Student loan forgiveness can provide significant relief for borrowers struggling with debt. However, understanding the eligibility criteria and the process for receiving forgiveness and potential refunds can be complex but with this article you’ll be able to explore how you can determine if your student loan will be forgiven and if you are eligible for a refund.
Eligibility for student loan forgiveness
To determine if your student loan will be forgiven, you need to understand the various forgiveness programs available and their eligibility criteria. Here are some of the most common programs:
- Public Service Loan Forgiveness (PSLF): This program forgives the remaining balance on Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer, such as a government or nonprofit organisation.
- Teacher Loan Forgiveness: If you teach full-time for five complete and consecutive academic years in a low-income school or educational service agency, you may be eligible for forgiveness of up to $17,500 on your Direct Subsidised and Unsubsidized Loans and your Subsidised and Unsubsidized Federal Stafford Loans.
- Income-Driven Repayment (IDR) Plan Forgiveness: Under IDR plans, any remaining loan balance is forgiven after 20 or 25 years of qualifying payments, depending on the specific plan. The Biden-Harris Administration has also announced additional relief for borrowers on the SAVE Plan, where forgiveness is granted after 20 or 25 years of payments.
- Total and Permanent Disability Discharge: If you are totally and permanently disabled, you may qualify for a discharge of your federal student loans.
To determine your eligibility, you should review the specific requirements for each program and ensure you meet the criteria. You can also contact your loan servicer for personalised information about your eligibility.
How to apply for loan forgiveness
Once you have determined that you are eligible for loan forgiveness, you need to apply through the appropriate channels.
For PSLF, you must submit the PSLF application form after making 120 qualifying payments. For Teacher Loan Forgiveness, you must complete the Teacher Loan Forgiveness Application and submit it to your loan servicer. For IDR plan forgiveness, your loan servicer will automatically forgive the remaining balance after you have made the required number of payments.
Receiving a refund
In some cases, you may be eligible for a refund of payments made on your student loans. Here are the scenarios in which you might receive a refund:
- Overpayment: If you have paid more than the total amount you owe, you can request a refund from your loan servicer.
- Income Below the Threshold: If your annual income was below the repayment threshold for your plan, you can request a refund for any payments made during that tax year. For example, if you made payments but your income was below the threshold for Plan 1, Plan 2, Plan 4 or Postgraduate loans, you can request a refund.
- Early Repayments: If you started making repayments before you were required to, you can request a refund for those payments.
To request a refund, you should contact your loan servicer and provide the necessary documentation to support your claim. The Student Loans Company (SLC) will process your request and issue a refund if you are eligible.
Conclusion
As of March 2021, all loan forgiveness programs are tax free as part of the American Rescue Plan up till the end of 2025. Determining if your student loan will be forgiven and if you are eligible for a refund requires understanding the specific forgiveness programs and their eligibility criteria.
By reviewing the requirements and contacting your loan servicer, you can gain clarity on your eligibility and take the necessary steps to apply for forgiveness and request a refund. Staying informed and proactive can help you manage your student loan debt effectively and take advantage of available relief options.
