Student Loan Forgiveness: Do You Qualify and What Other Avenues Can You Pursue if You Don’t?

Last Updated on September 3, 2021

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If you’re paying off student loans, you’re far from alone. Student loan debt has reached an all-time high in the United States according to a report by EducationData.org, which found student loans topped $1.73 trillion, with over $1.56 trillion in federal loans. As many as 43 million Americans owe an average of nearly $40,000 each.

Collapsing for-profit colleges coupled with the economic crisis of 2020 and the global pandemic have given rise to new and broader concerns about the crushing debt of student loans. So, when you hear about student loan forgiveness, naturally, it should pique your interest.

Student Loan Forgiveness: Dream or Disappointment?

While the Biden administration has made several sweeping proposals for limiting, canceling, or discharging student loan debt, we’re still not fully there as far as widespread forgiveness goes. Not many people are eligible so far. Those in public service are the only people who qualify.

If you work as a teacher, in government service, military service, and Americorps, you may qualify to have your student loan debt forgiven. Requirements vary but your loans must be through:

  • Direct Loan Program
  • Federal Family Education Loan Program
  • Perkins Loans

Private loans don’t qualify.

In addition, some state programs may offer loan forgiveness to medical personnel who work in underserved communities, the Army National Guard, and full-time teachers who work in low-income schools.

How Else Can you Qualify for Forgiveness?

Another avenue for the forgiveness of some student loan debt is if your educational institute defrauded you. In the past, only partial forgiveness was given if your school defrauded you in some way, and most claims have been tied up in red tape.

To qualify for the “borrower defense to loan repayment forgiveness,” you must file a claim at the Dept. of Education website and show evidence that your school misled, misrepresented, or deceived you about your loans. This typically applies to private loans given at for-profit colleges. The program was created under the Obama administration but hit significant snags under the Trump admin.

Today, the Biden administration says it will fully forgive loans to borrowers who apply correctly and can show evidence of their school’s misconduct.

Student Loan Discharge vs. Forgiveness

While ultimately, the terms are similar, forgiveness is not the same as a discharge. With a discharge, the borrower can immediately stop paying and may even be eligible for a refund. Discharges are granted for certain qualifications, including:

A permanent disability
Closure of the school while attending
The school falsified loan qualifications
A loan that was the result of identity theft
School failure to refund loans back to the lender

What Else is Happening with Student Loan Debt?

Meanwhile, the current pause on federal student loan interest, payments, and collections was extended to January 21, 2022. The pause gave millions a lifeline to focus on their families during the Covid-19 crisis.

The Department of Education also announced a series of public hearings to begin the process of overhauling federal student loan forgiveness and repayment programs.

What’s more, $5.8 billion in federal student loans were discharged through the Total and Permanent Disability (TPD) discharge program, and the Dept. of Education retroactively waived interest for 47,000 former and current military members who were supposed to have their interest waived but hadn’t for serving in dangerous combat zones.

While federal student loan forgiveness is making some strides, many activists and advocacy organizations are urging more reform. Regardless, even if more mass scale forgiveness was granted it would be limited to federal student loans. Private loans would ultimately require Congress to enact and pass legislation to meaningfully provide relief to private loan borrowers.

Several bills have been introduced in 2020 regarding economic hardship and disability discharge for private loans, but so far the bills have stalled.

If you do receive a discharge or forgiveness of student loan debt, make sure you understand how much is being forgiven, what the new balance if any is, and that you retain the proper paperwork and notices of the forgiveness or discharge amounts for your records.