Let me guess how you ended up here. You typed, “Are there legitimate student loan forgiveness companies?” into your search bar.
Perhaps you’ve heard rumors about magical programs that make your student loans disappear, and you’re wondering if they’re too good to be true.
Although you have to watch out for student loan forgiveness scams, you can find legitimate forgiveness programs offered by the federal government. Here’s what you need to know.
Is student loan forgiveness legit?
The short answer? Yes. The long answer? It’s complicated.
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’s probably a student loan forgiveness scam.
If you want to seek forgiveness for your federal loans, 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.
Here are five legitimate programs that could help you get your loans forgiven:
1. Income-Based Repayment
- Maximum monthly payment: Generally 10% or 15% of your discretionary income
- Loans are forgiven: After 20 or 25 years of payments
- Eligible loans: Direct Subsidized and Unsubsidized Loans, Grad PLUS Loans, Direct Consolidation Loans, Federal Stafford Loans, FFEL PLUS Loans, and FFEL Consolidation Loans
2. Pay As You Earn
- Maximum monthly payment: Generally 10% of your discretionary income
- Loans are forgiven: After 20 years of payments
- Eligible loans: Direct Subsidized and Unsubsidized Loans, Grad PLUS Loans, Direct Consolidation Loans
3. Public Service Loan Forgiveness
- Maximum monthly payment: Dependent on your repayment plan
- Loans are forgiven: After 10 years of payments under an IDR plan while working in a qualifying public service job
- Eligible loans: Direct Subsidized and Unsubsidized Loans, Grad PLUS Loans, Direct Consolidation Loans
4. Total and Permanent Disability Discharge
- Loans are forgiven: Upon proof of total and permanent disability
- Eligible loans: Any loans under the Direct, FFEL, and Perkins Loan programs
5. Perkins Loan cancellation
- Loans are forgiven: Upon proof of employment in a qualifying service career
- Eligible loans: Federal Perkins Loans
You might also be eligible for loan cancellation if you die or go bankrupt, or if your school closes or made fraudulent claims. You can read more about these student loan discharge programs here.
Lastly, you’ll find other forgiveness programs for particular professions. Here are comprehensive student loan forgiveness guides for:
- Law enforcement
- Doctors, nurses, and physician assistants
- Professors and teachers
4 things you need to know about student loan forgiveness
Is federal student loan forgiveness legit? Yes, with some caveats.
1. Not everyone is eligible
To be eligible for IBR, PAYE, or PSLF, 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.
This post has several scenarios to help you determine if you’re eligible for student 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 impressive.
3. Your remaining loans might be taxed
In the eyes of the Internal Revenue Service, a forgiven student loan is taxable income unless your debt is forgiven through PSLF or teacher forgiveness programs.
So if you eventually manage to have $50,000 worth of loans forgiven, you’re going to 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 Federal Student Aid 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.
Remember that the federal government is the one lender that wipes away your education debt. If you’re being promised something by illegitimate student loan forgiveness companies, they’re probably promising a lot more than they can deliver.
There are student loan forgiveness scams, but 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: 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, don’t just search Google for legitimate student loan forgiveness companies. 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.
Andrew Pentis contributed to this post.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 7.10%1||Undergrad & Graduate|
|1.99% – 6.65%2||Undergrad & Graduate|
|1.99% – 6.24%3||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 5.64%4||Undergrad & Graduate|
|3.18% – 6.06%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.18% effective July 10, 2020.