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Should I Apply for Student Loan Forgiveness?

Remember when you were trying to figure out life after high school? All of a sudden, you were 18 years old, and people were expecting you to make all these life-altering decisions—what college to go to, what to study, what job path to take. And chances are, you probably made some mistakes along the way. (I know I did.) And one of those slip-ups might’ve been believing the lie that student loans were the only way to pay for college.

Fast forward to today—you’re a college graduate staring at a mountain of student loan debt. Your friends just told you about student loan forgiveness, and you’re wondering if that’s the right option for you.

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. How nice of them, right? Sure.

The truth is, forgiveness programs are changing all the time—especially with all the craziness happening in the world right now—making it a challenge (and for most people, highly unlikely) 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 helps graduates get rid of their student loan debt if they meet certain very specific requirements. (Now, this is different than the big talk around the government forgiving all student loan debt as a whole.) These days, 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. It’s a nice thought—but it’s not that simple.

Student Loan Forgiveness vs. Loan Discharge: 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. And when you don’t have to make any more payments on your loan because of other situations, like a permanent disability, it’s called loan discharge.

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Clear as mud, right? Student loan forgiveness can get confusing. Sometimes loan cancellation or loan discharge can kind of sound like the same thing.

Chances are, you heard these terms tossed around back when you took out your loans and thought, No big deal. 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 here. 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 for forgiveness.

Student Loan Forgiveness Programs

Student loan forgiveness/cancellation and loan discharge all fall under the umbrella of loan forgiveness but have a different set of standards you have to meet. If it already sounds complicated to you, that’s because it is. Here are three of the most common forgiveness 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. But before you imagine life without that annoying student loan payment, you need to check out their requirements—and then check them again. Here are a few of the things you have to do:

  • Teach full time for five academic years in a row.
  • Take out the loan before the end of your five teaching years
  • Teach low-income students at an educational service agency or at the elementary or high school levels.
  • Make sure you’ve never had an outstanding balance on your loan.1

2. Public Service Loan Forgiveness

There’s been a lot of talk around this one lately. If you’re one of the lucky few who actually makes the cut, normally you’d 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 the amount of money you make).2

But like I said earlier, getting your loans forgiven with this program doesn’t happen as much as you’d think. As of April 2021, a total of 321,986 people had submitted 391,333 applications for their loans to be forgiven through public service.3 Out of those 391,333 applications, only 3,458 lucky ones were actually approved and granted student loan forgiveness. That’s only 0.88%! Aka—not even 1% of those who apply for student loan forgiveness are approved for it. That’s crazy!

If you’re one of the “chosen ones” who got an approval letter, you might want to tread lightly. Back in 2017, some borrowers who qualified for the program received letters of denial years later.4 Real 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 the harsh truth is 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 for this program. If you qualify for 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.

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 to get rid of your student loans—and the only person you have to depend on is you.

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!

Here’s how:

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. All it takes is shifting your mindset. Remember that your future is based on 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 high-priced coffee or a Peloton bike. 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 wipe it out. Go crazy—sell everything, work more hours, get a side hustle, and eat beans and rice (and not at Chipotle—that stuff isn’t cheap). Put all of that extra money toward the loan until it’s gone. 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.

If you haven’t paid on your student loans since 2020 thanks to the pandemic relief, and you’re getting pretty nervous because that relief is ending, here's something else I want you to think about: refinancing your student loans. This could be a solid 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 a lender that gets this done the right way. I recommend Splash Financial to help you refinance your loans.

The truth is, we’ve all been lied to. We’ve been told student loans are just a part of life, and if you want to go to college, then you have to have student loans. That’s just not true. With things like community college, in-state tuition, scholarships, tuition reimbursement, and good old-fashioned work, you don’t have to take out student loans to go to school. And maybe one day, 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! Hey, a guy can dream, right?

But if you already have student loans, here’s the bottom line: Call the shots and get on your own forgiveness plan. You can forgive yourself for taking out loans in the first place, then get out of debt as quickly as you can. Use our Student Loan Payoff Calculator to calculate how quickly you can pay off your loans by making extra payments.

Want to learn more about the dark side of the student loan industry? Watch our brand-new documentary, Borrowed Future, on Amazon Prime Video, Apple TV or Google Play.

George Kamel

About the author

George Kamel

George Kamel is a personal finance expert and host of The Fine Print Podcast. Since 2013, George has served at Ramsey Solutions where he teaches on how to spend less money, save more, and avoid consumer traps. He is also the host of The EntreLeadership Podcast.

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