Understanding Student Loan Forgiveness

July 28, 2023

The new federal student loan forgiveness program has piqued the interest of borrowers who thought they didn't qualify for such programs. Whether you're a recent graduate or have been repaying your loan for years, you should understand what loan forgiveness is, how it affects public and private student loans, and who might qualify.

What is student loan forgiveness?

Student loan forgiveness erases some or all of a borrower's obligation to repay their postsecondary education loans.

Who qualifies for student loan forgiveness?

Typically, borrowers who perform public service work in traditionally underserved communities or among underserved populations are eligible for student loan forgiveness. For example, healthcare professionals who work in areas where their skills are in short supply are more likely to qualify for these programs. However, not all programs have these types of qualification restrictions.

Are all postsecondary student loans eligible for loan forgiveness?

The short answer is, it depends. Some programs cover both federal and private student loans. Different agencies and companies offer forgiveness based on the loan type and other requirements.

For example, the Public Student Loan Forgiveness Program (PSLF) is reserved for students who took out federal student loans through the U.S. Department of Education. In addition to PSLF, the Biden-Harris administration has proposed a student loan debt relief plan that also would be limited to federal student loans. However, a recent ruling by a federal judge has put that plan, the Federal Student Loan Debt Relief program, on hold.

The PSLF Program is available to borrowers who have worked full time as public servants or at some nonprofits for at least 10 years and made at least 120 qualified payments on their loans. Borrowers can confirm their eligibility and apply for the program at studentaid.gov.

The Federal Student Loan Debt Relief website, meanwhile, has stopped taking applications because of the judge's ruling. Unlike the PSLF Program, under this plan, borrowers wouldn't need to meet workplace-related requirements to receive loan forgiveness.

Private student loans are credit-based loans made to eligible college students or their parents to cover higher education expenses. Some states may provide funds for private student loan forgiveness under certain conditions. Since private financial institutions or companies make these loans, they aren't eligible for federal loan forgiveness programs.

What are the options under state student loan forgiveness?

Most states, including California, offer borrowers at least one type of student loan forgiveness program.

Steven M. Thompson Physician Corps Loan Repayment Program

Licensed allopathic or osteopathic physicians and surgeons who work in a health professional shortage or primary care shortage area in California and commit to providing full-time direct patient care to the community for at least three years may be eligible for up to $105,000 in educational loans. Student loan borrowers can check their program eligibility and apply by visiting hcai.ca.gov.

California State Loan Repayment Program

Licensed health professionals who practice full time in underserved California communities for at least two years can receive up to $50,000 toward student loan forgiveness. Many health-related fields are eligible for this program. Borrowers can check their program eligibility and apply by visiting hcai.ca.gov.

CDA Foundation Student Loan Repayment Grant

Dental students expected to graduate within three months of application and those who graduated within three years of application may receive $50,000 per year, with a maximum of $250,000 over five years, to pay off their educational debt. Only students and graduates of Commission on Dental Accreditation-accredited programs are eligible. Borrowers can check their program eligibility and apply by visiting cda.org.

4 Tips for Managing Your Student Loan Debt

Borrowers often have a sizable amount of private student loan debt that cannot be forgiven under federal programs. Having a plan to pay off these balances is a wise financial move no matter where you are in your repayment journey.

Consider these tips to help manage your student loans:

  1. Stay connected.

Did you recently move or experience a layoff at work? Informing your loan servicer of financial difficulties could help you avoid late fees and determine your eligibility for hardship repayment options.

  1. Review repayment requirements.

Understanding your legal obligation to repay your loans is crucial. Doing so could help you avoid late payments or loan default, both of which would harm your credit.

  1. Seek ways to pay off your loans early.

By applying tax refunds or other financial windfalls to your student loans, you'll pay them off early and save money in interest charges. An early payoff might allow you to redirect those funds toward other financial goals.

  1. Be patient.

If you apply for a student loan forgiveness program, resist the urge to immediately adjust your budget. Wait until the debt is forgiven. Otherwise, you could create problems with your finances.