How To Apply For Studen Loan Forgiveness

Student loan forgiveness written on a memo stick.

This Week's Quote:

It always seems impossible until it is done.

                                      -Nelson Mandela

During these difficult times, I thought that this article may be helpful to those with student loans.

-Belinda Stickle

There are many options for student loan forgiveness and discharge, but each has different eligibility restrictions and a different application process. Learn how to apply for student loan forgiveness.

Student loan forgiveness and discharge options include:

• Public Service Loan Forgiveness

• Teacher Loan Forgiveness

• Loan Forgiveness for Volunteering

• Total and Permanent Disability Discharge

• Death Discharge

• Closed School Discharge

• Borrower Defense to Repayment Discharge

• False Certification Discharge

• Unpaid Refund Discharge

• Discharge after 20 or 25 years in an income-driven repayment plan

Some student loan forgiveness is automatic. Other student loan forgiveness requires the borrower to submit an application form. Application forms can be obtained by contacting the loan servicer or by calling the U.S. Department of Education’s Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243).

There is no fee to apply for loan forgiveness. You do not need to pay anyone for help in applying for loan forgiveness.

The American Rescue Plan Act of 2021 made all student loan forgiveness and student loan discharge tax-free through December 31, 2025. This legislation is likely to be extended or made permanent before it sunsets.

Public Service Loan Forgiveness

Public Service Loan Forgiveness (PSLF) cancels the remaining debt on eligible student loans after the borrower makes 120 qualifying monthly payments in an eligible repayment plan while working full-time in an eligible public service job.

The entire remaining debt is forgiven, including the outstanding interest and principal balance. If the borrower has made more than 120 qualifying payments, the extra payments will be refunded to the borrower.

The 120 qualifying payments do not need to be consecutive. It takes at least 10 years to qualify, since borrowers cannot make 120 qualifying payments in less than 10 years.

Payments that were paused during the pandemic under the payment pause and interest waiver count toward forgiveness.

Deferments and forbearances count toward loan forgiveness for borrowers who suspended repayment while serving on active duty in the U.S. Armed Forces. For example, the military service deferment counts toward PSLF.

Eligible public service jobs include working directly for a government agency (not indirectly through a government contractor), working for a 501(c)(3) tax-exempt charitable organization or working in public interest law for a non-profit organization.

Eligible loans include loans in the William D. Ford Federal Direct Loan Program (Direct Loans). Loans in the Federal Family Education Loan Program (FFELP) and Federal Perkins Loans may be made eligible by consolidating them into a Federal Direct Consolidation Loan. Borrowers can check their loan types using the Aid Summary tool, which is available at StudentAid.gov/aid-summary.

Eligible repayment plans include Standard Repayment and the four income-driven repayment plans: Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), Pay-As-You-Earn Repayment (PAYE) and Revised Pay-As-You-Earn Repayment (REPAYE).

The Temporary Expanded Public Service Loan Forgiveness (TEPSLF) program provides $700 million in funding to forgive eligible student loans that were repaid in the graduated and extended repayment plans, if the last year of payments are at least as much as they would have been under an income-driven repayment plan.

To apply for PSLF and TEPSLF, borrowers should use the PSLF Help Tool available at StudentAid.gov/PSLF.  This tool will confirm that the borrower is working for an eligible employer. It will also enable the borrower to file an Employment Certification Form (ECF) or apply for public service loan forgiveness. (Borrowers should file an ECF every year and whenever they change employers, to confirm that they are on track toward loan forgiveness and to create a record of qualifying payments.)

A temporary waiver is available through October 31, 2022 to allow payments to count toward PSLF regardless of loan program or repayment plan. Late payments and partial payments will count toward loan forgiveness. Borrowers must file an Employment Certification Form (ECF) or apply for loan forgiveness before the deadline. Federal Parent PLUS loans are not eligible for the waiver.

The waiver also allows monthly payments on FFELP and Federal Perkins loans to count toward loan forgiveness, if the loans are consolidated into a Federal Direct Consolidation Loan and the borrower files an ECF or applies for loan forgiveness before the deadline. It can take up to 45 days to consolidate federal student loans, so borrowers should not procrastinate. The PSLF Help Tool should be updated by the end of the year to recognize FFELP and Federal Perkins Loans.

Teacher Loan Forgiveness

College graduates who teach full-time in a low-income elementary or secondary school (or educational service agency) for five years may qualify for up to $17,500 in loan forgiveness on their subsidized and unsubsidized Federal Stafford Loans. Both FFELP and Direct Loans can qualify.

