How Application For Student Loan Forgiveness Currently Works

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Application for student loan forgiveness

As you probably know, there are alternatives for student loan forgiveness and discharge. But each has its own set of requirements and application process. This guide will focus on how the application for student loan forgiveness works in 2022. 

If you’re planning on taking out student loans, this guide will show you everything you need to know to pay them back. The guide is also ideal if you’ve already taken out your student loans and want to pay them back. 

Find out how to qualify for loan forgiveness.

Let’s begin. 

Will There Be A Student Loan Forgiveness In 2022?

Is it possible that student loans may be eliminated in the future? Maybe. Progressive senators are pressuring the Biden administration to cancel debtors’ student loans with a pen stroke. However, a blanket cancellation doesn’t appear to be on the horizon. 

Instead, Mr. Biden’s education secretary, Miguel Cardona, has pushed to improve current assistance programs. Under current programs, the U.S. Education Department has forgiven almost $12 billion in federal student loans in the last year, including:

  • Borrowers who attended institutions that misled them or committed misbehavior, such as ITT Tech students, will receive $1.5 billion (Borrower Defense to Repayment)
  • $4.5 billion for public employees and military personnel who made non-qualifying FFELP loan payments, late payments, or payments for less than the total amount owed
  • For borrowers who have a total and permanent incapacity, $5.8 billion has been set aside (TPD Discharge)

So do you qualify for student loan forgiveness? You probably do, but it won’t happen right away. After 20 years of monthly payments under an income-driven repayment plan, many borrowers are eligible for student loan forgiveness.

Is it possible that private student loans could be forgiven? Unfortunately, the Biden administration’s student loan forgiveness legislation is unlikely to encompass private student loans. According to Biden and members of Congress, only federal student debts are eligible for loan forgiveness.

Types And Application For Student Loan Forgiveness 

Application for student loan forgiveness

1. Public Service Loan Forgiveness Program 

People who work full-time for a nonprofit organization or the government are eligible for PSLF. After making 120 qualified loan payments, PSLF forgives the remaining student loan amount tax-free. 

Even though PSLF failed in the past, the U.S. Department of Education has introduced a PSLF Waiver that will last until October 31, 2022.

This temporary waiver allows eligible student loan borrowers to receive credit for late payments, incorrect types of loans, and payments made on any repayment plan in the past.

There are several sections to complete, and you must agree to the following terms:

  • You must make 120 qualifying monthly payments on Direct Loans while working full-time for a qualifying company to be eligible for forgiveness. The 120 qualifying payments and employment don’t have to be in a particular order.
  • You must be employed by a qualifying employer full-time when you ask for and get loan forgiveness to qualify for forgiveness.
  • Your student loans held by the Education Department may be transferred to FedLoan Servicing if you the form.
  • If the Department believes you are eligible for forgiveness, they may contact your employer before receiving the forgiveness. That is to ensure that you continue to work for the company.
  • If you qualify for forgiveness, the principal and interest owed on your eligible Direct Loans will be forgiven when you make your final qualifying payment. After making your final qualifying payment, whatever amount you pay on those loans will be considered an overpayment. You must continue to pay on any other loans you have.

Other Key Things To Know About The Application For Student Loan Forgiveness

If you’re not qualified for forgiveness, you’ll be advised of why the organization took that decision and how many PSLF qualifying payments you’ve made.

The important thing is that if you make 120 qualifying monthly payments, your student loan will be forgiven. Put another way; you must have been repaying your student loan for the past ten years. 

You must also be employed by a qualifying company when you meet this goal and submit the form.

It’s advisable that you submit the PSLF form once a year or if you change jobs, as this keeps your information up to current and makes the process of student debt forgiveness easier to complete.

2. Income-Driven Repayment Plans 

You can still get your college debt erased if you don’t work in public service. However, it will take a long time. After 20 to 25 years of payments, each income-driven repayment program guarantees to forgive your outstanding loan balance.

If you participate in one of the federal student loan IDR plans — ICR, IBR, PAYE, and REPAYE, you will see their monthly payments increase.

IF consolidated, all FFEL Loans, Direct Loans, Parent PLUS Loans, and Federal Perkins Loans.

You’ll be immediately enrolled when you submit your income-driven repayment application to your student loan servicer. Your servicer will keep track of your payments and let you know if you’ve met the criteria for forgiveness.

After making 240 monthly payments, most borrowers with solely undergraduate student loan debt will be eligible for loan forgiveness (20 years). 

If you have graduate school debt or are paying under an ICR plan, you must make 300 monthly payments (over 25 years) before applying for loan forgiveness.

