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Intro to Loan Forgiveness
Whether you’re thinking about entering the healthcare field or you’ve already graduated from your degree program, you may be wondering how you’ll handle student loan debt. If you have earned a scholarship, you’re part of the way there. But many students don’t know that there are different ways to pay off a loan (known as “qualifying payment plans”) or even that you may be able to reduce or eliminate what you have to pay back. This comprehensive guide breaks down the types of federal student loan repayment plans and how to qualify for loan forgiveness, with a special focus on healthcare professions.
What is Loan Forgiveness?
Student loan forgiveness is a program that relieves you from paying all or part of the remaining principal and interest owed on your federal student loans in exchange for working for an approved public service agency, government agency, tribal government or non-profit organization.
These forgiveness programs are only available for paying back specific federal loans—not private loans of any sort. To qualify for loan forgiveness, you must first make 120 payments—10 years of payments. If you think working in a service job in a health field is right for you, you can start your financial planning for school with this option in mind.
Do Healthcare Students Qualify?
The short answer is yes, and probably more than you think. With Americans collectively holding over $1.6 trillion in student loan debt as of 2020, loan forgiveness programs are becoming increasingly prevalent.
There’s no guarantee of loan forgiveness if you enter a particular profession, but healthcare workers in specific fields who are in short supply may have an edge.
Loan forgiveness for allied healthcare professionals is possible for, but not limited to:
Other healthcare professions that qualify typically include physicians, dentists, behavioral and mental health professionals, pharmacists, clinical research healthcare professionals, veterinarians and medical school faculty.
How Do You Qualify for Loan Forgiveness?
When you take out a student loan, you have the option to repay that loan several different ways, which are called qualifying payment plans. To qualify for loan forgiveness, you must make sure the loan you take is a federal loan that qualifies for forgiveness—and that the payment plan you choose qualifies for forgiveness after 120 payments.
You also must make on-time payments exactly as outlined in your qualifying repayment plan. Repeat: To qualify, it’s critical that you follow the repayment rules to the letter. This can’t be said enough. If you don’t, you could be ineligible for forgiveness—even if you think you’re on track.
You also must follow other rules set by your loan forgiveness program—including that you are employed in an approved public service or nonprofit healthcare job.
To qualify for federal loan forgiveness, you must have taken out a qualifying federal loan and a qualifying repayment plan.
According to Jodi Okun, founder of College Financial Aid Advisors, loan forgiveness rules can be tricky, and it’s important not to let the prospect of loan forgiveness drive your career choice. “I discourage young people from choosing a field just so their loan gets forgiven,” Okun says. “Sometimes a student’s path changes. And sometimes the policies around forgiveness change.”
Every loan forgiveness program is different, so make sure you research all of your options based on where you live and work and talk to your school’s financial aid office. Officials there can explain loan details.
Federal Loans That Qualify for Forgiveness
Loan forgiveness only applies to federal loans from the federal government that students or their parents receive by filling out the Free Application for Federal Student Aid (FAFSA); private student loans do not qualify for forgiveness. There are several types of these loans, all of which fall under the William D. Ford Federal Direct Loan (Direct Loan) Program, the largest federal student loan program. With these loans, the U.S. Department of Education (DOE) is your lender, but you’ll have a “servicer”—a company that the DOE assigns to handle the billing and services related to your loan. FedLoan Servicing, Navient, Great Lakes Educational Loan Services Inc., and Cornerstore are among the servicer names you may be familiar with. There are four types of Direct Loans in this program, and they all qualify for forgiveness:
There are two federal loan programs that have been discontinued, but if you have these loans, you could still be eligible for forgiveness:
Federal Repayment Plans Eligible for Forgiveness
Once you’ve taken out a federal student loan, you’ll need to decide how you want to pay it back before forgiveness is even an option. Several repayment plans are available to choose from, depending on your financial situation. With these plans, your payment is set at an amount that should be affordable based on your income. The payment plan you choose will depend on how much you earn in relation to the amount of debt you have. Review the loan payment plans to decide which one best applies to your situation. You may also be assigned a payment plan, but according to the Federal Student Aid web site, you can change repayment plans at any time, for free.
