Types of Repayment Plans for Student Loan Forgiveness
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College graduates have already received plenty of help from President Joe Biden’s administration in student loan forgiveness of federal student loans. The U.S. Department of Education canceled about $3 billion in his first 18 months and most recently announced the cancelation of another $32 million.
More federal is unlikely, and the Biden Administration announced a final loan pause will end on December 31, 2022. This means borrowers will have to begin repaying student loans in January 2023. And the debt forgiveness offered is $10,000 for federal student loans ($20,000 for Pell Grant recipients) and does not include private student loans. The good news is the Administration capped how much your payments will be: no more than 5% of your monthly income.
But $10,000 (for qualifying incomes) may not be enough to help you eliminate your student loan debt. Here are other ways you can find relief.
Related: Average Student Loan Debt by State
In this article
Repayment plans for student loan forgiveness
Here are some of the main repayment plans for student loan forgiveness.
Plan | Best for |
Income-Based Repayment | Loans after July 1, 2014 |
Pay As You Earn | Loans from 2007 to current |
Revised Pay As You Earn | Direct Loan borrowers |
Income-Contingent Repayment | Low income |
Income-Sensitive Repayment | Low-paying jobs |
Public Service Loan Forgiveness | Public service jobs |
AmeriCorps Education Award | Volunteers |
Faculty Loan Repayment | Health profession faculty students |
Teacher Loan Forgiveness | Teachers in low-income schools |
Perkins Loan Cancellation | Teachers, public service workers |
Federal Employee Student Loan Repayment | Federal workers |
John R. Justice | Lawyers |
National Institutes of Health | Health researchers |
Air Force JAG | Air Force lawyers |
Army College Loan Repayment | Military occupational specialties |
Navy Student Loan Repayment | Sailors |
National Guard Student Loan Repayment | Guardsman for 6 years |
5.54% - 15.86% VARIABLE rate APRs 3.54% - 14.83% FIXED rate APRs
- Easy online application!
- No origination fees, late fees, and no insufficient fund fees
- Flexible repayment options to help you find the right loan for you
- Student loans for college, graduate, law, MBA, Health Professionals, and Parent loans
- Students are 5x more likely to be approved with a cosigner
- 0.25% discount when you set up autopay
Income-based repayment plans
Income-based repayment plans are tied to each borrower’s student loan repayment plan. This can be especially helpful if your student loan payments exceed your income. When tied to your income, they can be affordable and should be lower than what you’re paying now, no matter the repayment period.
Each plan forgives any remaining balance at the end of the plan, provided the borrower qualifies and follows each plan’s rules.
If they qualify, the grad can apply for a plan. If you’re interested in applying for one, contact your lender or go to the Federal Student Aid website and click “Manage Loans,” then click “Qualify for Loan Forgiveness.”
Many plans require paying a certain percentage of the borrower’s discretionary income, such as 10%. How much discretionary income you have is based on a formula such as your family size and income tax returns. A loan simulator run by the federal government can help you figure out how much you’d be expected to pay in income-driven plans, among others.
Here are some of these income-contingent repayment plans:
Income-Based Repayment
Called IBR, the Income-Based Repayment Plan requires paying 10% of your discretionary income if you’re a new borrower on or after July 1, 2014, for 20 years. It rises to 15% for older loans, and the loan is forgiven in 25 years.
Either way, the loan repayment won’t exceed the payment of the 10-year standard repayment plan, and your loan will be forgiven at the end of the term.
Pay As You Earn
Called PAYE, the Pay As You Earn plan requires paying up to 10% of your discretionary income, and the loan is forgiven after 20 years. Loans made as far back as 2007 are eligible.
Revised Pay As You Earn
Also called RePAYE, it’s a modified version of PAYE that’s available to borrowers after Dec. 17, 2015. It’s open to all Direct Loan borrowers.
Payments are for up to 10% of discretionary income, and the loan is forgiven after 20 years. It also has an interest subsidy to help cover 50% of the interest when the new payments can’t keep up with the accruing interest.
Income-Contingent Repayment
The Income-Contingent Repayment Plan, or ICR, doesn’t have initial income requirements, and any eligible user can make payments through the plan.
Payments are either 20% of discretionary income or what you’d pay on a repayment plan with a fixed payment over 12 years, adjusted to your income.
ICR plans to forgive loans after 25 years.
