the participant’s outstanding qualifying nursing education loan balance in exchange for an initial two-year service commitment. Participants may be eligible for an additional 25% of their original loan balance for an optional third year of service.

Funding preference is given to nurses with the greatest financial need and those working at facilities with the greatest shortages. The application cycle typically opens annually and is submitted online through the Health Resources and Services Administration (HRSA) website.

Other Federal Forgiveness Avenues

Beyond PSLF, IDR forgiveness, and programs for educators, there are other federal avenues for student loan forgiveness:

• Borrowers with federal Perkins Loans who work in public service jobs for five years may be eligible to have up to 100% of their loans canceled
• This includes cancellation for teachers working in low-income public schools or teaching qualifying subjects
• Nurses have access to PSLF and the NURSE Corps Loan Repayment Program
• Members of the armed forces may be eligible for student loan forgiveness through various military loan forgiveness and repayment assistance programs, with specific benefits depending on their branch, status, and circumstances

Federal Student Loan Discharge Options

In certain specific situations, federal student loans may be discharged, meaning the borrower is no longer obligated to repay the loan. These situations typically involve circumstances related to the school the borrower attended or the borrower’s personal situation.

Closed School Discharge

A borrower may be eligible for a closed school discharge if their school closes while they are enrolled or soon after they withdraw. For loans first disbursed on or after July 1, 2020, the school must have closed within 180 days after the borrower withdrew; for loans disbursed before that date, the timeframe is 120 days.

To qualify, the borrower must not have completed their program because of the closure and must not be completing or have completed a comparable educational program through a teach-out agreement or by transferring credits to a comparable program.

If the borrower meets the eligibility requirements, their loan holder (loan servicer) will generally send them an application for closed school discharge. Borrowers can also contact their loan servicer directly to inquire about the application process or download the application from the Federal Student Aid website.

In some cases, if the Department of Education has sufficient information, an automatic closed school discharge may be initiated approximately one year after the school’s official closure date for borrowers who meet the criteria.

If the application for closed school discharge is approved:

• The borrower is no longer obligated to repay the loan
• They will receive reimbursement for any payments made voluntarily or through forced collection
• The record of the loan and any associated adverse credit history will be deleted from the borrower’s credit report

It’s important to understand the “teach-out” exception. If a borrower chooses to complete their program through a teach-out agreement at another school approved by the closed school’s accrediting agency, they may become ineligible for closed school discharge, particularly if they transfer credits into a comparable program. Borrowers should carefully consider their options if offered a teach-out and weigh the potential benefits against the possibility of losing their eligibility for loan discharge.

Transferring credits to a different institution that is not part of a teach-out agreement may still allow for closed school discharge.

Borrower Defense to Repayment

The Borrower Defense to Repayment program provides a pathway for borrowers to seek discharge of their federal student loans if their school engaged in certain misconduct related to the making of a federal loan or the educational services provided, which caused them harm warranting a full discharge.

This includes situations where the school made substantial misrepresentations or omissions of fact about the school’s programs, financial charges, or the employability of its graduates, if this information was central to the borrower’s decision to enroll or take out loans.

Other qualifying misconduct can include:

• Breach of contract by the school
• Aggressive and deceptive recruitment tactics
• Judgments issued against the school for violations of law related to the loan or educational services
• Prior Secretarial action taken against the school by the Department of Education

Examples of misleading practices that could qualify for borrower defense include false promises about:

• Job placement rates
• Potential earnings after graduation
• Transferability of credits to other institutions
• True cost of the program

Borrowers who believe their school misled them can apply for borrower defense online at StudentAid.gov or by mail using the application form available on the website.

The application requires detailed information about the school’s misconduct, including:

• What the school did or failed to do
• Who at the school was involved
• When the misconduct occurred
• How it harmed the borrower

It’s crucial to provide as much detail as possible and include any supporting documentation, such as emails, advertisements, course catalogs, enrollment agreements, student handbooks, or transcripts. Submitting a materially complete application with all required information is essential for the Department of Education to review the claim.

If the borrower defense application is approved, the borrower may receive:

• A full discharge (100%) of the federal student loans related to the application
• Reimbursement of any amounts already paid towards the loans
• Removal of negative credit reporting related to the loans
• Reinstatement of eligibility for Federal Student Aid (FSA) if it was lost due to the defaulted loans

The Borrower Defense program has been particularly relevant in recent years, with significant activity and settlements related to for-profit colleges accused of widespread deceptive practices. Borrowers who attended institutions like Corinthian Colleges or ITT Technical Institute, among others, have received billions of dollars in loan discharges through this program.

