If you’re wondering how to get out of paying your student loans back in full, you’ve probably looked into student loan debt forgiveness at one point.
However, student loan debt forgiveness is entirely dependent on eligibility.
And it’s more limited than you might think. It’s only applicable to federal student loans, not private loans. What’s more, eligibility depends how much you’re making and how much you owe.
Here are a few things to keep in mind if you’re banking on student loan debt forgiveness as an option for repayment.
How does student loan debt forgiveness work?
In most cases, you must first qualify for an Income-Based Repayment Plan (IBR Plan).
This is a plan with monthly payments based on a percentage of your income. After completing every scheduled payment over the duration of the loan term, only the balance that’s left over will be forgiven.
Under IBR Plans, student loan forgiveness eligibility doesn’t kick in for 20 years. However, most of these plans have shorter loan terms than that. So your loans will most likely be paid off before forgiveness is even an option.
Additionally, you’ll be exceeding the 10-year standard repayment plan term. Therefore, you’ll be paying more towards interest without the forgiveness payoff in the end.
Who is eligible for student loan debt forgiveness?
Here’s a breakdown of various income levels and debt amounts that do and don’t qualify for forgiveness, using our Income-Based Repayment Calculator.
Note that all of these scenarios are based on:
- Having some loans disbursed before July 2014
- Having up to four people in the family (you, your spouse, and children who receive more than half of their support from you)
- Living in the continental U.S
- An annual income growth of five percent
Average income, average debt
Let’s say you’re making $50,556 a year.
That’s the average salary projected for college graduates this year according to a survey from the National Association of Colleges and Employers.
And, you’re saddled with $37,172 in student loans, the average debt for the class of 2016.
Let’s assume all of those loans are direct undergraduate loans at an average weighted interest rate of 4.00% APR.
If you are a single person, you would not qualify for an IBR Plan or forgiveness.
If there are two-to-four people in the family, you would qualify for an IBR Plan but not forgiveness, as the loan would be paid off by the time you’re eligible.
High income, high debt
Let’s say you’re making $70,000 a year with $100,000 in direct undergraduate and graduate loans at an average weighted interest rate of 5.00% APR.
Whether it’s just you or up to four people in the family, you would qualify for the IBR Plan.
However, you would not be eligible for forgiveness. The loan would be paid off by the time you’re eligible.
High income, low debt
Let’s say you’re earning $70,000 a year with just $20,000 in direct undergraduate loans. These student loans have an average weighted interest rate of 4.00% APR.
Whether it’s just you or up to four people in the family, you would not qualify for an IBR Plan or forgiveness.
Low income, high debt
Let’s say you’re making just $30,000 a year. And, you have $50,000 in direct undergraduate loans at an average weighted interest rate of 4.00% APR.
If you’re single, you would qualify for an IBR Plan but not forgiveness.
But, if your family has two-to-four people, you would qualify for both an IBR Plan and forgiveness.
The student loan debt forgiveness amount would range from $2,682 for two people, and up to $64,055 if you have four people in the family.
Examples by profession
Doctor. Let’s say you’re earning $200,000 a year with $183,000 in direct undergraduate and graduate loans. All of which are at an average weighted interest rate of 5.00% APR.
You would not qualify for an IBR Plan or forgiveness, whether it’s just you or up to four people in the family.
Social worker. Let’s say you’re earning $41,000 a year with $60,000 in direct undergraduate and graduate loans at an average weighted interest rate of 5.00% APR.
If it’s just you or up to three people in your family, you would qualify for an IBR Plan but not forgiveness.
However, if you have four people, though, you would qualify for forgiveness, up to $26,126.
Teacher. Let’s say you are a middle-school teacher earning an average salary of $45,105 a year, according to Payscale. You have $35,000 in direct undergraduate loans at an average weighted interest rate of 4.00% APR.
If you’re single or have up to four people in the family, you would qualify for an IBR Plan but not forgiveness.
Do the math yourself
It’s easy with our IBR Calculator. You can make adjustments based on the following:
- Whether the loan was disbursed before or after July 2014
- Your annual income
- Number of people in your family
- Debt amount
- Interest rate
- Whether you live in the continental U.S., Alaska, or Hawaii
- Annual income growth
The calculator doesn’t just tell you whether you qualify for an IBR plan and forgiveness. It also tells you:
- Your first month’s IBR payment
- Your last month’s IBR payment
- Total amount you’ll pay
- The number of months you’ll be paying on it
- Total forgiveness you’ll receive (if any).
Don’t qualify for student loan debt loan forgiveness?
There are some situations in which you have other student loan debt forgiveness options.
You could be eligible if you work in public service or file bankruptcy. Additionally, if you have a permanent disability, have your college commit fraud against you, or your college closes down before you could complete your degree program.
However, student loan debt forgiveness is a long shot. So before you start counting on it, do your homework first to see how much of a possibility it really is.
If student loan debt forgiveness doesn’t look likely, your best bet is sticking to the standard 10-year repayment plan. Or, pay your student loans off faster, if you can.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 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 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% 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 Month/Day/Year, 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 08/21/18. 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@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 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.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 6.23%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|