Your income amount must be submitted every year. If your income rises enough, your payment could be higher than the 10-year standard repayment plan.
Income-Sensitive Repayment
Income-sensitive repayment is a way to help borrowers with lower-paying jobs afford their monthly loan payments for loans serviced by lenders in the Federal Family Education Loan Program, or FFELP.
Monthly payments increase or decrease based on your annual income. The amount paid is based on a fixed percentage of a borrower’s gross monthly income, between 4% and 25%. They continue for up to 10 years.
5.54% - 15.86% VARIABLE rate APRs 3.54% - 14.83% FIXED rate APRs
- Easy online application!
- No origination fees, late fees, and no insufficient fund fees
- Flexible repayment options to help you find the right loan for you
- Student loans for college, graduate, law, MBA, Health Professionals, and Parent loans
- Students are 5x more likely to be approved with a cosigner
- 0.25% discount when you set up autopay
Career-Based Student Loan Forgiveness Plans
Another category of repayment plans for student loan forgiveness involves working in specific careers for several years when the loan is forgiven. These are usually public service jobs, such as teaching and police work or government jobs, or not-for-profit work. Here are some of them:
Public Service Loan Forgiveness
The Public Service Loan Forgiveness Program, or PSLF, provides student loan forgiveness after 10 years of payments. That adds 120 consecutive monthly payments while working full-time for a qualifying employer.
To qualify for PSLF, you must work for a federal, state, local or tribal government or not-for-profit organization. Other eligible professions include being in the U.S. military, AmeriCorps, Peace Corps, education, and public health services. Loans are repaid in an income-driven repayment plan.
AmeriCorps Education Award
Volunteer with any of the AmeriCorps organizations for one year, and you may be eligible for aid up to the value of a Pell Grant. For the 2021-22 award year, the maximum Pell Grant award amount is $6,495.
Faculty Loan Repayment Program
The Health Resource and Services Administration runs the Faculty Loan Repayment Program, or HRSA, to recruit and retain health profession faculty members by getting students to pursue faculty roles.
Up to $40,000 in student loan repayment is provided, along with money to offset the tax burden of the program.
Teacher Loan Forgiveness Program
Teachers who work full-time for five complete and consecutive academic years in a low-income school or educational service agency, among other qualifications, may be eligible for up to $17,500 in student loan forgiveness in this program.
Perkins Loan Cancellation
All or part of a Perkins Loan can be canceled if a borrower works in volunteer service or as a teacher under certain conditions. These include working at a school serving low-income families, working with children with disabilities, or as a teacher in math, science, foreign language, bilingual education, or another field that has a shortage of qualified teachers in the state where the applicant works.
Other professions that may qualify for a Perkins Loan cancellation include:
- Military
- Child or family services agency
- College faculty
- Firefighter
- Law enforcement officer
- Nurse
- Public defender
- Volunteer in Americorps VISTA or Peace Corps
5.54% - 15.86% VARIABLE rate APRs 3.54% - 14.83% FIXED rate APRs
- Easy online application!
- No origination fees, late fees, and no insufficient fund fees
- Flexible repayment options to help you find the right loan for you
- Student loans for college, graduate, law, MBA, Health Professionals, and Parent loans
- Students are 5x more likely to be approved with a cosigner
- 0.25% discount when you set up autopay
Federal Employee Student Loan Repayment Program
This federal program allows agencies to repay federally insured student loans to recruit or retain workers, up to $10,000 per employee in a calendar year and not more than $60,000 for any employee.
Workers receiving this benefit must sign a service agreement to stay in the paying agency for at least three years. Applicants can only sign up for the program when hired, not months later.
John R. Justice
The John R. Justice Student Loan Repayment Program, or JRJ, helps state public defenders and prosecutors who agree to stay in their jobs for at least three years by paying up to $10,000 per calendar year and up to $60,000 total per attorney.
National Institutes of Health
There are five NIH loan forgiveness programs. Up to 25% of the eligible education debt, up to $35,000 per year, is repaid by the NIH for health researchers who agree to conduct qualifying research supported by a nonprofit or any government agency in the United States for two years.
U.S. Military Student Loan Forgiveness Options
Several student loan forgiveness options are available for members of the U.S. military. Students may have heard about them as an incentive when they joined the military. Here are some programs that the various military branches offer:
Air Force
The Air Force JAG student loan repayment program offers up to $65,000 in student loan forgiveness for joining the Judge Advocate General.
