student loan forgiveness basics

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In 2018, there are 44 million Americans that are in severe student loan debt, totaling over 1.4 trillion dollars.

If you’re anything like these 44 million Americans, paying off your student loans may seem like a mountain too tall to climb. For most of us, it’s difficult to even make the monthly payments.

Did you know that you can qualify for student loan forgiveness? There are programs out there that look at what you do for a job and the number of loans you have. Based on this information, these programs offer forgiveness of your student loans.

Let’s take a look at everything you need to know about student loans, forgiveness, and if you qualify.

Student Loan Forgiveness

Student loan forgiveness and public service loan forgiveness are offered in many states across the nation. Some depend on your income, public service, or the type of work you do.

Student loan forgiveness is exactly what it sounds like. Part of your loan is forgiven and you don’t have to pay it back. Most of these programs are available through the government for federal student loans.

The qualifications for each loan varies and some can get pretty specific. If you have private loans, you don’t qualify for federal student loan forgiveness.

You’re not eligible for federal student loan forgiveness programs if you have private loans, but there are other strategies for managing private loan debt.

Types of Loan Forgiveness

There are a bunch of different loan forgiveness programs. There are federal loans that are based on income-driven plans and there are state programs.

Let’s take a look at both of these and how they break down.

Income-Driven Repayment

First things first, you need to know what type of loans you have and when you borrowed them. Were they used for undergraduate or graduate school?

The plans you qualify for depends on these answers. There are different income-driven repayment plans available to you as a student loan holder.

They are Income-Contingent Repayment or ICR, REPAYE, PAYE, and Income-Based Repayment or IBR. We’re going to explore what each of these means.


To qualify for an income-based repayment plan, your payments must be under what you would pay on a standard plan for repayment.

Your income determines what you pay back. Based on when you borrowed, your payments will be 10-15% of your income for anywhere from 20 to 25 years.

If you’re a borrower before July 1, 2014, your payment doesn’t go over 15% of your income and you pay for a total of 25 years.

If you’re a borrower after July 1, 2014, your payments don’t go over 10% of your income and you pay for a total of 20 years.

After these payment plans are over, you don’t have to make any more payments and the rest of your balance is forgiven.

You do need to keep in mind that the amount of student loan forgiveness when your repayment plan is over is taxable income. It will increase the amount you owe in taxes significantly, but you still won’t be paying as much as you would without forgiveness.


Income-contingent repayment plans have you paying up to 20% of your income.

Direct subsidized and unsubsidized loans qualify as well as direct plus loans and direct consolidation loans.

There are also quite a few consolidated loans that would qualify for income-contingent repayment plans. These loans include subsidized and unsubsidized federal Stafford loans as well as FFEL plus loans and federal Perkins loans.

Anyone that has one of the qualified student loans is qualified for this student loan forgiveness plan.

Like the IBR, the student loan forgiveness amount is noted as taxable income and could raise your taxes for the year quite a bit.


The REPAYE student loan forgiveness program depends on your area of study, graduate or undergraduate. For this loan, you pay 10% of your income for 20-25 years.

If you borrowed for an undergraduate program, you’ll be paying 10% of your income for 20 years. If you borrowed for a graduate program, you’ll be paying 10% of your income for 25 years.

These repayment amounts only exist for as long as your student loans qualify for the program.

The loans that qualify for these student loan forgiveness programs are direct subsidized and unsubsidized loans, direct plus loans, and direct consolidation loans.

If you have consolidated loans that include subsidized and unsubsidized federal Stafford loans, FFEL or federal Perkins loans, these also qualify.

Just like the other two loan forgiveness programs, IBR and ICR, the amount that is forgiven is taxable.


For the PAYE student loan forgiveness program, you pay 10% of your income for 20 years.

The qualification for this program is more specific than the others. You have to be a new borrower after Oct. 1, 2007 and receive a disbursement of a loan after Oct. 1 of 2011. You also have to have a payment plan that isn’t more than what you would pay for a standard plan.

You had to start college after Jan. 2008 and continue past Oct. 2011 with no early graduation. This income, like the others, is also taxable, making the payoff at the end not as big as one would hope.

Public Service

The public service student loan forgiveness program is a great program because of the number of student loans that are forgiven as not taxable. This means that when they are forgiven, you don’t owe anything back.

However, because of that fact, this loan is difficult to qualify for as it has very strict standards. You must be working in public service positions for a non-profit or government agency. Once you make 120 standard payments, you qualify for this loan.

If you have anything other than a direct loan, you are disqualified from receiving this forgiveness. You must be employed full-time for a public service agency.

This doesn’t have to be in a consecutive amount of time. It could be split up as long as you’re working for a public service agency when you pay your qualified payments.

The public service student loan forgiveness has no guarantee of staying around forever. Congress can change this program whenever they feel like it. You could be on payment 119 and they decide they are no longer doing it.

If this is your only option for forgiveness, it doesn’t hurt to work towards this goal. For those that do qualify, and make it to the end, the payoff will be great.

State-Sponsored Forgiveness

Some states throughout American have loan forgiveness and others don’t offer anything. The assistance programs that are available are often depending on your job field.

Each state is different so you’ll have to check on the specifications of whether or not your forgiveness amount will be taxable.

You can ask at your college what state programs are available to you. Some of the programs might even be able right at the school, without having to request elsewhere. Getting their advice and opinions on where to turn is helpful.

A lot of the school sponsored repayment plans that often available at law schools. They aren’t seen at many other universities across the nation, but it doesn’t hurt to inquire about it.

Next Steps

As you can see, there are many different loan forgiveness programs out there for those that are weighed down by a lot of student debt. You don’t have to be overwhelmed by your debt as there are options available to you.

However, at the end of the day, the student loan forgiveness programs could change in the blink of an eye. If presidential candidates or Congress decide to eliminate a program or change the way a program works, it will affect you as the student debt holder.

You have the ability to change repayment plans one time in a year. If you’re finding you’re not keen on the one you’ve been using, you can change it without any negative consequences.

Be Informed!

Gathering the information about the loans you borrowed, when you borrowed them, and why you borrowed them will help equip you when you’re searching for a forgiveness program.

Once you have this information, you can see what forgiveness programs you qualify for and get started on your request.

Watch out for loan forgiveness scams. There are quite a few out there that will try to trick you by claiming to reduce debt and then not following through on their claims. They charge high fees and don’t return your money. Always go through a state or government funded program.

You have to remember that most loan forgiveness payments are taxable. Depending on the number of your student loans, it could make sense to not request a program at all. If you have a small amount, and the taxes would be more than you would pay on your own, it doesn’t make sense to get help.

If you need help with this process, or can’t figure out what loan programs you qualify for, reach out to us today.