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Cancellations For:

There are a number of loan forgiveness and cancellation programs for borrowers working in public service and helping professions. Perkins borrowers have the most options available, but other federal borrowers can also receive considerable relief. You should also consult this thorough list of loan forgiveness programs by state.

TEACHERS

There are programs that will fully or partially cancel student loans for borrowers who work for a certain amount of time as teachers. Perkins loans may be fully canceled for full-time teachers working at low-income schools or teaching certain subject areas.

If you received a Stafford Loan on or after October 1, 1998, and teach full time for five consecutive years in a low-income school, you might be eligible to have a portion of your loan canceled. This applies to FFEL Stafford Loans, Direct Subsidized and Unsubsidized Loans, and in some cases, Consolidation Loans. Up to $5,000 may be canceled. The limit is $17,500 for borrowers who teach five consecutive years as highly qualified math or science teachers in eligible secondary schools or as special education teaches in eligible elementary or secondary schools.

Many teachers will also qualify for public service cancellation.

You must complete this form to apply.

There is also a new teacher grant program. This program (called TEACH GRANTS) is not tied to financial need and provides up to $4,000 annually to students who are enrolled in an eligible program and who agree to teach full-time in a high-need field at a public or private elementary or secondary school that serves low-income students. Recipients of these grants must teach for at least four years within eight years of completing the program for which the TEACH Grant was awarded. The Department of Education has issued proposed rules for this program.

The first TEACH grants will be awarded to eligible students for the 2008-09 school year.

CHILD CARE PROVIDERS

There is a loan forgiveness demonstration program for certain child care providers with FFEL or Direct Loans. Only loans made after October 7, 1998 qualify. Under this program, individuals who work full-time in certain child care facilities that serve low-income families and who meet other qualifications may be eligible to have up to 100 percent of their FFEL and/ or Direct Loan program loans forgiven. The Department is not accepting new applicants into the program because no additional funding has been provided, but applications for renewal benefits are available for those borrowers who have previously been granted forgiveness under the Child Care Provider Loan Forgiveness Program. For more information, go here.

Many child care providers will also qualify for public service cancellation.

PUBLIC SERVICE CANCELLATION

This cancellation program is available to borrowers that work in public service jobs for ten years and repay their loans through an eligible repayment plan. The remaining balance is then canceled after the ten years of service is completed.

ALERT: This is a new program that will be administered by the Department of Education. General information is available on this site. More details will be posted once the Department issues final rules later this year. Only then will we know for sure who will be eligible for public service cancellations and what you will need to do to apply. If you think you are going to be eligible and you don’t currently have a Direct Loan, you should consider getting into the Direct Loan program through loan consolidation. If you have a FFEL consolidation loan, you cannot re-consolidate for this purpose until July 1, 2008. For more information see this new website created by the Project on Student Debt.

Who is Eligible?

The program applies only to Direct loan borrowers, but it covers all types of Direct loans, including Stafford, PLUS and consolidation loans. Borrowers with other federal government loans can consolidate with Direct Loans in order to obtain this benefit. If you have a FFEL consolidation loan, you cannot re-consolidate for this purpose until July 1, 2008.

In order to qualify, you must not be in default and you must have made 120 monthly payments (10 years of payments) on your loans AFTER October 1, 2007. Payments can be made through any one or combination of eligible repayment plans, including the new income-based repayment system once it becomes available in July 2009, income contingent repayment, ten year standard plan payments, or graduated or extended payments of not less than the monthly amount that would be due under a ten year standard plan.

The new income-based repayment plan, passed as part of the College Cost Reduction and Access Act will not be available until July 1, 2009. In the meantime, if you need income-based repayment, you can select a Direct Loan income contingent plan and then later switch to the new income based repayment plan. The ICRP payments you make after October 1, 2007 should count toward the ten year cancellation period.

You must be employed in a public service job at the time of the forgiveness and must have been employed in a public service job during the period in which you made each of the 120 payments.

What is a “public service job”?

The term “public service job” is defined in the law as: “a full-time job in emergency management, government, military service, public safety, law enforcement, public health, public education (including early childhood education), social work in a public child or family service agency, public interest law services (including prosecution or public defense or legal advocacy in low-income communities at a nonprofit organization), public child care, public service for individuals with disabilities, public service for the elderly, public library sciences, school-based library sciences and other school-based services, or at an organization that is described in section 501(c)(3) of the IRS Code and exempt from taxation, or teaching as a full-time faculty member at a Tribal College or University and other faculty teaching in high-needs areas, as determined by the Secretary.

The law is clear that anyone employed by the government, a 501(c)(3) non-profit organization, or in military service should qualify regardless of the type of job. Borrowers working for other employers should also qualify, but only if they are working in a “public service job.” As listed above, these “public service jobs” include emergency management, public safety, law enforcement, public health, public education, social work in a public child or family service agency, public interest law services, public child care, public service for individuals with disabilities, public service for the elderly, public library services, and school-based library services and other school-based services.

The law also states that the public service job must be “full-time.” We do not yet know how this will be defined. There is no requirement that you must work in the same public service job for the entire ten year period. There is also no requirement that the ten years of public service be consecutive.

Public Service Cancellation FAQs

For more information, see this new website created by the Project on Student Debt.

PERKINS LOANS PROGRAMS

Perkins Loans may be completely canceled in certain circumstances, including if you are a:

  • Full-time teacher in a designated elementary or secondary school serving students from low-income families
  • Full-time teacher at any school of math, science, foreign languages, bilingual education, or other fields designated as teacher shortage areas
  • Full-time special education teacher (includes teaching children with disabilities) in a public or other nonprofit elementary or secondary school)
  • Full-time qualified professional provider of early intervention services for the disabled
  • Full-time employee of a public or nonprofit child- or family-services agency providing services to high-risk children and their families from low-income communities
  • Full-time nurse or medical technician
  • Full-time law enforcement or corrections officer
  • Full-time staff member in the education component of a Head Start Program
  • Vista or Peace Corps volunteer (up to 70%)
  • Active duty servicemember in the U.S. Armed Forces (up to 50% in areas of hostilities or imminent danger)

MILITARY SERVICE

The Perkins loan program has discharge programs for borrowers serving in the Armed Forces. The other loan programs do not have military discharges. However, if you are serving in the military, you should look into special programs to help you, including deferment and forbearance options.

PEACE CORPS AND AMERICORPS

AmeriCorps members are eligible to get the interest on their student loans paid while they are serving. There are a number of prerequisites to this benefit. Click here for more information. You will only get this benefit if you complete your service. Exceptions are sometimes made if you fail to complete your service for a compelling reason. You are also eligible to get a forbearance on loan payments while you are serving.

Depending on how the final rules come out, AmeriCorps members might be able to have their benefits counted toward the ten year public service cancellation period.

Peace Corp volunteers with Perkins loans may cancel up to 70% of their loan obligations. The other loan programs do not have special discharges for Peace Corp volunteers. You can get a deferment if you are a Peace Corp volunteer.

NATIONAL HEALTH SERVICE CORPS

The National Health Service Corps is a competitive program that recruits fully trained and licensed health professionals to provide primary health services in selected high-need communities. Professionals selected for this program may receive funds to be applied to the principal, interest, and related expenses of government loans and certain commercial loans.

PRIVATE PROGRAMS

Many employers offer student loan repayment or discharge programs. Employers offer these as an incentive to recruit new employees or retain current employees. These programs vary a lot depending on the employer. You should check with a potential employer to see if they offer loan forgiveness or special repayment options.

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