Back in the day, when you were trying to figure out life after high school, you might’ve believed the lie that loans were the only way to pay for college. And now that you’re a college graduate staring at a mountain of debt, you probably wish you would’ve explored other options. (If it makes you feel any better, so do I. I’ve totally been there.)
It might seem like the government created student loan forgiveness programs because they understand the amount of financial stress graduates face as they struggle to pay back those loans. So nice of them, right? The truth is, forgiveness programs are changing all the time—especially with all the craziness happening in the world right now—making it harder and harder to get those loans forgiven. Here’s everything you need to know about these programs and how they actually work.
What Is Student Loan Forgiveness?
Student loan forgiveness is a government plan that first came on the scene in 2007, and it’s designed to help graduates with their student loan debt if they meet certain qualifications. A lot of college grads apply for student loan forgiveness through their loan servicer, hoping they won’t have to pay part—or any—of their student loans back. If only it were that simple.
Student Loan Forgiveness vs. Discharge: What’s the Difference?
Student loan forgiveness can get confusing, because you might’ve also heard of loan cancellation or discharge—which kind of sounds like the same thing. So, what’s the difference? Basically, when you don’t have to make any more payments on your loan because of your job, it’s called forgiveness or cancellation. When you don’t have to make any more payments on your loan because of other situations, like a permanent disability, it’s called discharge.
Chances are, you heard these terms tossed around back when you took out your loans and thought, It’s chill. I can just get all this debt forgiven or discharged later, and I won’t have to worry about it.
But let’s take a step back for a minute and look at the facts. In reality, the chances of getting your loans forgiven seem about as predictable as winning the lottery.
It might look like the U.S. Department of Education is coming to the “rescue” through their student loan forgiveness programs. The only problem is that their requirements are pretty much up in the air depending on where you work, how many payments you’ve made, and whether or not the government changes their mind about who should qualify.
Student Loan Forgiveness Programs
Student loan forgiveness/cancellation and discharge all fall under the general umbrella of loan forgiveness but have different criteria. Here are three of the most common programs:
1. Teacher Loan Forgiveness
If you’re a teacher, you might be able to say good-bye to up to $17,500 of those federal student loans.1 But before you imagine life without that student loan payment, you need to check out their requirements—and then check them again. Here are a few of the requirements:
- Teach full time for five academic years in a row.
- Teach low-income students at an educational service agency or at the elementary or high school levels.
- You must have taken out the loan before the end of your five teaching years.
- Make sure you’ve never had an outstanding balance on your loan.
2. Public Service Loan Forgiveness
There’s been a lot of hype around this one lately. If you’re one of the lucky few who is eligible, you’ll have to:
- Work full time for a qualifying employer, like the government or a nonreligious nonprofit.
- Make (or prove that you’ve made) on-time payments for 10 years.
- Have Direct Loans.
- Have an income-driven repayment plan (that just means the amount of each monthly payment is based on your income).2
But like I said earlier, getting your loans forgiven with this program doesn’t happen as much as you’d think. As of March 2020, a total of 145,758 people had submitted 188,396 applications for their loans to be forgiven through public service.3 Out of those 188,396 applications, only 3,174 were actually approved, and just 1,831 lucky people had been granted student loan forgiveness. That’s only 1.3%!
If you’re one of the lucky ones who got an approval letter, you might want to be extra cautious. In 2017, some borrowers who qualified for the program received letters of denial years later.4 Nice, right? This means they spent 10 years in low-paying jobs, only to find out they wasted their time and effort. Not. Cool. And they could’ve been debt-free a lot sooner if they'd just paid off their loans instead of waiting around for them to be forgiven.
3. Total and Permanent Disability (TPD) Discharge
If you have a disability that leaves you totally or permanently disabled, you might qualify. With this program, your federal student loans or your Teacher Education Assistance for College and Higher Education (TEACH) grants could be discharged.
In order to qualify, you have to prove your disability status through one of these:
- Veterans Affairs
- The Social Security Administration
- Your physician5
If your loans do get discharged, you’ll be monitored for the next three years to make sure you’re actually disabled. If you’re no longer disabled within those three years, you’ll have to start making those payments again.
You can learn more about other types of forgiveness, cancellation or discharge on the official Federal Student Aid site. But just know there are other ways to ditch your debt that don’t involve trying to understand all those loopholes. My head hurts just thinking about it, y’all.
Should I Apply for Student Loan Forgiveness?
So, by now, you’ve probably figured out that student loan forgiveness isn’t exactly your ticket to freedom. Because most of these programs have so many eligibility requirements that can change on a dime, it’s not a great idea to count on them. After all, the last thing you want to do is stay in a low-paying job in the hopes that your loans will be forgiven in 10 years, and then realize later that you did all that work for nothing. There’s a better (and faster) way!
The Alternative to Student Loan Forgiveness
Instead of relying on the government to save you, take control of your own financial future. It’s time to destroy that debt—and fast!
1. Decide to change.
I’m talking no more credit cards and no more debt. If you really want to get out of debt fast, you need to stop getting into more of it. Remember that the caliber of your future is determined by the choices you make right now.
2. Get on a budget.
You might think you don’t need a budget. I get it—sometimes it feels like your payments are eating your entire paycheck every month. But when you create a zero-based budget and start telling every dollar where to go, you’ll feel like you’ve gotten a raise. But don’t blow it all on a car upgrade or designer kicks. Throw that money at your debt!
3. Use the debt snowball.
The debt snowball is the fastest way to pay off debt. Start with the smallest balance and do everything you can to get rid of it. Yup—sell everything, work more hours, get a side hustle, and eat beans and rice (okay, it doesn’t have to be literal beans and rice, but you get the point). Put all of that extra money toward the loan until it’s G-O-N-E. Then take the minimum payment you were paying on the first and put it toward the second. Pretty soon, you’ll see that “snowball” start to grow—all the way to debt freedom.
4. Think about refinancing your student loans.
Here's something else I want you to think about: refinancing your student loans. This could be a dope option for you if it would help you increase your debt snowball. The things to keep in mind are:
- It should never cost you anything to refinance.
- You should only get a fixed rate on your loans.
- Your new net interest rate must be lower than your current net rate.
- You should never sign up for a longer repayment period.
- You should never let the joy of a refinancing make you so happy that you take your eye off the goal of getting completely out of debt as soon as possible.
Just be sure to find the right lender to get this done the right way. I recommend Splash Financial to help you refinance your loans.
Honestly, my heart behind all this is that future generations will never even consider student loans as an option. With that mindset, it’s possible that one day no one will need student loan forgiveness programs!
But if you already have student loans, here’s the bottom line: Get on your own forgiveness plan (and forgive yourself for taking out loans in the first place) and get out of debt as quickly as you can. Use my Student Loan Payoff Calculator to calculate how quickly you can pay off your loans by making extra payments.
Want to learn more about paying off debt as fast as humanly possible? My latest quick read, Destroy Your Student Loan Debt, will help you learn how to take control of your money and get rid of those loans—for good. Boom.
About Anthony ONeal
Since 2003, Anthony has helped hundreds of thousands of people make smart decisions with their money, relationships, and education. He’s a #1 national bestselling author of Debt-Free Degree and national bestselling author of The Graduate Survival Guide. He recently released Destroy Your Student Loan Debt. He travels the country spreading his encouraging message to help teens and young adults start their lives off right and people of all ages succeed with money. You can follow Anthony on YouTube and Instagram @AnthonyONeal and online at anthonyoneal.com or facebook.com/aoneal.