3. Teacher Loan Forgiveness 

College graduates who teach full-time for five years in a low-income elementary or educational service organization or secondary school may be eligible for subsidized and unsubsidized Federal Stafford Loan forgiveness of up to $17,500. Direct and FFELP loans are both eligible.

Only new borrowers on October 1, 1998, are eligible. Teachers with advanced degrees are not eligible. However, if you have a Bachelor’s degree, full state teacher certification, and permanent certification or license, you’re highly qualified.

Teachers in elementary schools must also pass a state-mandated test of knowledge and teaching abilities in reading, writing, and arithmetic. 

Those in middle and secondary schools must also have completed a state exam in each of the academic subjects they teach or have an academic major, graduate degree, or advanced certification in each of the academic areas they teach.

State-mandated certification or licensing exams are examples of rigorous state tests.

Up to $17,500 in student loan forgiveness is available for math, science, and special education instructors. In addition, other teachers may be eligible for student loan forgiveness of up to $5,000.

You Can Use Teacher Loan Forgiveness Together With PSLF 

The Teacher Loan Forgiveness program can be used with the PSLF program. However, the same period of teaching service is ineligible for both loan forgiveness schemes.

Defaulted borrowers don’t qualify unless they have made satisfactory repayment arrangements with the student loan holder.

Submit a Teacher Loan Forgiveness Application to the loan servicers to apply for Teacher Loan Forgiveness. In addition, the certification portion of the application form must be completed by the school’s chief administrative officer to the educational service agency.

4. Borrower Defense To Repayment 

Application for student loan forgiveness

If you attended a school that misled you or participated in other wrongdoing that violated specific state laws are eligible for the Borrower Defense to Repayment program, which forgives their federal student loan debt.

Borrowers engaged in one of the federal student loan IDR plans, such as IBR, ICR, PAYE, or REPAYE, are eligible.

All Direct Loans and, if merged, FFEL Program loans are eligible.

You must claim with the U.S. Education Department, accompanied by proof that the institution breached the law, deceived you significantly, or misrepresented itself. Studentaid.gov is where you can apply online.

It took several years for the Trump administration to decide whether their student loans would be forgiven. Under the Biden administration, decisions have been made more quickly.

5. Total And Permanent Disability Discharge (TPD)

If a borrower has a TPD, federal college debts may be forgiven. However, keep in mind that if the parent borrower becomes disabled, the federal Parent PLUS loans can be discharged, but not if the student becomes disabled.

A total and permanent disability can be demonstrated in three ways:

  • The Department of Veterans Affairs (V.A.) decides that the borrower is unemployable due to 100 percent debilitating service-connected impairments.
  • The borrower is eligible for Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) from the SSA. The following disability review will be 5 years after the last disability status determination.
  • A doctor in the United States confirms that the borrower can’t participate in a significant gainful activity due to a physical or mental disability that has lasted or is likely to endure for at least 5 years or is projected to result in death.

Application For Student Loan Forgiveness For TPD 

The U.S. Department of Colleges runs a data match with the SSA and V.A. to determine which borrowers are qualified for a TPD discharge and will automatically dismiss their federal education loans.

The doctor must sign the TPD Discharge Application to apply for a TPD discharge based on their certification.

The TPD Discharge Application is accessible as a downloadable PDF form on the DisabilityDischarge.com website. In addition to the PDF version, you can also apply online. 

A three-year post-discharge supervision period is dismissed if the borrower’s loans are dismissed based on SSA determination or a doctor’s certification. If the debts are dismissed due to a V.A. determination, there is no post-discharge monitoring period.

The borrower’s yearly earnings from employment must be less than 100 percent of the poverty level for a family of two during the post-discharge monitoring period. In addition, the borrower must not take out a new federal education loan or TEACH Grant. 

Some private student loan lenders offer a disability discharge comparable to the federal student loan TPD discharge.

Inquire with the lender about the possibility of a disability discharge. In addition, inquire about the lender’s compassionate review process if the lender does not issue a disability discharge.

Application For Student Loan Forgiveness: Closed School Discharge 

If your institution closed while you were enrolled or within 180 days of their withdrawal, you might qualify for a closed school discharge on your federal student loans and federal Parent PLUS loans.

You wouldn’t qualify for the closed school discharge if you completed your program through a teach-out program or another college. You may also not qualify for the closed school discharge if you transfer your courses to another college.

After establishing that the college is included on the U.S. Education Department’s list of closed schools, send a Closed School Discharge Form to the loan servicer to petition for a closed school discharge.

