If you funded — or plan to fund — a significant portion of your college education with student loans, don’t fret. You could still be a candidate for what works out as (for practical purposes) a retroactive scholarship: loan forgiveness. Loan forgiveness programs come in two basic forms, forgivable loans and loans that are forgiven.
The two types of programs are quite similar. However, with one kind, you know the debt will be forgiven if you uphold your end of the bargain. Forgivable loans are loans, like any others, but you agree to the terms of the loan with the understanding that you will go to work in a certain field upon graduation. In exchange for your service to the career area in question, a percentage of the loan will be forgiven for each year you put in, until the terms of the loan have been satisfied. Forgivable loans, once you qualify, offer a guarantee of forgiveness upon your entry into the required field. On the other hand if you change your mind, you’ll be on the hook for them. Such loans tend to have interest rates that are less favorable than those of other student loans and repayment can be burdensome. I would assume that this is supposed to deter students from changing their minds about career choice after accepting a forgivable loan.
The other drawback that may come into play with forgivable loans is that you pretty much have to know what you want to do with your life (or at least the part of it immediately following your graduation) when you apply for the forgivable loan. Once you’re on the hook for the loan, you would be penalized for changing your major by the harsher repayment terms that such loans mandate. Alternatively, if you have a clear career path in mind (think medical or teaching fields) a forgivable loan can be an immense leg up in getting on with your post-graduate life while carrying less debt. These types of loans are often administered by your state’s financial aid commission. Visit the website for the state in which you plan to attend college, or in which you plan to work after graduation, for more information on forgivable loans.
Loans that can be forgiven, on the other hand, tend to be your standard, run of the mill federal (Stafford, Perkins, PLUS, etc.) loans or state student loans that are forgiven in exchange for a graduate performing qualifying work after college. Unlike forgivable loans, you have no guarantee when you borrow that such loans will be forgiven. However, if you qualify for one of the many programs out there and meet all the criteria under such programs, a portion of your student loan debt could be wiped out. In terms of repayment options, such as those available under the federal repayment and consolidation programs, these loans tend to be far more flexible than forgivable loans. Moreover, you can change your major to whatever you want whenever you want without getting stuck with a higher interest rate. But you may not qualify for a forgiveness program, either.
Specific Programs
The vast majority of loan forgiveness is clustered around two particular career sectors: teaching and the medical fields. The federal government offers two programs to forgive loans for teachers, each one geared toward its primary types of student loans: Perkins and Stafford. Both programs are dependent on the length of service and the locale in which a graduate is willing to work. The maximum benefit under the Perkins program is 100 percent forgiveness of all Perkins loans. Under the Stafford Loan Forgiveness Program for Teachers, an education graduate can have nearly $20,000 of his Stafford loans forgiven is he reaches the maximum benefit level within the program guidelines.
Along with the federal programs which are, of course, administered on a national level, many individual states also offer programs to forgive teachers their student loans. The more populous states (California, New York, Texas, Florida and Illinois) tend to have not only the biggest need for teachers but also the largest loan forgiveness programs.
After teachers, the next largest career area for which loan forgiveness is offered are those centered around health and medical professions. The federal government offer loan forgiveness through its National Health Service Corps Program. Under the program, health care professionals who are willing to work for two or more years in a government-designated, underserved are can have a big chunk of their loan debt erased. The particularly good news about this program is that it applies to a wide range of health careers, including: nurses; physicians; dentists; physician assistants; dental hygienists; psychiatrists and psychologists; social workers; therapists and counselors. In addition to the NHSC, the Nursing Education Loan Forgiveness Program offers another opportunity for nurses to have their education debts forgiven. Visit the Association of American Medical Colleges’ website (www.aamc.org) for more information on health care-related loan forgiveness programs.
While more limited, there are opportunities for people who graduate in other fields. Both the Peace Corps and AmeriCorps offer loan forgiveness programs for their volunteers who qualify. Attorneys who serve indigent clients or in underserved areas can also qualify for loan forgiveness. Childcare providers who meet certain criteria are also eligible to have part of their loans forgiven under the Federal Child Care Provider Program.