Total and Permanent Disability (TPD) Discharge

Borrowers who are totally and permanently disabled may qualify for a discharge of their federal student loans and/or Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligation through the Total and Permanent Disability (TPD) Discharge program.

To be considered totally and permanently disabled, the borrower must be unable to engage in any substantial gainful activity due to a physical or mental impairment that:

• Is expected to result in death
• Has lasted for a continuous period of at least 60 months
• Is expected to last for a continuous period of at least 60 months

Borrowers can qualify for TPD discharge by providing documentation from one of three sources:

1. The U.S. Department of Veterans Affairs (VA)
   • Veterans who have a service-connected disability that is 100% disabling or are totally disabled based on an individual unemployability rating may qualify automatically or by submitting VA documentation
2. The Social Security Administration (SSA)
   • Individuals receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits may qualify by providing SSA documentation showing their next continuing disability review has been scheduled within five to seven years, at three years with a prior renewal, or if they have an established onset date of at least five years prior to the application or have been receiving benefits for at least five years, or if they qualify based on a compassionate allowance
3. An authorized medical professional
   • A licensed doctor of medicine (MD), doctor of osteopathy (DO), nurse practitioner (NP), physician assistant (PA), or certified psychologist at the independent practice level must certify on the TPD discharge application that the borrower meets the criteria for total and permanent disability

To apply for TPD discharge, borrowers can complete an application online at StudentAid.gov TPD Discharge or submit a paper application with the required documentation to the Department of Education’s TPD Servicer (currently Aidvantage, formerly Nelnet).

The application requires:

• Personal information
• Loan details
• Documentation supporting the disability claim

If approved, the borrower’s federal student loans (Direct Loans, FFEL Program loans, Federal Perkins Loans) and/or TEACH Grant service obligation will be discharged. There is no longer a post-discharge income monitoring period for TPD discharges.

The TPD discharge process can be initiated automatically for eligible veterans and Social Security beneficiaries based on data shared with the Department of Education, simplifying the process for these individuals.

Discharge Due to False Certification or Unauthorized Actions

Federal student loans may also be discharged in situations where the borrower’s eligibility for the loan was falsely certified by the school or if the loan was made due to unauthorized actions by the school.

False Certification discharge may be granted if:

• The school falsely certified the borrower’s ability to benefit from its training (e.g., if the borrower did not have a high school diploma or GED and the school did not properly administer an Ability to Benefit test)
• The school falsely certified the borrower’s high school graduation status or falsified their high school diploma
• The school certified the eligibility of a student who had a disqualifying status (such as a physical or mental condition, age, or criminal record) at the time of certification that would prevent them from meeting the legal requirements for employment in the occupation for which the program of study was preparing them

A borrower may also be eligible for discharge based on unauthorized signature or unauthorized payment if:

• An employee or affiliate of the school signed their name on the loan application or promissory note without their authorization
• The school endorsed their loan check or signed their authorization for electronic funds transfer without their knowledge, and the loan money was not given to the borrower or applied to charges they owed to the school

A forgery discharge may be available if a loan was falsely certified in the borrower’s name as a result of identity theft, and the borrower did not receive or benefit from the loan proceeds.

To apply for discharge under these circumstances, borrowers must complete and submit the appropriate Loan Discharge Application to their loan servicer, depending on the specific reason for the discharge. Applications are available on the Federal Student Aid website.

Supporting documentation, such as high school transcripts, evidence of the disqualifying status, signature samples, or a police report in cases of identity theft, is often required. If the application is approved, the borrower is relieved of the obligation to repay the loan, and any amounts paid on the loan may be refunded.

Other Federal Discharge Scenarios

Federal student loans may also be discharged in other specific situations.

An unpaid refund discharge may be an option if a borrower withdraws from school, and the school does not return the federal loan funds to the loan servicer as required by law. This typically applies if the borrower completed less than 60% of the academic period for which the loan was intended.

Before applying for this discharge, borrowers should first attempt to resolve the issue directly with the school. If unsuccessful, they can apply for an unpaid refund discharge by completing the Loan Discharge Application: Unpaid Refund and submitting it to their loan servicer, along with any supporting documentation such as the school’s refund policy or enrollment agreements. If approved, the portion of the loan that the school should have refunded will be discharged.

