Federal Student Loan Debt Forgiveness

Federal student loan debt forgiveness will typically come in one of two forms and is a means to having a student loan cancelled. Firstly, debt forgiveness may be offered to someone who is in dire financial hardship and secondly, for graduates who are in certain fields of study.

Possibly the most popular type of loan forgiveness programs are specifically aimed at a select group – law students, nurses and teachers. This is especially true if a graduate wishes to work in a high need area, such as low income schools, a public interest attorney who works with disadvantaged individuals, or a medical healthcare facility that doesn’t enjoy certain privileges.

Federal student loan debt forgiveness that is offered to lawyers, nurses and teachers will usually allow for some or all of the loan to be cancelled, but this is generally in exchange for a graduate providing a certain numbers years of service in a facility such as the ones mentioned above.

Possibly the most popular type of loan forgiveness program is offered to teachers, who are willing to work in:

  • Low income public schools.
  • Early childhood programs.
  • A school with disabled children
  • A study area that has a critical need, such as maths or science.

The most common type of loan forgiveness program offered to students is the federally sponsored teacher loan forgiveness program. This program is specifically aimed at teachers who work in a K-12 school, have at least 5 years teaching experience, and have an outstanding student loan from 1998.

Nurse have, and will, always be in high demand, and this explains why both the federal and state governments have developed various loan forgiveness and loan repayment programs for nurses. The federal government’s nursing education loan is, without doubt, the most popular program.

If a nurse works in a high need healthcare facility and still has outstanding federal loans, this program could see up to 60% of their nursing loan forgiven. Nurses who are most in demand include RN’s, LPN’s, nurses with advanced degrees, and particularly nurse faculty.

Public interest lawyers tend to make far less money than others in the in the legal industry, but their work of assisting disadvantaged individuals is vital in the current day and age. It must be said that loan forgiveness programs for lawyers could be drastically improved, and are nowhere near as attractive as the programs offered to nurses and teachers.

The first step for any law student is to see if there are any loan forgiveness or loan repayment programs offered at their specific law school. The College Cost Reduction Act of 2007 actually went a long way to help law students. There were even certain measures within this act that were intended to alleviate some of the stress and burden caused by student loans. A public interest attorney will need to have paid their student loan consistently for 10 years to qualify for forgiveness on their outstanding loan balance.

In order to obtain loan forgiveness based on economic hardship, a student is likely to find this a real struggle. There have been a few extremely rare cases where the bankruptcy court has ruled that an individual’s financial situation is dire enough to erase their student loans. This will include both federal and private loans.

However, an individual is still obligated to repay their student loans regardless of bankruptcy, and therefore in order to be considered for loan forgiveness, they must prove that they have a long-term physical disability that will make it impossible for them to ever find full-time work.

With that said, there is a way to pay off student loans off through a bankruptcy. The bankruptcy court can decide to discharge all unsecured debts in order to get students loans repaid first. This would involve an individual filing a chapter 13 bankruptcy, which typically reorganizes their debts.

Debts that receive the lowest priority in a bankruptcy reorganization and payback will be credit card debt. Therefore, the judge may decide to allocate the majority of a graduate’s monthly payments towards their student loans, whilst their credit card debts take a back seat. However, bankruptcy is an extremely serious financial decision to take, and so this should always be viewed as a last resort.