- Which loans are eligible: Only federal Direct Loans are eligible for forgiveness, but you can consolidate other student loan types in order to repay them on PSLF. Consider keeping your Perkins Loans separate if you qualify for Perkins Loan cancellation, which we’ll explore further below.
- Best for you if: you plan to work in public service for at least 10 years and you’re already on, or are willing to switch to, an income-driven repayment plan.
Here’s why: Since you must still be working in the public interest when you apply for forgiveness — after your 120th loan payment — PSLF is a big commitment. It’s worthwhile only for grads who plan to pursue a career in public service anyway, says Kristin Bhaumik, assistant director for special programs in the University of Michigan’s office of financial aid.
“You don’t want to seek a job only because of a promise of possible forgiveness down the line,” she says. “Ten years is a very long time for most people to plan out their future just for loan forgiveness.”
Teacher Loan Forgiveness
- How it works: Teachers who work full time for five consecutive years can have up to $17,500 in Direct or Stafford Loans forgiven. The program is available only to teachers who work in low-income public elementary or secondary schools, and who took out their first loans after Oct. 1, 1998.
- Which loans are eligible: Direct Loans and Stafford Loans
- Best for you if: you plan to teach full time in a low-income public school for at least five years and have a loan balance of $17,500 or less. If you have a larger loan balance and plan to teach for 15 years or more, consider enrolling in PSLF after five years.
Here’s why: Participants will also qualify for PSLF, which is more generous, but Teacher Loan Forgiveness will reduce or eliminate your loans in half the time: five years instead of 10. Although the two programs can’t overlap, you can take advantage of both if you plan to teach for 15 years or more.
Perkins Loan cancellation
- What it is: Borrowers with federal Perkins Loans can have up to 100% of their loans canceled if they teach full time in a low-income public school, or teach qualifying subjects like special education, math, science or a foreign language. This program has a lower commitment term than the others: Just one year of teaching service will make you eligible, but you’ll get the maximum cancellation benefit after five years. You can also postpone your loan payments while you’re teaching if you know you’ll qualify for cancellation.
Borrowers who work in other public service jobs — such as firefighters, nurses, police officers, school librarians and public defenders — can have their Perkins Loans forgiven over five years of service too. Check this chart and call your loan servicer or the financial aid office at the school you attended for more details on your eligibility for those programs.
- Which loans are eligible: Perkins Loans only. The total amount of Perkins Loans you can borrow as an undergrad is $27,500; as a grad student, you can borrow an additional $32,500.
- Best for you if: you have Perkins Loans and you plan to work in an eligible public service job for at least one year.
- What it is: The federal government offers three income-driven repayment plans, which calculate your monthly loan payments as a percentage of your income. All of these programs automatically forgive your remaining loan balance after a certain number of years. A fourth plan, called Revised Pay As You Earn (REPAYE), is available as of December 2015.
Income-based repayment (IBR): There are two versions of IBR, and the one you qualify for depends on the year you first took out your loans. If you took out loans for the first time before July 1, 2014, and your monthly payments on the standard repayment plan are more than 15% of your discretionary income, you’ll pay 15% of your income toward your loans for 25 years. Then the remainder of your loans will be forgiven. If you took out loans for the first time after July 1, 2014, and your monthly payments on the standard repayment plan are more than 10% of your discretionary income, you’ll pay 10% of your income toward your loans for 20 years. Then forgiveness will kick in.