What You Need To Know About Student Loan Forgiveness

June 11, 2015 : Robert Farrington – Guest Contributor

Editor’s Note: Did you know there are ways to have your student loans paid off? And they don’t involve having a wealthy, childless aunt somewhere. Here are several great options for student loan forgiveness that are open to a wide range of people. 

Student loan forgiveness programs are great options for student loan borrowers to get a break on their debt in exchange for service in various industries and careers. The Consumer Financial Protection Bureau estimates that up to 25% of the American workforce qualifies for some type of student loan repayment program. However, finding and understanding these programs can be difficult. Here is what you need to know.

Federal Student Loan Forgiveness Programs

There are a variety of federal programs to help borrowers with student loans. A program that applies to many Americans is Public Service Loan Forgiveness. For borrowers who work at least 10 years in the public sector (including education, public safety and local government), this could be a great option to receive forgiveness. You can find more information on these programs from the U.S. Department of Education.

Additionally, Public Service Loan Forgiveness is not taxable.

State Student Loan Forgiveness Programs

Many states also have loan forgiveness or student loan repayment assistance programs. These programs are designed to encourage students to work in needed areas of the specific state. Some states, such as Kansas, have many opportunities for individuals to get loan forgiveness or repayment assistance.

Finding individual state programs can be tough. A great resource for identifying state-specific loan forgiveness programs is Student Loan Forgiveness Programs by State.

It’s important to examine the taxability of each program. Many of these programs are subject to federal income taxes but are not subject to state income tax. Consult each program’s terms and conditions when applying to fully understand the taxability of the income you receive.

Taxable Forgiveness Programs with Repayment Plans

Finally, there are student loan forgiveness programs that are included as part of income-based repayment programs. For Income-Based Repayment (IBR) and Pay-As-You-Earn (PAYE), borrowers can receive student loan forgiveness on any remaining loan balance after the payment term ends (typically 20-25 years depending on the loan type).

It’s important to note that any loan balance forgiven under the IBR or PAYE program will be considered ordinary income and taxed as such. There are exceptions to having to pay taxes on the amount forgiven, so individuals should consult a tax professional to determine the proper course of action when filing a return.

The Benefits Typically Outweigh the Costs

Given that student loan debt can rarely be discharged in bankruptcy, these programs can be a great way to lower the burden of student loans while allowing individuals to pursue rewarding careers in areas that may not have huge salaries. That’s why borrowers should search for potential programs that could help.

Robert Farrington – Guest Contributor

Robert Farrington – Guest Contributor

The College Investor

Robert is a personal finance expert that helps millennials get out of student loan debt and start investing at his website, The College Investor.Robert is also the author of two free ultimate guides for young adults, The Definitive Guide to Student Loan Debt and The College Graduate's Guide to Saving for Retirement. Robert is also the author of two free ultimate guides for young adults, The Definitive Guide to Student Loan Debt and The College Graduate's Guide to Saving for Retirement. Through these guides and other resources, Robert continues to help young adults better their financial future.

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