There’s no denying that the idea of student loan forgiveness is an enticing one. Think about it: federal student loan forgiveness could be the easiest and most convenient way to get rid of all your lingering college debt, remove an enormous load of stress and anxiety from your life, and give you the peace of mind that comes with not owing anything to any lenders.

However, there’s one thing that not everybody talks about when it comes to student loan forgiveness: these forgiveness programs were created with specific requirements, meaning many people might not even be eligible in the first place.

The Public Service Loan Forgiveness (PSLF) program looks enticing on the surface. But like many things that seem to be too good to be true, there’s a catch. To better understand if this is the right path for you, let’s take a quick look at the eligibility requirements and some of the pros and cons of this student loan forgiveness program.

Who is Eligible for Student Loan Forgiveness?

Before you pursue this repayment course of action, be mindful of the fact that there are several requirements that borrowers need to satisfy to be eligible:

  • Qualifying Employment:You must work in “public service.” This is defined as working for a governmental organization, a not-for-profit organization that is tax-exempt, or a not-for-profit organization that provides a specific public service (e.g., public health).
  • Qualifying Employment Status: You must be considered a full-time employee per the organization.
  • Have a Qualifying Loan: This means a Direct Loan. If you have other federal student loans, you may become eligible if you consolidate them into a Direct Consolidation Loan.
  • Qualifying Repayment Plan: All the government’s income-driven repayment plans are qualifying plans. Note that there is a current waiver of this provision, currently until 10/31/22.
  • Make 120 Qualifying Payments: This means you make all your monthly payments reliably, on time, for 10 years.

Benefits of Student Loan Forgiveness

Let’s begin with the easy part: all of the good things about student loan forgiveness programs. While you already know that the eligibility requirements for student loan forgiveness programs can be quite strict, there are also some serious benefits for those that can qualify — particularly in the realm of personal finance. Some of these benefits include:

  • May improve your credit score
  • Stress relief
  • Can reduce student loan payments

Let’s take a closer look at these benefits one by one.

Improve Your Credit Score

First and foremost, student loan forgiveness may help with improving your credit score. Because a vast majority — if not the entirety — of the existing debt in your credit history likely comes from your student loans (especially if you’re not a homeowner), student loan forgiveness allows you to start over fresh with a much better credit score.
Whether you qualify for full or partial student loan forgiveness programs, even the slightest reduction to a college graduate’s total loan balance may positively impact a credit report. Not to mention, the elimination of student debt from your credit history may improve your eligibility to qualify for future loans — whether it be a personal loan, a mortgage, or an auto loan.

Relieve Stress

Another great benefit of student loan forgiveness programs is the stress relief that comes with lowering your debt. After going through a higher education program, far too many college graduates experience incredibly high stress levels when they enter the job market. Even something as simple as searching for an entry-level job can be 10 times more stressful than you’d expect when massive debt lingers over them. (This is only amplified when searching for an entry-level position that actually pays well.)

Thankfully, student loan forgiveness can help remove the major stressor of debt from your life by lowering your total loan balance on your federal student loans. While this isn’t to say that student loan debt forgiveness programs will solve all of your financial stressors, there’s no doubt that they can help relieve the stress tied specifically to your federal education loans.

Lower Your Student Loan Payments

Last but not least, even if you don’t receive total and complete absolution, student loan forgiveness can still give you the chance to bring down the monthly payments on your student loans. By forgiving just a part of your federal loans, student loan borrowers receive the option to refinance their loans at a lower interest rate or lower monthly payment.

Once that total loan amount is brought down, borrowers can contact a financial institution to talk about student loan refinancing. When your total loan balance is lower, you may qualify for a lower monthly payment or lower interest rate. Your loans might not have been completely forgiven overnight, but even a reduced monthly payment with a lower interest rate is still a positive.

Drawbacks of Student Loan Forgiveness

Now for the part that’s a little harder to stomach: the drawbacks of student loan forgiveness. There’s no denying that there are some seriously great benefits to student loan forgiveness programs offered by the federal government. Even so, not many people are willing to talk about the fact that there are also some significant drawbacks to student loan forgiveness. These drawbacks include:

  • A limited number of employers qualify.
  • It only applies to federal student loans.
  • There are strict eligibility requirements.

Let’s break down these disadvantages one at a time.

