Understanding Student Loan Forgiveness, Cancellation, Discharge and Repayment Plans

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By Nathan Paulus

Updated: November 8, 2024

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Student loan debt is higher than ever. Students are taking out federal and private loans to pay for college costs, which often take years to pay back. On average, they pay off their debt in 20 years. For some professional graduates, it takes more than 45 years to clear.

This kind of debt can weigh heavily on a person, especially if they aren’t making enough money to keep up with their monthly payments and rising interest. That’s why they may look into student loan forgiveness, cancellation, discharge and repayment plans.

If you are facing mounting student loan debt, you have options. By learning about them, you attempt to free yourself completely of this debt, or, at the very least, make it easier to pay.

Key Takeaways

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Various programs, such as Public Service Loan Forgiveness and Borrower Defense, offer opportunities to qualify for student loan forgiveness based on career or being defrauded by a school.

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Apply for forgiveness through official channels like StudentAid.gov but continue making payments during the process to avoid default if denied.

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If approved, your remaining loan balance may be canceled. In some cases, you may receive refunds for overpayments.

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If denied, review your application for errors, consider appealing or explore other forgiveness programs you may qualify for.

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Repayment plans and other options like refinancing or debt management strategies are available if you don’t qualify for forgiveness.

Differences Between Forgiveness, Cancellation, Discharge and Repayment

Forgiveness, cancellation and discharge all mean that you don’t need to repay some or all of the loan. There are also such things as repayment plans. Find out what each one means so you can explore the different choices you may have.

Term
What This Term Means

Forgiveness

This is used interchangeably with cancellation. Essentially, you won’t be required to make payments on your loans because of your job.

Cancellation

This is the same as forgiveness, where you will not have to make loan payments due to your job.

Discharge

You are no longer required to make loan payments if you get a discharge due to other circumstances such as total or permanent disability.

Repayment Plans

These are plans to repay your loans based on your income.

Current State of Student Loan Forgiveness

The U.S. government has been trying to address the student loan debt crisis — Americans owe $1.75 trillion in federal and private student loan debt. As of February 2022, the Biden Administration approved $415 million in a student loan forgiveness program for borrowers who were defrauded by their schools. These are usually for-profit schools that misrepresent themselves to students. This is called the Borrower Defense Program. Under it, 16,000 borrowers will receive student loan forgiveness.

Borrowers who qualify will be contacted, but if you believe you are eligible for this program, you can use the following resources.

  • StudentAid.gov: On this official government website, you can find out more about the program. Also, you can see if you qualify.
  • Borrower Defense Program Application: Do you think you are eligible? Then apply for the Borrower Defense Program on this site.
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YOUR LOANS ARE YOUR RESPONSIBILITY TO PAY BACK

While you may be eligible for forgiveness, cancellation and/or discharge programs, you are still held responsible for paying back your loans. By finding a flexible option that works for you, you can reduce student loan repayment stress and focus solely on decreasing the debt.

List of Loan Forgiveness, Cancellation and Discharge Options

If you’re struggling to cover the costs of your loan payments, loan forgiveness, cancellation and discharge programs may offer you a good solution. Learn more about what these options include below to help you determine which one is best for you.

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IS THERE A DIFFERENCE BETWEEN FORGIVENESS AND FORBEARANCE?

Yes, there’s a difference between student loan forgiveness and forbearance. While forgiveness means that you may not have to pay back some or all of your loan, forbearance allows you to lower or suspend your payments temporarily, usually for up to 12 months, while you are going through a financial hardship.

Federal

Different federal programs offer you student loan forgiveness or cancellation of your debt. You’ll need to look into the choices to see which ones you may qualify for. Please use the tables below and add in the programs in the appropriate table.

Forgiveness Programs
Condition for Cancellation or Forgiveness
Eligibility Requirements and Additional Notes
Loan Amount Discharged

Public service

Qualifying nonprofit and
government employees

All, if you make 120 qualified
payments

Income

People with large balances when
compared to their income

The rest of your balance after you
make payments for 20-25 years.
You pay a percentage of your
monthly income.

Cancellation Programs
Condition for Cancellation or Forgiveness
Eligibility Requirements and Additional Notes
Loan Amount Discharged

Perkins Loan

Perkins student loan holders

All, if you work in public
service for five years

Discharge Programs
Condition for Cancellation or Forgiveness
Eligibility Requirements and Additional Notes
Loan Amount Discharged

Borrower Defense Program

Those who were defrauded by
schools, typically for-profit ones

The rest of your loan

Closed school

People who went to a school that
closed and didn’t receive a degree

All, and you may get refunds
for payments made

Career-Based

You may be eligible for forgiveness, cancellation or discharge if you go into a certain profession. For example, if you become a medical professional, teacher or doctor, or you go into the military or public sector, you could become eligible. This is to encourage people to go into these fields.