The four repayment plans listed below are the only plans eligible for the main forgiveness program, Public Service Loan Forgiveness (PSLF) Program. It’s critical to make sure you’re in the right repayment program to be eligible for loan forgiveness. In addition to the PSLF program, there are several other loan forgiveness programs specifically for healthcare workers; they are detailed below.
The following four repayment options, as described by Federal Student Aid, are available for all students regardless of whether they work in a healthcare field.
With each of these repayment plans—except for the REPAYE plan—your spouse’s income or loan debt is considered if you file a joint tax return; If you file separate federal income tax return from your spouse, your student loan payments are based on your income only. And, you must update your income and family size every year, even if they remain the same, because payments are recalculated annually—and that means your payments could go up or down.
As with everything regarding your loan, it’s important to discuss all the details with your loan servicer so you are aware of your responsibilities.
Federal Loan Forgiveness Programs
There are a few types of loan forgiveness programs, available through the federal government or through other organizations. After you’ve chosen a federal loan and a repayment plan that qualifies for forgiveness, take a look at these options.
Public Service Loan Forgiveness Program
This program forgives the remaining balance on a public service employee’s Federal Direct Loans after 120 qualifying monthly payments. That means you must make payments for 10 years before you can qualify. During that time, you must not default on your loans, and you must use a qualifying repayment plan while working for an employer approved by the forgiveness plan.
Students in the Public Service Loan Forgiveness Program can get into trouble if they don’t follow the rules. Some students think they’ll qualify for forgiveness but don’t because they miss a detail or misunderstand a rule, Okun says. If any of your payments aren’t made in a qualified repayment plan that’s based on income, you can end up ineligible without realizing it.
Work for an Approved Employer
Also crucial: You must work for an approved employer throughout the time you’re in the Public Service Loan Forgiveness Program. Be very careful about how and when you change employers. It’s possible to regain eligibility if you change jobs and begin working for another approved employer and apply for forgiveness at that point. However, don’t assume your employer is approved—be sure to check with your employer. The best way to confirm employer eligibility is to submit the Employment Certification Form. Doing that also confirms you’re in an eligible repayment plan with eligible loans.
Submit the Employment Certification Form
As part of the program, you must complete and submit the Employment Certification for Public Service Loan Forgiveness form every year or when you change employers so the government can verify you’re making qualifying PSLF payments.
Send the completed Employment Certification form, with your employer’s certification, to FedLoan Servicing, the U.S. Department of Education’s federal loan servicer for the PSLF Program:
If FedLoan Servicing is your servicer, you may upload your Employment Certification form on their website.
Follow the Strict Payment Timetables
PSLF has very specific rules about when qualifying payments can be made. You can only make payments during the time frames when you’re required to make payments. That means:
Loans under the FFEL Program or the Federal Perkins Loan Program do not qualify, since they are not Direct Loans. But they may become eligible if you consolidate them into a Direct Consolidation Loan. Any payments made on the FFEL Program or Perkins Loans before the consolidation do not count toward the 120 qualifying loan payments.
Federal Perkins Loan Cancellation
Perkins loans were discontinued in 2017, but if you have a Perkins loan, you might be eligible for full or partial cancellation for working in certain healthcare fields:
To apply, you’ll need to contact your loan servicer. If you’re not sure who your servicer is, you can find that information on the My Federal Student Aid website.
Other Conditions for Federal Loan Cancellation or Discharge
There are several reasons—unrelated to your work—that your federal student loans (both Direct Loans and Federal Perkins Loans) may be fully canceled or discharged:
Other Healthcare Student Loan Forgiveness Options
In addition to the PSLF program, a number of organizations offer loan repayment assistance in exchange for a two-year or more work commitment by healthcare workers in an underserved area or at a research facility. Your loans need to be federal student loans. Find out from the individual organization what kind of loan repayment schedule is required to qualify. Take a look at the various options below.