Limited Employers Qualify

To qualify for PSLF, you must work for a qualifying employer. While this seems like a fairly straightforward requirement, bear in mind that you are ultimately making a career decision when you pursue this path. By choosing to work in public service, you are eliminating the option of starting your own private practice, launching a business, or working for a private company.

Not only is it possible to make more money in the private sector, but some professionals prefer running their own business as an overall career choice. Letting the promise of student loan forgiveness shape your career may ultimately lead you down a path that isn’t right for you.

Only Applies to Federal Student Loans

When looking for ways to pay for college, many college students find that they might not qualify for a lot of federal student aid from the Department of Education because of the sheer amount of money their parents make. When this happens, students are left to take out a private student loan. Believe it or not, private student loans do not qualify for student loan forgiveness programs.

This is a real problem for graduate students, especially — when pursuing a master’s degree, students cannot apply for many of the federal student loans they were eligible for in undergrad. They have to resort to private student loans to continue their higher education career. When this happens, they disqualify themself from having those loans forgiven in the future. This forces private student loan borrowers to look into other loan servicer repayment programs after graduation, such as deferment, refinancing, or forbearance.

Strict Eligibility Requirements

As previously outlined, the federal government only offers a select few student loan forgiveness options, each with stringent and complicated eligibility requirements.

As such, it can be tough to qualify for student debt cancellation — much harder than you might think. This is especially true after you first graduate. In many student loan forgiveness options, you’re required to pay into your student debt for a large portion of the life of the loan before you even qualify for any repayment programs whatsoever. These strict eligibility requirements make student loan forgiveness inaccessible to most Americans.

Take teacher loan forgiveness, for example: Not only is this forgiveness option reserved exclusively for one specific career path, but you also have to meet a long list of specific qualifications. Even then, if you check all the right boxes, you will still only have either $5,000 or $17,500 forgiven depending on the subject area you’re teaching.

It’s an Incentive, Not a Solution

PSLF and other forms of loan forgiveness tied to income-based repayment plans are designed to be incentives, not solutions. Having a portion of your debt forgiven may make a substantial dent in your overall debt burden, but make sure that you’re committed to serving in the public sector.

You should approach this program with caution. Take a minute to review the eligibility requirements and see how they match up against your career goals. Arming yourself with knowledge about the pros and cons of PSLF will ultimately help you make the right decision.

Frequently Asked Questions

What lenders offer student loan forgiveness programs?

​Generally, only student loans granted by federal student aid from the Department of Education qualify for student loan forgiveness programs. Private lenders do not offer student loan forgiveness and are excluded from repayment programs.

Do I qualify for student loan forgiveness if my loans have a cosigner?

Loans signed with a cosigner, like the Parent PLUS loan, do not qualify for student loan forgiveness or repayment programs. However, if you consolidate your cosigned loans through the Federal Direct Consolidation Loan program, you may qualify for student loan forgiveness retroactively.

What are my other student loan repayment options?

If you are a college graduate who finds themselves struggling to make student loan payments on time or in full, there are a few last-ditch options that you may qualify for aside from forgiveness. These other student loan repayment options include:

  • Income-based repayment plans reduce the size of your monthly student loan payment to a more manageable, more affordable amount based on your income and the size of your family. (In other words: higher income, higher payments; lower income, lower payments.)
  • Deferment will temporarily suspend all student loan payments to give you the chance to get financially stable before resuming your repayments.
  • Forbearance can come in handy for those who do not qualify for deferment. It allows you to momentarily stop your student loan principal payments or reduce your monthly payment for up to a year.
  • Refinancing student loans is meant to ease the burden and stress of paying back a single loan or multiple loans. When someone refinances their student loan(s), they are obtaining a new loan that pays off and replaces one or more student loans and that has terms that may work better for their current financial situation, payment preferences and financial goals.

These alternate repayment plans can help provide you with the opportunity to handle your personal finances without the added stress and anxiety that comes with student loan payments.

Learn More About Student Loan Repayment Options

When you take student loan forgiveness pros and cons into consideration, it’s clear to see that student loan forgiveness might not be the perfect solution for every borrower — and that’s perfectly okay. There’s no shortage of potential student loan repayment options out there for you, each one with its respective pros and cons to consider. This is why you need to put in the work of weighing your options to find the one that works best for you, your personal finances, and your individual lifestyle.

Student loan refinancing is an option for both private and federal student loan debt. If you’re interested in refinancing your student loans, explore today’s current rates through Splash Financial and decide if it’s the right option for you.