Did you know that over 45 million Americans hold student loan debt, totaling a staggering $1.7 trillion? That’s enough to send Beyoncé to space with her own crew several times over! With numbers like these, it’s no surprise that student loan forgiveness has become a hot topic. But what exactly is it, and how can it help you? Let’s take a look.
Understanding student loan forgiveness
Student loan forgiveness offers eligible borrowers relief from paying back some or all of their student loans. This can be a game-changer for many, easing financial burdens and allowing more freedom in life choices.
- Types of Eligible Loans: Primarily available for federal loans, such as Direct Loans, but is not applicable to private loans. For example, if you’ve refinanced your government loans into a company like Ernest (i.e., a private loan company), you aren’t eligible for student loan forgiveness on your Ernest loan.
- Eligibility: The availability of student loan forgiveness is often based on factors like employment in public service, teaching, or certain non-profit sectors.
- Programs: These include Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, and Income-Driven Repayment (IDR) plans. We cover each in detail down below.
For those who qualify, it’s like a golden ticket to debt relief, helping to reduce financial stress significantly.
Key programs for loan forgiveness
The average student loan debt amount in the U.S. stands at $38,290, so let’s dive into the most popular programs that could help you shed some of that student loan weight.
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Public Service Loan Forgiveness (PSLF)
This program forgives the remaining balance on Direct Loans after 120 qualifying payments while working full-time for a qualifying employer.
- Qualifying Employers: Government organizations, non-profit organizations, and some other public service roles.
- Payment Plans: You must be on an income-driven repayment plan to qualify for this program.
- Loan Types: Only Direct Loans qualify, but other federal loans can be consolidated into a Direct Loan in order to pass the test.
The PSLF gathers different components (employers, repayment plans) for a powerful payment solution to debt.
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Teacher Loan Forgiveness
This program offers up to $17,500 in loan forgiveness for teachers who work in low-income schools for five consecutive years.
- Eligible Teachers: Must be highly qualified and work in specific subjects like math or science.
- School Requirements: The school must be listed in the Teacher Cancellation Low Income (TCLI) Directory.
- Loan Types: Subsidized and unsubsidized Direct and FFEL loans.
Teachers are the unsung heroes of our society, and this program acknowledges their role by lightening the load of their financial load.
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Income-Driven Repayment Plans (IDR) such as the SAVE plan (soon to be phased out by 2028)
IDR plans adjust your monthly payments based on your income and family size, with potential forgiveness of the remaining balance after 20-25 years.
- Types of IDR Plans: Includes Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE).
- Biden’s SAVE plan: It’s a form of IDR plan that allows payment based on income and family size but offers additional benefits, such as full forgiveness after 10 years if debt is under $12,000.
- Forgiveness Timeline: Depending on which program you choose, you may be able to have your remaining balance wiped after a certain number of years. For example, under Biden’s SAVE plan, you can wipe your loans (if under $12k) after 10 years.
- Annual Documentation: Requires yearly proof of income and family size.
Note that Trump’s big, beautiful bill will phase out Biden’s SAVE plan by 2028. Let’s chat more about what Trump’s bill will do to student loan forgiveness.
The Trump administration’s 2025 changes to loan forgiveness
The trump administration is dwindling down the options for student loan forgiveness to crack down on federal spending. Trump’s “big, beautiful bill” will drastically reshape options for repayment, reducing the options to just two: a standard repayment plan and a new income-based Repayment Assistance Plan (RAP) that can stretch repayment up to 30 years. The popular SAVE plan from the Biden era is being phased out, with interest resuming and borrowers needing to switch plans by August 1 to begin earning credit toward forgiveness. While the changes are being framed as simplifying the system, advocates warn they could lead to mass confusion, higher monthly payments, and increased defaults on loans, especially as millions of borrowers face tight deadlines, unclear guidance, and a massive application backlog.
Do student loans get automatically forgiven after 10 years?
No. Not automatically. There is a myth floating around that student loans get automatically forgiven after paying them for several years, but that is not true. This may be true if you’ve applied and qualified for one of the above-listed forgiveness programs, such as the SAVE program. But even with that program, there are still certain criteria you have to meet. The bottom line? Federal student loans, without more, do not get “automatically” forgiven after 10 years. Although it sounds awesome, there is more to it than that.
Frequently Asked Questions (FAQs) about student loan forgiveness
Q: How do I apply for the Public Student Loan Forgiveness program (PSLF)?
A: You first need to understand if you are eligible. Then, you’ll need to submit an employment certification form. You will need to do this annually or when you change employers. Don’t forget to keep detailed records of your loan payments and employment.
Q: What happens if my forgiveness application is denied?
A: There are a few things you can do:
- Review and Appeal: Check for errors or incomplete information and appeal if necessary.
- Seek Professional Advice: Consider consulting with a student loan advisor to determine why this happened and what your options are.
- Explore Alternative Options: Look into other repayment plans or consolidation options.
Q: Is Biden’s relief plan still happening?
A: Not as of July 2024. On June 30, 2023, SCOTUS struck down Biden’s debt-relief plan that offered complete forgiveness for more than 40 million borrowers. And now, Trump is phasing out Biden’s SAVE program as well.
Where to from here?
Given the weight of student loan debt, with the average being around $40,000, such loan forgiveness programs, as outlined above, can be a lifeline for many borrowers. They offer financial relief and a path to a brighter financial future. Whether through Public Service Loan Forgiveness, Teacher Loan Forgiveness, or Income-Driven Repayment plans, there are multiple options to explore. Remember, it’s essential to stay informed, regularly check your eligibility, and seek help if needed. Take a look at StudentAid.Gov to get started.
Laura Tynan is the founder of The Witch of Wall Street, a personal finance and investing community, where women are shown how to manage, multiply and manifest money, using simple strategies. Laura holds a BSc Hons in Finance, is a Chartered Accountant, and is certified in EFT Tapping, Breathwork, and RRT. She has been recognized by the Financial Times as a Top 20 Future Female Leader and by Yahoo! Finance as a Global Champion of Women in Business. She is a multi-award-winning speaker who has spoken at, and been featured in, Forbes. Laura hosts The Witch of Wall Street podcast and is the author of the personal finance and investing book for women, by the same name, which is available now on Amazon.
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