Federal Student Loan Forgiveness Explained

Individuals who hold certain public service occupations and owe the government educational loans can apply for student loan forgiveness. This program comes with certain provisions for borrowers. Having a public service job in an approved government agency or nonprofit organization is one of the primary requirements for this program. If an applicant meets the program's requirements, his or her loan is eligible for cancellation, deferment or forbearance.

Teacher Loan Forgiveness

Certain teachers are one of the beneficiaries of the student loan forgiveness program. If a borrower obtained a Perkin's Loan, his outstanding balance may be completely canceled provided that he is working full time in an elementary or secondary school in a district with low-income constituents. Teachers in special education and those in subjects determined to have a shortage of teachers (e.g., math and science) are also eligible .

Meanwhile, individuals with Stafford Loans can take advantage of a forgiveness amount of up to $17,500 for the principal and interest accrued. The borrower must be teaching in a qualified school for five successive academic years, must not have a student loan in default, and must meet the other requirements.

Loan Forgiveness for Other Public Service Workers

Aside from educators in eligible schools, there are other types of public service jobs that qualify for student loan forgiveness. Borrowers employed in the following occupations may avail the program:

  • Armed Forces personnel/members
  • law enforcers
  • public librarians or public library staff members
  • accredited nonprofit organizations' volunteers (e.g., AmeriCorps and PeaceCorps)
  • health care professionals like nurses, doctors, medical technicians, health researchers
  • public or nonprofit school-based employees

Federal student loans acquired under the Direct Loan Program are the only loans accepted to benefit from the forgiveness program. Loans that are not covered by the Direct Loan Program must be consolidated through the Direct Consolidation Program to become eligible. Borrowers are also required to make 120 monthly payments while working in the approved public service organizations.

Child Care Providers' Loan Forgiveness

Professionals who deliver services as full-time child care providers in institutions that serve low-income communities can apply for the student loan forgiveness program. The borrower's student loan secured through the FFEL or Direct Loan may get a 100 percent forgiveness if she meets other qualifications. Borrowers may also acquire forbearance if they don't qualify for the 100 percent forgiveness. The program allows a loan forgiveness of 20 percent of the annual rate of the remaining balance for working the second and third consecutive years, and 30 percent of the annual rate for working the fourth and fifth years.

Because funds are limited for the Child Care Provider loan forgiveness program, application for new borrowers is discontinued. However, the Department of Education still accepts renewal benefits for loans that have been previously granted forgiveness.

Maximum Amount/Percentage Forgiven

Borrowers must keep in mind that the student loan forgiveness only applies to the outstanding balance of the loan and not the total amount of the borrowed federal student funds. The types of public service workers that may obtain complete forgiveness of the loan's remaining balance are teachers, child care providers, law enforcers and health care providers working full-time. Others can get 15 percent, 20 percent, and 30 percent forgiveness of the remaining debt depending on the number of successive years employed in their public service fields.

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