How Does Loan Forgiveness Work?

The average undergraduate student has more than $20,000 of debt when he graduates, and after going on to get a higher degree, most students have even more debt. Thankfully, there are a wide variety of loan forgiveness programs that free borrowers from some of the burden of making student loan payments.


Loan forgiveness is a process by which students have all or part of their remaining student loan balance canceled. After having that part of the loan forgiven, the borrower does not ever have to repay that portion or pay any more interest on it. Loan forgiveness makes it easier for borrowers to work important but low-salary positions because they do not have to worry as much about making money to pay off educational debt.


Most loan forgiveness programs work only on federal student loans. Some apply only to Perkins loans, others only to Stafford loans and some work on any type of loan, including federal consolidation loans and PLUS loans for graduate students. In general, loan forgiveness programs require that the borrower work in a particular field. Some are for teachers, others are for public service employees and some are for graduates who give at least one year to volunteer work through Peace Corps or Americorps. The military also offers student loan forgiveness programs for those who enlist.


Each loan forgiveness programs specifies the conditions that the borrower must fulfill to qualify. For example, the Public Service Loan Forgiveness program requires that borrowers make 120 monthly payments while working in full-time public service position. After that point, the remaining balance is forgiven. Loan forgiveness for teachers often requires that the teachers work in high-need positions or in schools that serve low-income neighborhoods. In general, the borrower must complete the term of service before receiving any loan forgiveness, although sometimes the borrower can defer loan payments while working.


After fulfilling all of the conditions for a specific loan forgiveness program, the borrower should download and print the application from the website of the institution that forgives the loan. In general, this is a federal government website, although some state agencies and private companies also offer loan forgiveness. Fill out the application, get the required documentation that you have met the conditions for forgiveness and submit the completed application to the lender. Continue making loan payments as scheduled until you have received confirmation that your loan has been forgiven. If it was only a partial loan forgiveness, you will have to keep making payments until your balance is fully paid off.