Avoid Student Loan Scams: 6 Legitimate Student Loan Forgiveness Options

Avoid Student Loan Scams: 6 Legitimate Student Loan Forgiveness Options

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While there are legitimate student loan forgiveness programs that will cancel your student debt, there are also plenty of scams out there, too. So it’s natural to be skeptical about whether student loan forgiveness is real.

To help you access the real programs (and avoid the scams), here’s what you need to know about legitimate student loan forgiveness programs:

Yes, student loan forgiveness is real, but…

The short answer? Yes. The long answer? It can take a long time to get it.

Getting loan forgiveness is a lengthy process that only applies under certain circumstances. It’s also only available for federal loans; forgiveness for private student loans doesn’t exist. So if someone is promising to erase your debt with a private lender, it could be a student loan forgiveness scam.

The only exception is student loan repayment assistance programs (LRAPs), which sometimes give you financial assistance to pay off both your federal and private loans. These typically come from a state or private organization. You can check out a long list of LRAPs here.

If you want to pursue a federal loan forgiveness program, you might have to switch to an income-driven repayment (IDR) plan. With these plans, you’ll pay a percentage of your income toward your student loans.

Although your monthly payments on an IDR plan might be lower than on the standard repayment plan, the term of your loan will be longer. With a longer repayment term, you could end up paying much more in interest than if you stayed on the standard 10-year term.

Where to get legitimate student loan forgiveness

As mentioned, these six options are only for federal student loans — you’ll have to try LRAPs for your private debt.

1. Income-driven repayment
2. Public Service Loan Forgiveness
3. Teacher Loan Forgiveness
4. Total and Permanent Disability Discharge
5. Perkins Loan cancellation
6. Student loan forgiveness or cancellation by profession

1. Income-driven repayment

The Federal Student Aid (FSA) office offers four IDR repayment plans:

All these plans adjust your payments in accordance with your income. If you still have a balance at the end of your repayment term, the remainder will be forgiven.

  • Maximum monthly payment: Generally 10%, 15% or 20% of your discretionary income, depending on the plan and when you borrowed
  • Loans are forgiven: After 20 or 25 years of payments

2. Public Service Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) is an option for professionals who work in public service. After 10 years of service, your loans will be forgiven.

But make sure you meet all the requirements of the program and submit an Employment Certification form each year. You wouldn’t want to get to the end of your 10 years only to find out you weren’t eligible for the program (as many borrowers found out the hard way).

  • Maximum monthly payment: Dependent on your repayment plan, but you’ll need to put your loans on an IDR plan
  • Loans are forgiven: After 10 years of payments on an IDR plan while working in a qualifying public service job

3. Teacher Loan Forgiveness

The Teacher Loan Forgiveness program is available for teachers who work in low-income schools or qualifying educational agencies. Through this program, you could get up to $17,500 in loan forgiveness, depending on what subject you teach.

  • Loans are forgiven: After five consecutive years of qualifying work
  • Loan forgiveness amount: Up to $17,500 for full-time, highly qualified teachers of math, science or special education; up to $5,000 for full-time highly qualified teachers of other subjects

4. Total and Permanent Disability Discharge

If you experience a total and permanent disability, you could qualify to get your entire federal student loan balance canceled. You might also be eligible for loan cancellation if you die or go bankrupt, or if your school closed or made fraudulent claims. You can read more about these student loan discharge programs here.

  • Loans are forgiven: Upon proof of total and permanent disability

5. Perkins Loan cancellation

Although the Perkins loan program ended in September 2017, some borrowers still have Perkins loans that they borrowed before this time. If you do, you could get your Perkins loan cancelled if you work in a qualifying profession for a certain period of time.

6. Student loan forgiveness or cancellation by profession

Lastly, you’ll find other forgiveness programs for particular professions. Here are comprehensive student loan forgiveness guides for:

4 things you need to know about student loan forgiveness

Is federal student loan forgiveness real? Yes, with some caveats.

1. Not everyone is eligible

To be eligible for some income-driven repayment plans, for example, your payments must be lower than what they’d be under the standard 10-year repayment plan.

Say you earn $30,000 per year as a social worker but have $80,000 in debt because of your master’s degree. Tying your loan repayment to your income would keep your payments lower over a longer period. It would cost you more to repay the loan unless you qualified for loan forgiveness.

2. Forgiveness takes a long time

Depending on which program you’re pursuing, your student loans might not be forgiven for decades. In that time, you’ll pay more in interest than under the standard plan.

And remember: When it comes time to finally get your loans forgiven, your remaining balance might not be all that big.

3. Your remaining loans might be taxed

In the eyes of the Internal Revenue Service, a student loan that’s forgiven at the end of an IDR repayment plan is typically considered to be taxable income. So if you eventually manage to have $50,000 worth of loans forgiven, you might be on the hook for paying federal (and possibly state) taxes on that amount.

4. It’s not always worth it

As noted above, you might pay significantly more in interest if you opt for forgiveness through an IBR plan. Run your numbers through our IBR calculator to see exactly how much.

Since many student loan forgiveness programs require you to work in public service, you’ll likely earn a lower salary than you would in the private sector. You’d almost certainly earn a higher income as a lawyer for a firm representing name-brand clients than you would as an attorney for the government, for example.

Watch out for these student loan forgiveness scams

Although the programs above are legit, you’ll want to be on the lookout for loan forgiveness scams.

For example, seemingly legitimate student loan forgiveness companies might charge you to fill out government forms for your student loans. But you can complete the paperwork yourself for free by using the tools on the FSA website.

Even worse, other companies might call and pretend they can forgive your student loans for a fee. Don’t buy into this. You’ll never have to pay a fee to participate in a student loan forgiveness program. Only loan forgiveness scams will ask you for advance fees.

Along with student loan forgiveness scams, there are also plenty of other student loan scams. If you’ve fallen victim to one of them, you may contact:

  • Your bank or credit card company: You could seek to stop the payment to the scammer if you paid a fee upfront.
  • The three major credit bureaus: You could report fraud or freeze your credit report to avoid future harm.
  • The Office of the Inspector General: You could ask for advice if your student loan information was compromised.
  • The Consumer Financial Protection Bureau (CFPB): You could report the business and submit a complaint.

How to seek student loan forgiveness

If you’re struggling to repay your loans and think forgiveness is the right path for you, read our comprehensive guide to student loan forgiveness. See if you qualify for any existing options.

If none of the legitimate federal programs apply to your situation, consider putting your loans into deferment or forbearance. You may also refinance your loans with a private lender.

Along the way, be on the lookout for student loan forgiveness scams that are after your money, not your well-being.

Whatever you do, don’t ignore your loans. Because that’s the one way to ensure they never disappear.

Rebecca Safier and Andrew Pentis contributed to this post.

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