Federal student loans, including Direct Loans, FFEL Program loans, Federal Perkins Loans, and PLUS loans, will be discharged if the borrower or the student on whose behalf a PLUS loan was taken out dies. To initiate a death discharge, a family member or other representative must provide acceptable documentation of the death, typically an original or certified copy of the death certificate, to the loan servicer.

In certain limited circumstances, it may be possible to have federal student loans discharged through bankruptcy. However, this is not an automatic process and requires the borrower to file a separate action within their bankruptcy case, known as an “adversary proceeding,” and prove to the bankruptcy court that repaying the loans would impose an “undue hardship” on them and their dependents.

The bankruptcy court will consider various factors, including the borrower’s current and future ability to repay the loans while maintaining a minimal standard of living, as well as their good faith efforts to repay the debt before filing for bankruptcy. Discharging student loans through bankruptcy is generally considered difficult, but recent guidance from the Department of Justice aims to streamline the evaluation process in these cases.

State-Level Student Loan Forgiveness Programs

Many states across the U.S. offer their own student loan forgiveness programs designed to attract and retain professionals in high-need occupations or specific geographic areas. These programs often target professions such as healthcare, education, and public service, and the eligibility criteria, forgiveness amounts, and application processes vary significantly from state to state.

Here are examples of state programs:

New York offers various loan forgiveness programs, including:

• Get on Your Feet Loan Forgiveness Program for recent graduates with income-driven repayment plans and income under $50,000 who graduated from NYS high school and college
• Programs for teachers, nurses, social workers, district attorneys, and young farmers

Information and applications are available on the New York State Higher Education Services Corporation (HESC) website.

California features:

• California State Loan Repayment Program (SLRP) for healthcare professionals who commit to working in Health Professional Shortage Areas (HPSAs) or Federally Qualified Health Centers (FQHCs)
• CalHealthCares and loan repayment programs for nurses and allied health professionals

Details can be found on the California Department of Healthcare Access and Information (HCAI) website.

Texas provides:

• Teach for Texas Loan Repayment Assistance Program for certified teachers in shortage fields or communities
• Loan repayment assistance for various healthcare professionals through the Texas Higher Education Coordinating Board and the Texas Department of State Health Services

Florida offers:

• Florida Loan Repayment Assistance Program (LRAP) for legal aid attorneys working in underserved areas
• Nursing Student Loan Forgiveness Program for nurses employed in designated critical shortage areas

Information can be found on the Florida Department of Education’s Office of Student Financial Assistance website.

Maryland administers:

• Janet L. Hoffman Loan Assistance Repayment Program (LARP) for individuals in various public service professions who serve low-income or underserved residents

Details and applications are available through the Maryland Higher Education Commission (MHEC).

Illinois provides:

• Illinois Teachers Loan Repayment Program for teachers who have already received federal Teacher Loan Forgiveness and teach in low-income areas
• Loan repayment assistance for healthcare and human services professionals

Information can be found on the Illinois Student Assistance Commission (ISAC) website.

Other states with notable programs include:

• Maine: Opportunity Maine Tax Credit (a refundable tax credit for eligible student loan payments made by residents who graduated after 2007 and live and work in Maine)
• Michigan: Michigan State Loan Repayment Program for healthcare providers in shortage areas
• Kansas: Rural Opportunity Zones Student Loan Repayment
• Colorado: Loan forgiveness for teachers in high-poverty schools and shortage areas
• Louisiana: State Loan Repayment Program for healthcare professionals in shortage areas

Eligibility requirements for these state-level programs often include:

• Residency in the state
• Graduation from a state high school or college
• Employment in a specific high-need profession or underserved area within the state
• Meeting certain income limitations

The American Bar Association and Equal Justice Works provide valuable lists and summaries of state-based loan repayment assistance programs, particularly for legal professionals.

Navigating the Application Process

For borrowers considering pursuing student loan cancellation, a systematic approach is essential to navigate the often-complex processes involved.

Determining Your Eligibility

The first step is to thoroughly understand the types of federal student loans you have. This information can be found by logging into your account at StudentAid.gov and reviewing your loan details.

Next, research the various federal and state forgiveness and discharge programs that might be relevant to your specific profession, employment situation, and personal circumstances. The Federal Student Aid website, along with your state’s higher education agency and professional organizations related to your field, are valuable resources for this research.