Programs for Teachers
Condition for Cancellation or Forgiveness
Eligibility Requirements and Additional Notes
Loan Amount Discharged

Teacher loan forgiveness

  • Working in low-income elementary
    or secondary schools for five
    years
  • Only for loans taken out after 1998

    • Up to $17,500 in federal direct
    or Stafford loans

    State-sponsored repayment
    assistance

    Licensed teachers

    Depends on the state; check with
    your state’s department of higher
    education

    Perkins loan

    Work as a teacher, full-time, in a
    public school or teach qualifying
    subjects such as math, foreign
    language, special education, or science

    100% of the loan

    Programs for Medical and Health Professionals
    Condition for Cancellation or Forgiveness
    Eligibility Requirements and Additional Notes
    Loan Amount Discharged

    State-sponsored repayment
    assistance

    Nurses and doctors

    Depends on your state program;
    check on the department of
    higher education website

    Public Service Loan Forgiveness
    program

    Medical professionals with
    federal direct loans

    Make 10 years’ worth, or 120,
    on-time payments

    NURSE Corps Loan Repayment
    Program

    Nurses

    The program pays up to 85% of
    qualified nurses’ unpaid student
    loan debt.

    Programs for Military Members
    Condition for Cancellation or Forgiveness
    Eligibility Requirements and Additional Notes
    Loan Amount Discharged

    Military student loan forgiveness

    Members of the military
    with loans

    Depends on the branch of
    the military

    Programs for the Public Sector
    Condition for Cancellation or Forgiveness
    Eligibility Requirements and Additional Notes
    Loan Amount Discharged

    Public Service Loan Forgiveness

    Qualifying nonprofit and
    government employees

    All, if you make 120 qualified
    payments

    Programs for Other Careers
    Condition for Cancellation or Forgiveness
    Eligibility Requirements and Additional Notes
    Loan Amount Discharged

    State-sponsored repayment
    assistance

    Licensed lawyers

    Depends on your state

    Federal student loan repayment
    assistance

    Federal employees who work
    at an agency for at least
    three years

    $10,000 per year per employee
    for federal loans

    Volunteer organization forgiveness

    AmeriCorps, Peace Corps and
    other volunteer organization
    employees

    Depends on the terms of service

    Loan repayment assistance
    programs

    Those working as dentists

    Depends on the state

    U.S. Department of Agriculture
    assistance programs

    Vets who work in underserved
    areas

    $25,000 per year for three years
    in student loan repayment help

    Others

    You could also get your loan discharged, forgiven or canceled if you experience disability or bankruptcy or you pass away — then your family wouldn’t have to have to pay back your loan. It all depends on whether or not your disability prevents you from working or you qualify for discharge due to hardship under your bankruptcy filing.

    Death

    If you pass away with student loan death, your family can take the appropriate steps to get it discharged so they don’t have that extra burden on them.

    Available Programs Due to Death
    Condition for Cancellation or Forgiveness
    Eligibility Requirements and Additional Notes
    Loan Amount Discharged

    Death

    You must provide proof of death

    The rest of your loan, once a
    death certificate is sent to
    the loan servicer

    Disabilities

    If you have a disability and you are unable to work, then you could potentially qualify for a program for individuals with disabilities.

    Available Programs If You Are An Individual With Disabilities
    Condition for Cancellation or Forgiveness
    Eligibility Requirements and Additional Notes
    Loan Amount Discharged

    Veterans’ permanent and total
    disability

    This is for veterans who got
    injured and are now facing
    permanent and total disability

    All of the loan

    Permanent and total disability

    This is for people who are
    permanently and totally
    disabled and can’t work
    anymore

    The rest of your loan

    Bankruptcy

    There is a myth that you cannot get student loan debt discharged. You can, but it’s much harder than discharging other types of debt. Filing bankruptcy on student loans through Chapter 7 or Chapter 13 alone is not enough; you will also have to file an adversary proceeding.

    Available Programs Due to Bankruptcy
    Condition for Cancellation or Forgiveness
    Eligibility Requirements and Additional Notes
    Loan Amount Discharged

    Undue hardship on you

    Federal and private loans

    Depends on your situation

    How Do You Apply for Forgiveness?

    You can apply for forgiveness through StudentAid.gov. It depends on the program you are applying for. Navigate to that official government website to find the specific application you need. You will need to prove how you qualify. There is no average timeframe for when you will hear a reply.

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    MAKING PAYMENTS DURING APPLICATION PROCESS

    You should continue making payments on your student loans during the application process, just in case you don’t get approved. You don’t want to accidentally default on your loans.

    Next Steps If You’re Approved

    If you get approved for student loan forgiveness, there are a few different things that will occur.

    1. 1
      Notification of approval

      You will be notified about which program you have qualified for under student loan forgiveness, cancellation or discharge. You’ll find out if you qualified for full or partial forgiveness. If you were approved for the former, when you log into your loan account, your debt will be down to $0. If you were approved for the latter, you’ll determine how much you still need to pay back and the terms of your repayment.

    2. 2
      Refunding of payments

      In some cases, you will receive a refund for payments you already made. For example, if you were approved for the Public Service Loan Forgiveness and you made more than 120 qualifying payments, those would be counted as overpayments and you’d get a refund.

