Loan forgiveness

What It Means

Loan forgiveness means the lender cancels some or all of what you still owe once you meet a program's conditions, so you no longer have to repay that amount. In everyday use it almost always means federal student loansFederal student loanA student loan made by the U.S. Department of Education, with a fixed rate set by law and federal repayment plans and protections. See more, where the main routes are Public Service Loan Forgiveness (PSLF) and the forgiveness at the end of an income-driven repayment planIncome-driven repaymentA federal student loan repayment plan that sets your monthly payment from your income and family size instead of from your balance. See more. Forgiveness usually comes after years of qualifying payments, and private student loansPrivate student loanA student loan from a bank or other private lender, priced by your credit and governed by its contract rather than federal student loan rules. See more don't qualify for the federal programs.

How People Say It

• "Three more years and my loans are forgiven under PSLF."
• "Did your forgiveness go through?"
• "I'm on the ten-year plan for public service."

The Breakdown

Worked example. A nurse at a qualifying nonprofit hospital has made 36 qualifying payments on federal loans:

What the result means. PSLF is the faster route for someone who stays in public service, and studentaid.gov says payments under the new Repayment Assistance Plan count toward it when the other rules are met. The RAP count is the fallback: if the borrower leaves public service, whatever remains is forgiven after 360 qualifying payments. Studentaid.gov puts forgiveness on income-driven plans at 20 to 30 years depending on the plan.

Other routes. The CFPB mentions forgiveness for teachers in certain low-income schools, and federal loans can be discharged when a borrower dies or becomes totally and permanently disabled.

Good to Know

Taxes depend on the route. Studentaid.gov says amounts forgiven through PSLF aren't taxable income. The IRS says a student loanStudent loanMoney borrowed to pay for college or career school, repaid with interest after you leave school; it comes from the federal government or a private lender. See more discharged after December 31, 2025 because of the student's death or total and permanent disability may be nontaxable, and Federal Student Aid's servicer pages note that a balance forgiven at the end of an income-driven plan can be taxed. Ask a tax professional before a forgiveness date, since a tax bill in that year may need planning. RefinancingRefinancingReplacing a loan you already have with a new one, usually to get a lower rate, a different term or a different payment. See more federal loans with a private lender ends eligibility for these programs, the CFPB warns.

Related Terms and Categories

• Income-driven repayment

  A federal student loan repayment plan that sets your monthly payment from your income and family size instead of from your balance.

• Federal student loan

  A student loan made by the U.S. Department of Education, with a fixed rate set by law and federal repayment plans and protections.

• Student loan

  Money borrowed to pay for college or career school, repaid with interest after you leave school; it comes from the federal government or a private lender.

• Private student loan

  A student loan from a bank or other private lender, priced by your credit and governed by its contract rather than federal student loan rules.

• Refinancing

  Replacing a loan you already have with a new one, usually to get a lower rate, a different term or a different payment.

• Loan default

  Failing to repay a loan as the contract requires, usually after missed payments, which lets the lender use stronger ways to collect.

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