Carefully review the eligibility criteria for each program that seems potentially applicable. Pay close attention to:

• Types of loans that qualify
• Specific employment requirements (including the type of employer and whether full-time employment is necessary)
• Requirements related to your repayment plan
• Duration of service commitments
• Application deadlines

Online tools such as the PSLF Help Tool and the Loan Simulator available on StudentAid.gov can help in assessing your potential eligibility for certain programs and estimating potential benefits.

Gathering Necessary Documentation

Once you have identified the programs or discharge options for which you might be eligible, gather all the necessary documentation required for the application process:

Loan documents:

• Promissory notes
• Statements from your loan servicer(s) detailing your loan types, outstanding balances, interest rates, and payment history

Employment verification documents:

• W-2 forms
• Employment contracts
• Official letters from your employer(s)
• Specific certification forms required by the forgiveness programs you are applying for, such as the PSLF Employment Certification Form

Income documentation (for income-driven repayment plans and some state-level programs):

• Copies of your federal income tax returns (and potentially your spouse’s returns)
• Recent pay stubs
• Other forms of proof of your current income

Specific documentation for discharge options:

• Official notifications of school closure
• Court documents related to borrower defense claims
• Medical records or disability determination letters from the VA or SSA
• Police reports in cases of identity theft

Submitting Your Application

After gathering all the required documentation, carefully follow the specific application instructions provided for each program or discharge option you are pursuing. These instructions will outline where you need to submit your application (whether it’s to your loan servicer, the U.S. Department of Education, or a state agency) and the accepted methods of submission (such as online portals, mail, or fax).

Ensure that all forms are completed accurately, truthfully, and in their entirety. Any missing information or errors can lead to significant delays in processing or even denial of your application.

Make sure that all necessary signatures are obtained from yourself and any other required parties, such as your employer or a medical professional, and that these signatures meet the program’s specific requirements.

Submit your application to the correct entity using the specified method. For programs like PSLF, electronic submission through the Federal Student Aid website is generally recommended as it can lead to faster processing.

Keep copies of all completed forms and supporting documents for your own records. Note the date on which you submitted your application and any confirmation numbers or receipts you receive as proof of submission.

Tax Implications of Student Loan Forgiveness

Understanding the tax implications of student loan forgiveness and discharge is crucial, as the forgiven amount may be considered taxable income under certain circumstances.

Federal Tax Treatment

Generally, under the Internal Revenue Code, the cancellation of debt is considered taxable income by the IRS. However, several exceptions exist where forgiven student loan amounts are not subject to federal income tax:

• Loan amounts forgiven under the Public Service Loan Forgiveness (PSLF) Program
• Teacher Loan Forgiveness Program
• Loan discharges due to the borrower’s death or total and permanent disability (TPD) if the discharge occurs between January 1, 2018, and December 31, 2025, as per the Tax Cuts and Jobs Act of 2017 and subsequent legislation
• Loan discharges due to school closure or borrower defense may also be tax-exempt under certain conditions

Forgiveness of the remaining balance under Income-Driven Repayment (IDR) plans is generally considered taxable income at the federal level. However, the American Rescue Plan Act (ARPA) temporarily made IDR forgiveness tax-free for federal income tax purposes for loans discharged between December 31, 2020, and January 1, 2026. Unless this provision is extended by Congress, IDR forgiveness occurring after 2025 will likely be subject to federal income tax.

State Tax Treatment

The taxability of forgiven student loans at the state level varies. Many states conform to the federal tax treatment and will not tax loan forgiveness that is exempt at the federal level. However, some states, including Arkansas, Indiana, Mississippi, North Carolina, and Wisconsin, have laws or policies that may tax forgiven student loan amounts as income, even if they are exempt from federal taxes.

It’s essential for borrowers to check the specific tax laws of their state or consult with a tax advisor to understand the state-specific implications of student loan forgiveness.

Planning for Tax Implications

Given the potential tax implications, especially for forgiveness received through IDR plans after 2025 and the varying state tax treatments, borrowers should plan accordingly:

• Estimate the potential forgiven amount
• Consider setting aside funds to cover any future tax obligations
• Consult a qualified tax professional to understand specific tax implications based on individual circumstances and the type of loan forgiveness or discharge received

Borrowers will typically receive Form 1099-C, Cancellation of Debt, from their loan servicer if their debt is forgiven, which will be needed for tax reporting purposes if the forgiven amount is taxable.