Army
The Army College Loan Repayment program forgives up to $65,000 of student loan debt for members of the Army’s military occupational specialties, or MOS. To qualify, soldiers must give up their Post 9/11 GI Bill.
Navy
The Navy Student Loan Repayment program pays up to $65,000 of federally guaranteed student loans. Three annual payments are made during the first three years of service. Enrollees must sign up for the program when they enlist.
National Guard
The National Guard Student Loan Repayment Program offers loan forgiveness of up to $50,000 for qualifying federal loans for members who enlist for at least six years, among other conditions.
Summary of repayment plans
Plan | Top benefit |
Income-Based Repayment | 10-15% of income paid |
Pay As You Earn | 10% of income paid |
Revised Pay As You Earn | 10% of income paid |
Income-Contingent Repayment | Can last only 12 years |
Income-Sensitive Repayment | As low as 4% of income paid |
Public Service Loan Forgiveness | Loan forgiven after 10 years |
AmeriCorps Education Award | $6,495 |
Faculty Loan Repayment | Up to $40,000 |
Teacher Loan Forgiveness | $17,500 forgiven |
Perkins Loan Cancellation | Entire loan can be forgiven |
Federal Employee program | $60,000 |
John R. Justice | $60,000 for public defenders, prosecutors |
National Institutes of Health | $35,000 annually for health workers |
Air Force College JAG | $65,000 |
Army College LoanArmy College Loan | $65,000 |
Navy Student Loan Repayment | $65,000 |
National Guard Student Loan | $50,000 |
5.54% - 15.86% VARIABLE rate APRs 3.54% - 14.83% FIXED rate APRs
- Easy online application!
- No origination fees, late fees, and no insufficient fund fees
- Flexible repayment options to help you find the right loan for you
- Student loans for college, graduate, law, MBA, Health Professionals, and Parent loans
- Students are 5x more likely to be approved with a cosigner
- 0.25% discount when you set up autopay
Is more Federal aid coming?
You never know what Congress will do or if the president will approve a bill, but each has announced plans to offer more student loan debt forgiveness and repayment options.
Federal legislators plan to cancel up to $50,000 for each student loan borrower, affecting an estimated 34 million people. The president has said he’s committed to canceling $10,000 for each federal student loan borrower.
Biden has also proposed making community college tuition-free, cutting undergraduate federal student loan payments in half, doubling awards for Pell Grants, and expanding student loan debt forgiveness.
For example, the president has proposed requiring undergrads with federal student loans to pay only 5% of their discretionary income if they have more than $25,000 in student loans.
Those proposals are just that — proposals. Until they’re enacted, borrowers may want to look for other student loan forgiveness programs that already exist and that they can use.
How do I apply?
Applying for student loan forgiveness is usually pretty straightforward. Once you’ve found a loan forgiveness program, such as through the Department of Education, asking your loan servicer, or elsewhere, you fill out the form and submit it to your lender. The Federal Student Aid website, studentaid.gov, is a good place to start looking for loan forgiveness programs. Once you meet the program requirements, such as keeping up payments, then your loans are automatically forgiven when the loan term ends.
Do I have to pay taxes on any forgiven loans?
Some student loan forgiveness programs did require paying taxes on the amount forgiven as taxable income, but President Biden changed that when he signed the American Recovery Act. It made all student loan forgiveness and discharges tax-free, no matter what type of loan program was used. This provision is effective through Dec. 31, 2025. State taxes, however, may still be charged.
The bottom line
Federal student loan payments were suspended during much of the coronavirus pandemic and will continue to be in forbearance through December 31, 2022. If you expect to have difficulty making payments again, now is the time to look into your options before the repayment clock starts again.
President Biden could extend the break, though you’ll likely have to start paying back your federal student loans sometimes. Finding a loan forgiveness program could make that much easier for you.
The average student loan debt depends on your age, with Americans 24 and younger owing $15,000 on average, compared to $33,000 for ages 25 to 34 and $42,000 for ages 35 to 49. A little relief for any outstanding balance could make the rest of your life a lot more affordable.
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Writer
Aaron Crowe is a freelance journalist who specializes in personal finance writing and editing. He has worked at newspapers, where he won a Pulitzer Prize, and has written for numerous online publications. These include AOL, US News & World Report, WiseBread, Bankrate, AARP, and many websites focusing on housing, credit and insurance. He lives in California with his wife and daughter.
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