If you don’t qualify for a closed school discharge, a borrower defense to repayment discharge may be available.

Borrowers should also see if their state offers a tuition recovery fund or a performance bond program.

Application For Student Loan Forgiveness: Other Loan Discharge Options To Consider 

Unlike student loan forgiveness programs, which take years to be eligible for, loan discharge might result in your outstanding debt being erased immediately. It may also result in you receiving a refund of previous loan payments. 

Here are other options to consider and their application for student loan forgiveness. 

Bankruptcy Discharge for Student Loans: You can’t afford to fund your essential living expenditures while repaying your student loans without causing undue hardship.

Discharge Due To Death: You die, or if you’re a parent with PLUS Loans, you die, or the child for whom the loan was taken out dies.

Unpaid Refund Discharge: you dropped out of school, and the school failed to repay the loans to the loan servicer as required.

False Certification Discharge: your college deceitfully certified your student loan eligibility.

Perkins Loan Discharge: You work full-time in a public or nonprofit elementary or secondary school system as a teacher in a low-income area, as a special education teacher, or in the fields of science, mathematics, bilingual education or foreign languages, or in any other field of expertise identified by a state education agency as having a teacher shortage in that state.

Identify Theft: Your information was exploited to acquire Federal Student Aid, resulting in identity theft, whether grants or student loans.

Downsides To The Application For Student Loan Forgiveness 

Student loan forgiveness programs have three significant drawbacks. For starters, loan forgiveness is politically motivated. Access to loan forgiveness may alter when the administration changes.

Borrowers who attended fake institutions have a hard time getting their loans erased under the Borrower Defense to Repayment program under the Trump administration. On the other hand, President Biden approved many of the identical petitions within weeks after taking office.

Second, meeting the eligibility conditions for the forgiveness programs can take years. As a result, your loan balance could quadruple depending on your interest rate, leaving you in a deeper financial hole if you don’t qualify for forgiveness.

Finally, the student loan forgiveness program’s qualifications are complex and riddled with technicalities that could exclude you. Hopefully, consumer advocacy groups’ efforts and letters like this from Senators Elizabeth Warren and Dick Durbin will make the forgiveness process easier.

Other Factors To Consider 

Application for student loan forgiveness

PSLF is not a given. According to a recent analysis by the Government Accountability Office, 99% of persons who applied for PSLF the first year it was offered were turned down.

You may have to pay taxes on the forgiven loan sum. In addition, you’ll have to pay taxes on the remaining sum if you get loan forgiveness after 20-25 years of adopting an income-driven repayment plan. 

It takes a long time for a loan to be forgiven. Remember that the longer you pay on loan, the more interest you pay. Depending on which forgiveness program you choose, you must decide whether it is worth it to defer your loan payments for 10, 20, or even 20-25 years.

You may not save any money. On the other hand, you might be close to paying off your loan by the time you’re ultimately able to zero it out. Request that your loan servicer run some figures for you to see whether or not waiting is worthwhile.

Paying ahead or refinancing your loan may actually be a better option for paying off your debt faster. You’ll save more money if you stop paying interest as soon as possible.

Conclusion 

There are a variety of possibilities for getting your federal student loans forgiven in part or whole. If you’re not qualified, you might be able to get your student debts forgiven in part or whole. If you aren’t eligible, look into your choices for payback.

Consult an expert if you don’t know what to do or which path to take. They can help you develop an excellent plan to get you out of debt. 

Application For Student Loan Forgiveness FAQs 

1. Is it possible to get a defaulted student debt forgiven?

If you’re totally and permanently disabled, your school closed, or your institution made deceptive misrepresentations. You may be eligible for loan forgiveness. 

On the other hand, defaulted student loans are not eligible for the Public Service Loan Forgiveness Program or income-based repayment plans. For additional information, see this guide to forgiving defaulted student loans.

2. How do I know if I qualify for PSLF? 

You must submit the Employment Certification for PSLF Form once a year and each time you change employment to ensure that you are eligible for PSLF. You’ll know that your loan payments count toward your 120 qualifying payments this way. 

PSLF is exclusively available for Direct Loans. If you consolidate your other federal loans into a Direct Consolidation Loan, you may be eligible for PSLF. If you decide to go this way, consolidate as soon as feasible. Before consolidating, any payments you make do not count toward your 120 eligible payments.

You must also ensure that your 120 payments are made on schedule. For example, it does not count toward the 120 days if you pay 15 days after the due date. So, these are the frequently asked questions about the application for student loan forgiveness and if you have other questions, check out our blog page at FSL to find answers.