Avoiding Common Pitfalls

Navigating the student loan cancellation landscape can be challenging. Here are common pitfalls to avoid:

• Ignoring the problem: Being proactive and understanding all available repayment and forgiveness options is crucial.
• Not understanding repayment options: Failing to fully understand and compare all federal repayment options, including income-driven repayment plans, before pursuing forgiveness can be costly. Choosing the wrong repayment plan can negatively impact eligibility for certain forgiveness programs like PSLF.
• Incorrectly consolidating loans: This can lead to the loss of valuable benefits associated with the original loans, such as specific forgiveness options or interest subsidies on Perkins loans.
• Making late payments: This can negatively affect credit scores and potentially disqualify borrowers from certain forgiveness programs, while also incurring additional fees.
• Poor communication with loan servicers: Not communicating proactively with loan servicers, especially when facing financial difficulties, can be problematic. Servicers may be able to offer temporary solutions like adjusted payment plans or forbearance.
• Assuming automatic forgiveness: Student loan forgiveness is not an automatic process. Borrowers must meet specific eligibility requirements and complete the necessary application forms for each program.
• Misunderstanding eligibility criteria: Misinterpreting the detailed eligibility criteria for different federal and state loan forgiveness and discharge programs can lead to applying for programs for which the borrower does not qualify.
• Poor record-keeping: Failing to maintain detailed and accurate records of loan payments, employment history, and communications with loan servicers can create obstacles when trying to demonstrate eligibility for forgiveness.
• Missing recertification deadlines: Missing the annual recertification deadlines for income-driven repayment (IDR) plans can result in payments reverting to the standard repayment plan, interest capitalization, and potential loss of IDR plan benefits or forgiveness eligibility.
• Falling for scams: Be vigilant and avoid student loan forgiveness scams that charge fees for services that are available for free through the Department of Education and its loan servicers. Be skeptical of companies promising immediate or guaranteed forgiveness.
• Relying on misinformation: Relying on common myths and misinformation about student loan forgiveness programs instead of verifying information through official sources like the Federal Student Aid website can lead to incorrect assumptions and wasted effort.

Alternative Student Loan Management Strategies

Even if immediate student loan cancellation or discharge is not an option, there are alternative strategies borrowers can use to manage their student loan debt effectively.

Federal Loan Consolidation

Federal loan consolidation allows borrowers with multiple federal student loans to combine them into a single Direct Consolidation Loan through the U.S. Department of Education. There is no fee associated with federal loan consolidation.

The primary benefits include:

• A single monthly payment and one loan servicer, simplifying loan management
• Access to additional income-driven repayment plans
• Potentially lower monthly payments by extending the repayment period for up to 30 years
• Making borrowers with non-Direct Loans (like FFEL and Perkins loans) eligible for PSLF and some IDR plans
• A fixed interest rate for the life of the loan, calculated as the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of one percent

However, borrowers should be aware that:

• Extending the repayment period will increase the total amount of interest paid over the life of the loan
• Any outstanding interest on the original loans will become part of the principal balance of the consolidation loan, potentially leading to more interest accruing over time

Borrowers can apply for a Direct Consolidation Loan online at StudentAid.gov Loan Consolidation or by submitting a paper application.

Student Loan Refinancing

Student loan refinancing involves taking out a new loan from a private lender to pay off existing federal and/or private student loans. The main goal is usually to secure a lower interest rate, which can result in long-term savings and potentially lower monthly payments. Borrowers might also refinance to change their loan term or to consolidate multiple loans into a single loan with one monthly payment.

However, it’s crucial to understand that refinancing federal student loans with a private lender means losing important federal benefits and protections, such as:

• Access to income-driven repayment plans
• Federal loan forgiveness programs (including PSLF)
• Federal deferment and forbearance options

Private loans typically offer less flexible repayment options compared to federal loans. Refinancing is generally recommended only for borrowers with good credit and a stable income who are confident they will not need these federal benefits.

Federal Student Loan Repayment Plan Options

Borrowers have several federal student loan repayment plan options to choose from, even if forgiveness is not an immediate possibility:

Standard Repayment Plan:

• Fixed monthly payments for up to 10 years (or 10 to 30 years for consolidation loans)

Graduated Repayment Plan:

• Payments start low and increase every two years
• Repayment period of 10

Our articles make government information more accessible. Please consult a qualified professional for financial, legal, or health advice specific to your circumstances.