    3. 3
      Credit history change

      If you had negative marks on your credit report due to your student loans, these could go away, depending on the type of program you qualified for. This means that your credit report could improve, which will make it easier for you to get approved for future loans. If your cancellation erases your default, then you could once again become eligible for federal student loan aid.

    4. 4
      You could get taxed.

      Right now, under the Biden Administration, all student loan forgiveness will stay tax-free until the end of 2025. But if this policy is not renewed, then income repayment forgiveness is going to be taxed as income. If you receive notification that your student loans are forgiven, you’ll get a cancellation of debt form (1099-C) in the mail to file when doing your taxes.

    Next Steps If You’re Denied

    There is the possibility that you will be denied for student loan forgiveness. Here are some steps you should take if that occurs.

    1. 1
      Review your application

      You can make sure that you properly filled out your application by contacting a representative in the U.S. Department of Education's office of Federal Student Aid to ensure it details all the necessary information.

    2. 2
      Try to appeal the denial

      In some instances, you may be able to appeal the denial and get your application reexamined. For example, if you are applying for the ​​Total and Permanent Disability (TPD) discharge program, you could have the chance to appeal within one year of your denial date. If your condition has worsened, you may be able to reapply and try again.

    3. 3
      Look into other programs

      There is the possibility that you could qualify for another program. Go on StudentAid.gov to see if there are alternative programs you might be able to apply to based on your career, disability, or bankruptcy status, or your income.

    What Happens If You Don’t Qualify: Repayment and Other Alternatives

    If you don’t qualify for forgiveness, cancellation or discharge, it can be disheartening. But there are other options you can go after depending on your specific situation. You don’t need to give up at this point. It may take some time and creative thinking, but there are alternative solutions.

    Repayment Plans

    Available Repayment Plans and Options
    Condition for Repayment Plan
    Eligibility Requirements and Additional Notes
    Loan Amount Discharged

    Standard Repayment Plan, with
    a set timeframe

    All borrowers of federal student
    loans

    Depends; payments are on a
    fixed amount and your loan
    will be paid off within 10 years,
    or 10 to 30 years for
    consolidation loans

    Graduated Repayment Plan,
    with a set timeframe

    All borrowers of federal student
    loans

    Depends; payments are on a
    fixed amount and your loan
    will be paid off within 10 years,
    or 10 to 30 years for
    consolidation loans

    Extended Repayment Plan,
    with a set timeframe

    Direct loan borrower

    More than $30,000 in outstanding
    direct loans and the loan will
    be paid off within 25 years

    Revised Pay As You
    Earn Repayment Plan (REPAYE),
    with a set timeframe

    Direct loan borrower with eligible
    loan type

    Any outstanding balance on
    your loan is going to be
    forgiven if you haven't repaid
    your loan in full after
    20 years for undergrad, or
    25 years for graduate or
    professional study

    Pay As You Earn Repayment
    Plan (PAYE)

    New borrower on or after
    10/1/2007, and must have
    received a disbursement of
    a Direct Loan on or after
    10/1/2011

    Your monthly payments will
    be 10% of discretionary income

    Other Alternatives

    If you are not a candidate for forgiveness, cancellation, discharge or repayment, then there are other roads you can go down. They include debt strategy plans, refinancing, budgeting and more. With a plan of action in place, you can pay off your student loan debt sooner and hopefully relieve yourself of this burden once and for all. Then, you can start to save for your future and fulfill your financial goals.

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      Use the debt avalanche or debt snowball method

      With these options, you can pay off your student loan debt. With the debt avalanche method, you make minimum payments on all your debt and then pay off your debt with the highest interest first. With the debt snowball method, you pay off your smallest debts first and move onto the larger debts. While the former works out better mathematically, the latter works out better from a psychological standpoint. Why? You may be encouraged to keep going by accomplishing smaller, more attainable goals.

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      Try budgeting

      By budgeting, you will be able to see where you’re spending money and where you could cut back on your expenses. With the 70/20/10 rule, 70% of your money will go towards your necessities and everyday spending, 20% will go towards savings, and 10% will go towards your debt and donations. However, this approach doesn’t work for everyone, so use a plan you’ll actually follow.

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      Refinance your loans

      If your interest is way too high on your student loans, then you could always try to refinance them to lower the interest rates. You will have a higher chance of being able to refinance if you have improved your credit score overtime. You’re showing your student loan servicer that you are capable of paying back your debts, so they will be more likely to give you an attractive interest rate.

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      Negotiate with your student loan provider

      If you have private student loans, you could call up your student loan lender and agree to pay a lump-sum settlement. This will only work if your loans are in default already, since your lender will be desperate to get their money back. It isn’t easy to negotiate a lump-sum settlement, but it may be possible in your situation.

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      Use extra money to pay back loans

      Whenever you receive birthday money, a tax refund, a bonus from your job, or other extra money, you can put it towards your student loans. The faster you pay off the loan, the better, because you can avoid paying tons of interest on your loans. The longer you wait, the harder it will become to pay them off.

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    Resources for Student Loan Forgiveness

    There are many resources available to help when it comes to student loan forgiveness. Here are some places to start.

    About Nathan Paulus

    Nathan Paulus headshot

    Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.

    Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.

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