Only people who were new borrowers as of October 1, 1998 are eligible.

Eligibility is limited to highly qualified teachers. Highly qualified teachers have at least a Bachelor’s degree, full state certification as a teacher, and certification or licensing on a permanent basis. Elementary school teachers must also have passed a rigorous state test of knowledge and teaching skills in reading, writing and mathematics. Middle and secondary school teachers must also have passed a rigorous state test in each of the academic subjects in which the teacher is teaching or have an academic major or graduate degree or advanced certification in each of the academic subjects in which the teacher is teaching. Rigorous state tests can include state-required certification or licensing tests.

Math, science and special education teachers are eligible for up to $17,500 in student loan forgiveness. Other teachers may receive up to $5,000 in student loan forgiveness.

Teacher Loan Forgiveness is stackable with the Public Service Loan Forgiveness program. The same period of teaching service, however, cannot qualify for both loan forgiveness programs.

Borrowers who are in default are not eligible unless they have made satisfactory repayment arrangements with the holder of the loan.

To apply for Teacher Loan Forgiveness, submit a Teacher Loan Forgiveness Application to the loan servicer or servicers. The chief administrative officer at the school or educational service agency must complete the certification section of the application form.

Loan Forgiveness for Volunteering

Volunteers with AmeriCorps may earn Segal AmeriCorps Education Awards which can be used to repay their federal student loans and state student loans. The education awards are worth up to the maximum Federal Pell Grant amount. There is a seven-year limit on using the education awards. Volunteers age 55 and older may transfer their education awards to their children or grandchildren.

Volunteers with the Peace Corps may receive a transition payment (readjustment allowance) of more than $10,000 after completion of two years of service.

Both the education awards and transition payments may be used to repay federal student loans. These lump sum payments count toward up to 12 qualifying monthly payments for Public Service Loan Forgiveness.

However, some borrowers may be better off making payments under an income-driven repayment plan. These payments can be as low as $0 and still count toward Public Service Loan Forgiveness. Volunteering full-time with AmeriCorps or Peace Corps qualifies as full-time employment in an eligible public service job.

The U.S. Department of Education publishes a guide to repaying federal student loans for Peace Corps volunteers.

Recipients of the Segal AmeriCorps Education Award may apply the award to their student loans through the My AmeriCorps portal. Choose “Create Education Award Payment Request” and then specify “Loan Payment” as the Payment Type.

Borrowers should contact the PSLF loan servicer if they want to apply their education awards or transition payments as a lump sum payment that qualifies for Public Service Loan Forgiveness. Include the date and amount of the transition payment and the amount that was applied as a lump sum payment toward your student loans when filing an Employment Certification Form (ECF). Also include a statement that the lump sum payment was from a transition payment for service in the Peace Corps and that the lump sum payment should count toward PSLF.

Total and Permanent Disability Discharge

Federal education loans may be discharged if the borrower has a Total and Permanent Disability (TPD).

Note that Federal Parent PLUS loans can be discharged if the parent borrower becomes disabled, but not if the student becomes disabled.

There are three ways of demonstrating a total and permanent disability:

• The U.S. Department of Veterans Affairs (VA) determines that the borrower is unemployable because of service-connected disabilities that are 100% disabling.

• The borrower qualifies for Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) from the Social Security Administration (SSA) and the next disability review will be 5 or more years after the date of the most recent disability status determination.

• A U.S. doctor certifies that the borrower is unable to engage in substantial gainful activity due to a physical or mental impairment that has lasted or is expected to last for at least 5 years or that can be expected to result in death.

The U.S. Department of Education performs a data match with the VA and SSA to identify borrowers who are eligible for a TPD discharge and will discharge their federal education loans automatically.

To apply for a TPD discharge based on a doctor’s certification, the doctor must sign the TPD Discharge Application.

The TPD Discharge Application is available on the DisabilityDischarge.com website as a printable PDF form. There is also an online Application Wizard that can be completed instead of the PDF version. Borrowers can request that an application form be mailed to them by calling 1-888-303-7818, by faxing 1-303-696-5250 or by sending email to disabilityinformation@nelnet.net.

If the borrower’s loans are discharged based on a doctor’s certification or SSA determination, there is a three-year post-discharge monitoring period. There is no post-discharge monitoring period if the loans are discharged based on a VA determination. During the post-discharge monitoring period, the borrower’s annual earnings from employment must be less than 100% of the poverty line for a family of two and the borrower must not get a new federal education loan or TEACH Grant. (A pending proposal will eliminate the post-discharge monitoring period.)

