Student loans can be a great investment in your future, or can be a huge burden if not fully thought out or abused. If you currently have a student loan or are thinking about getting student loans, you should know that student loans CANNOT discharged in bankruptcy. This means that they will stick with you for the rest of your life, unless you pay them off, or, if you are lucky enough, qualify for student loan forgiveness. Before going further, check out my Student Loan Calculator and read my post on Getting Out From Student Loan Debt for some other ideas on student loan debt.
Under certain circumstances, all or part of your student loan can be canceled in a process called Student Loan Forgiveness. To qualify, you must perform volunteer work, perform military service, practice medicine in specific communities, or meet other criteria.
The great thing about student loan forgiveness, unlike other debt, is that the amount forgiven is NOT treated as taxable income.
While some volunteer work can be a huge life commitment, organizations such as VISTA all you to have a semblance of life while volunteering. They also offer money to be used towards your student loan debt, which is great!
Peace Corps – If you volunteer for the Peace Corps, you get automatic deferment of Stafford, Perkins, or Consolidation loans. You can also get partial cancellation of Perkins Loans based on the number of years of service. Currently, you get 15% per year, with a max of 70%.
Americorps – If you serve for 12 months, you can receive $4,725 towards your student loans.
Volunteers in Service to America (VISTA) – If you volunteer for 1,700 hours, you can receive $4,725 towards your student loans.
The military currently has a Student Loan Repayment Program. Each year, 15% of the student loan balance will be repaid by the program, up to the branch maximum. The current maximums are:
Army – $65,000
Army Reserve – $20,000
Navy – $65,000
Air Force – $10,000
To qualify, you must request this program at the time of enlistment or reenlistment. Also, you must score 50 or higher on the Armed Forces Qualifications Test.
Students who become full-time teachers in an elementary or secondary school that serves low-income families can have a portion of their Perkins Loan forgiven. This program forgives 15% of your loan in each of the first and second years, 20% in each of the third and fourth years, and the remaining 30% in the fifth year.
Furthermore, the American Federation of Teachers maintains a database of forgiveness options in various locations around the United States. Check it out here: Loan Forgiveness for Teachers.
Many law schools forgive the student loans of students who serve in the public interest or for non-profits. These loan repayment assistance programs provide loan repayment or forgiveness, lower interest rates on loans, or postponed payment schedules. Most programs have income limitations and specify which types of employment qualify.
Furthermore, many 23 states offer loan repayment assistance programs: Arizona, District of Columbia, Florida, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Montana, New Hampshire, New Mexico, New York (two programs), North Carolina, Ohio, Oregon, South Carolina, Texas, Vermont, and Virginia.
For more information, check out the American Bar Association’s website on Loan Repayment Assistance Programs.
If you are a medical student, there are several options available for student loan forgiveness.
The U.S. Department of Health and Human Services offers loan forgiveness programs through two programs:
National Health Service Corps: Complete a five-year commitment to providing medical care in “needed” areas, and you can receive up to $170,000 in loan forgiveness.
Nursing Education Loan Repayment Program: For two years of nursing service at a qualifying non-profit, you can have 60% of your loan forgiven. There is also an optional third-year, where you can have an additional 25% forgiven.
If you are interested in research, the National Institute of Health offers a loan forgiveness program that repays up to $35,000 each year for qualifying research at either a non-profit or university, as well as directly at the National Institute of Health.
If you are interested in veterinary medicine, the U.S. Department of Agriculture offers a Veterinary Medicine Loan Repayment Program where you can receive loan forgiveness of $25,000 per year for three years, as long as you work in a designated area.
Finally, many individual colleges offer different types of loan forgiveness programs, so check with your local college.
If you haven’t done so yet, make sure that you download my free eBook on Student Loan Debt below.
And finally, for a small price, I highly recommend this book: Student Loan Forgiveness Programs. Check it out.