Allowing the forgiveness of student loans or loan repayment programs is one of the most important opportunities for college graduates struggling with debt. These programs offer to cancel some or all of your student loans in exchange for choosing certain professions, military service, or even volunteer work.
Loan Forgiveness Programs
Loan forgiveness programs are those sponsored by the federal government and cover loans that were issued through federal programs like Stafford and Perkins loans. When participating in one of these programs, a portion of your debt is erased from your lender’s records.
Loan Repayment Programs
Student loan repayment programs, which are more common than loan forgiveness programs, are offered as benefits to attract or retain employees by certain employers. These programs can be used to eliminate any type of loan, including private loans. With student loan repayment, you can either receive additional funds you can use to pay off your loan, or a direct payment is made to your lender by your employer.
Taxes
In March 2021, President Biden signed the American Rescue Plan Act, which includes a provision that eliminates taxes on student loan forgiveness until the end of 2025. Prior to the American Rescue Plan Act, the amount forgiven under loan forgiveness or repayment programs could be considered taxable income in the year it was received. In other words, if you had $5,000 of forgiven loans in one year, that could increase your taxable income in the eyes of the IRS by an equivalent amount. While this is never fun, it shouldn’t deter you from using one of these programs, as the benefits far outweigh the costs.
Different Student Loan Repayment and Forgiveness Programs
There are hundreds of loan forgiveness programs available for graduates. Often, professional associations within various industries maintain a list of student loan repayment and forgiveness programs that apply to their profession.
Examples of some places you can start looking for your student loans to be forgiven or repaid (depending on the profession) include:
For Teachers
The American Federation of Teachers has a funding database to find money for continuing education, professional development, and classrooms. Also look for loan forgiveness programs, grants and awards for teachers, classroom sponsorship programs, summer study programs, and exchange programs.
For Medical, Nursing, and Mental Health Professions
With typical medical school students entering the job market with an average of $200,000 in student debt, the Association of American Medical Colleges offers student loan repayment and forgiveness options for medical professionals.
For Lawyers and Legal Professions
Most lawyers graduate from law school with an average financial burden of up to $150,000. The American Bar Association and Equal Justice Works provide strategies for state and federal loan repayment and forgiveness.
For Public Service and Volunteer Work
The Public Service Loan Forgiveness program, created under legislation from Congress in 2007, is one of the best federal student loan forgiveness programs available. The program offers full federal forgiveness benefits in exchange for working in qualified public service, meaning it allows you to completely wipe out your outstanding federal loans in exchange for working in public service roles such as teaching, nursing, or government jobs.
You can volunteer for a summer or for a period of time in the U.S. or abroad with organizations like AmeriCorps or the Peace Corps.
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Sources:
The Balance only utilizes high-quality sources, including peer-reviewed studies, to support the facts in our articles. Read our editorial process to learn more about how we fact-check and ensure the accuracy, reliability, and quality of our content.
Department of
Education. “The Biden-Harris Administration continues the fight to alleviate student loan debt for millions of borrowers, extending the pause on student loan repayments.”
Federal Student Aid. “Student Loan Forgiveness.”
Twitter. “@POTUS, August 24, 2022 at 11:32 AM.”
Department of Education. “The Biden-Harris Administration announces final extension of the pause on student loan repayments until December 31 and targeted debt cancellation to ease the transition to repayment.”
Congress.gov. “American Rescue Plan Act of 2021,” page 182.
Internal Revenue Service. “Topic No. 431 Cancelled Debt – Is It Taxable or Not?”
Cornell Law School, Legal Information Institute. “U.S. Code Title 42, Section 254l-1 – National Health Service Corps Loan Repayment Program.”
American Association of Medical Colleges. “Medical School Graduation Questionnaire, Summary Report of All Schools for 2019,” page 5.
Federal Student Aid. “Public Service Loan Forgiveness Program Data.”
Source: https://www.thebalancemoney.com/student-loan-forgiveness-and-repayment-programs-795126
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