Can a Student Loan be forgiven?

If you’re finishing up college or have already graduated, chances are you have brought a significant amount of student loan debt with you to graduation. If you’ve talked to any friends or family who have been in the “real world” for a while now, they’ve most likely shared the woes of paying off student loans. You’re rightfully nervous and wondering if you’ll be paying back your loans for the rest of your life. You also might be wondering, “Can a student loan be forgiven?”

The short answer is yes, it can. The longer answer delves into more complicated territory depending on what type of loan you have and the repayment plan you’ve chosen. Even your job after college could be a factor.

There is a Federal Student Loan Forgiveness Program already in place, though it is vastly underused because not many people know about it. Unfortunately there is no standard set in place for private loan forgiveness, though private companies can sometimes offer their own form of forgiveness that varies. Check with your private loan provider to see if they offer any programs like these.

For now, we’ll discuss federal loans since that is the standard. Once you consolidate all of your federal loans, you can choose from five repayment plans based on what works best for your lifestyle.

The standard repayment plan means you would pay back a set amount each month until the loan is paid off. The income contingent program decides your payment based on your income, family size, interest rate, and loan balance. Much like this, the income based plan focuses purely on your income and family size to decide on a payment amount. If you go with the graduated plan, you have the luxury of making lower payments, however, they will gradually increase every two years. Lastly, the pay as you earn plan is based on 10% of your income.

If you make regular, on-time payments each month and still have a debt balance after 20-25 years, then the remainder would be forgiven. Borrowers after 2014 would be forgiven after 20 years, while borrowers from before then would be forgiven after 25 years.

If you hold a full-time job in public service, such as a teacher or a nurse, then you could have your loan forgiven in 10 years as opposed to 25 years.

Check to see if your job could make you eligible for any other forms of forgiveness. For example, the Nurse Corps pays off 60% of the nurses loans in two years in exchange for their service in a needy community for at least two years.