Some lenders of private student loans provide a disability discharge that is similar to the TPD discharge available for federal student loans. Contact the lender to ask whether they offer a disability discharge. If the lender does not provide a disability discharge, ask about their compassionate review process.

Death Discharge

Federal education loans are discharged if the borrower dies. Federal Parent PLUS loans may also be discharged if the student dies.

To apply for a death discharge, provide the loan servicer with proof of death. Proof of death includes an original or certified copy of the death certificate or a photocopy of the death certificate.

Some lenders of private student loans will cancel the borrower’s loans if the borrower dies. Contact the lender for more information. If the lender does not offer a death discharge, ask about their compassionate review process.

Close School Discharge

If the student’s college closed while the student was enrolled or within 180 days of the student’s withdrawal, the student may be eligible for a closed school discharge of their federal education loans, including federal student loans and Federal Parent PLUS loans.

If the student is able to complete their program through a teach-out program or at another college, they are ineligible for the closed school discharge. If the student transfers their credits to another college, they may be ineligible for the closed school discharge.

To apply for a closed school discharge, submit a Closed School Discharge Form to the loan servicer after confirming that the college is listed on the U.S. Department of Education’s list of closed schools.

If a borrower is ineligible for a closed school discharge, they may be eligible for a borrower defense to repayment discharge.

Borrowers should also check whether their state has a tuition recovery fund or performance bond.

Borrower Defense to Repayment Discharge

Borrowers may be eligible for discharge of their federal education loans if their college engaged in fraudulent, deceptive or illegal practices concerning their student loans or education under federal or state law. Examples include providing false information about college costs, accreditation, job placement statistics or the ability to transfer credits.

Borrowers who qualify for the borrower defense to repayment discharge may also qualify for a refund of some or all of the payments they made on the loans.

To apply for a borrower defense to repayment discharge, submit an application on the U.S. Department of Education’s website.

False Certification and Unpaid Refund Discharges

If the student’s college certified the student as eligible for federal student aid, but the student is ineligible for employment in the occupation for which they are being trained due to age, criminal record, or physical or mental conditions, they may be eligible for a false certification discharge (Disqualifying Status Discharge).

If the student’s college signed their name to a loan promissory note without the student’s authorization, the student’s federal education loans may be eligible for a false certification discharge (Unauthorized Signature Discharge). Note that the student must not have received the loan proceeds, had the loan proceeds applied to charges owed by the student to the college, or otherwise benefited from the loan.

If the student did not have a high school diploma or GED, the student’s federal education loans may be eligible for a false certification discharge (Ability to Benefit Discharge).

If the student is a victim of identity theft in connection with their federal education loans, they may be eligible for the Identity Theft Discharge, sometimes called the Forgery Discharge.

When a student withdraws from a college, some or all of their federal education loans borrowed during the academic term must be returned to the U.S. Department of Education. If the college did not do this, the student may be eligible for an Unpaid Refund Discharge of their federal education loans.

To apply for a false certification discharge, submit the appropriate form to the loan servicer.

Discharge after 20 or 25 Years in an Income-Driven Repayment Plan

After 20 or 25 years in an income-driven repayment plan, the remaining debt is forgiven.

• 25 years under Income-Contingent Repayment (ICR)

• 25 years under Income-Based Repayment (IBR)

• 20 years under Pay-As-You-Earn Repayment (PAYE)

• 20 years under Revised Pay-As-You-Earn Repayment (REPAYE) for borrowers who have only loans for undergraduate school

• 25 years under Revised Pay-As-You-Earn Repayment (REPAYE) for borrowers with any federal loans for graduate or professional school

Time spent in an economic hardship deferment counts toward the 20 or 25-year repayment term in an income-driven repayment plan, but not toward Public Service Loan Forgiveness, according to the current regulations. (This may change.)

The payment pause and interest waiver counts toward the 20 or 25-year forgiveness.

Time spent in other deferments or forbearances does not count toward the 20 or 25-year forgiveness. Likewise, periods of delinquency and default does not count toward loan forgiveness. Any payments made on a defaulted loan, whether voluntary or involuntary, do not count toward the 20 or 25-year forgiveness period.

The forgiveness will be automatic. Borrowers do not need to apply for the 20 or 25-year forgiveness, but must continue repaying their loans until they are notified that the remaining balance has been forgiven. Any excess payments will be refunded to the borrower.

Credit Given to:  Mark Kantrowitz. Published October 22, 2021 on the Forbes Website.

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This Week’s Author, Belinda Stickle

-until next week.