Student loan forgiveness requires the federal government to cancel part or all of an educational loan. However, these programs do not give something for nothing. In order to get loans forgiven, one must complete certain requirements.
Six Loan Forgiveness Opportunities
Here are six of the most widely-known programs that provide opportunities for college graduates, who meet specific program and service requirements, to earn forgiveness for part or all of their federal student loans.
AmeriCorps offers a variety of service programs that provide college loan forgiveness opportunities. Tutor kids, clear trails, renovate houses, provide disaster relief and work with others in a variety of projects. Devoting your time to AmeriCorps can earn you monthly stipends and the opportunity for federal student loan forgiveness.
2. Peace Corps
Volunteers in the Peace Corps can apply for deferment of different loan programs and may even earn cancellation of Perkins Loans (starting at 15% for each year of service to the Peace Corps). The Peace Corps members make a real difference in the lives of people throughout the world and in developing countries.
3. Army National Guard
The Army National Guard offers a Student Loan Repayment Program for students who join. If you are a military veteran, you may be eligible for educational assistance programs.
The American Federation of Teachers (AFT) has a database that lists many student loan forgiveness programs for students who serve as teachers at elementary and secondary schools in low-income and rural areas. Requirements and benefits vary from one program to another. Search the AFT loan forgiveness program database to see what programs are available in areas where you are interested in working.
The Equal Justice Works organization, once known as the National Association for Public Interest Law, helps law students access loan forgiveness at their law schools for work in public or non-profit positions. A law school student who graduates, passes the bar and serves as a public defender may find their student loans for law school forgiven.
Registered nurses and physicians who agree to practice medicine in economically-depressed and remote locations in need of medical care, can seek loan forgiveness via the U.S. Department of Health and Human Services. Physicians who conduct clinical medical research and devote time and resources to the effort, may be eligible for the U.S. National Institutes of Health Loan Repayment Programs.
Understanding How Loan Forgiveness Works
In its simplest form, students who enter into certain types of programs, such as those described above, can have their loans forgiven by the federal government. In this case, forgiveness means that the student no longer owes money on the loans and that the debt of those loans is absolved. The programs act as a way for a student to erase student loan debt without actually having to pay the loans.
While the federal government can cancel or reduce the debts you owe via student loans, the circumstances under which they will offer debt forgiveness is specified by the types of forgiveness programs. Different programs offer different levels of forgiveness or will repay your college debts. It's important to note that loan forgiveness only applies to federal loans, such as Perkins or Stafford loans. Private loans cannot be forgiven by student programs.
It's also important to know that student loans that are forgiven can be considered taxable income, depending on the state one lives in. While the taxes incurred are surely better than having to repay student loans, for those on the edge of a different tax bracket, forgiveness may be something to worry about since it may push them into the next bracket.