Loan Forgiveness is where under certain circumstances, the federal government will cancel all or part of an educational loan. To qualify, you must: Perform volunteer work; perform military service; teach or practice medicine in certain types of communities; or, meet other criteria specified by the forgiveness program.
To find out whether you qualify for loan forgiveness, talk to the human resources staff at your employer.
Medical students should use the State and Other Loan Repayment / Forgiveness and Scholarship Programs search function provided by the AAMC at http://www.aamc.org/students/financing/repayment/. The U.S. programs listed here offer financial assistance, in the form of loan repayments, for a commitment to service (generally in an area of need). Information regarding each program has been provided by state health departments and other agencies, medical and health professions schools, federal programs, and military agencies. Please note that this compilation of listings is not exhaustive; your medical school advisor or financial aid advisor may have information regarding further resources that are not listed here.
Another valuable source for loan forgiveness programs is: FinAid-The Smart Student Guide to Financial Aid - www.flnaid.org. This site brings together a good deal of information on financial aid and how to apply for it. The site includes calculators to estimate your EFC, tips for successfully completing the FAFSA, and advice about college life and after. While there, you can subscribe to the free FinAid Newsletter. The site offers the following information:
Volunteer Work
These volunteer organizations offer loan forgiveness:
AmeriCorps. Serve for 12 months and receive up to $7400 in stipends plus $4725 to be used towards your loan. Call 1-800-942-2677.
Peace Corps. Volunteers may apply for deferment of Stafford, Perkins and Consolidation loans and partial cancellation of Perkins Loans (15% for each year of service, up to 70% in total). Volunteers make a real difference in the lives of real people with two years of service in more than 70 developing countries. Contact the Peace Corps at 1111 20th St., NW, Washington, DC 20526 or call 1-800-424-8580 or 1-202-692-1845.
Volunteers in Service to America (VISTA). Volunteer with private, non-profit groups that help eradicate hunger, homelessness, poverty and illiteracy. Provide 1700 hours of service and receive $4725. Call 1-800-942-2677 or 1-202-606-5000.
Military
Students who are in the Army National Guard may be eligible for their Student Loan Repayment Program, which offers up to $10,000. (Note, the military and veterans' associations provide many scholarships and tuition assistance programs. See the section on Military Aid for details.)
Teaching
Students who become full-time teachers in an elementary or secondary school that serves students from low-income families can have a portion of their Perkins Loan forgiven under The National Defense Education Act. This program forgives 15% of your loan for the first and second years of teaching service, 20% for the third and fourth, and 30% for the fifth. Contact your school district's administration to see which schools are eligible.
Mississippi teachers who currently have their Alternate Route Teaching License and teach in a shortage area may be eligible for the Teacher Loan Repayment program. Visit the Mississippi Office of State Student Financial Aid web site at www.ihl.state.ms.us or call 1-601-432-6997.
The American Federation of Teachers maintains a list of other loan forgiveness programs for teachers.
Legal and Medical Studies
Many law schools forgive the loans of students who serve in public interest or non-profit positions. For more information, contact Equal Justice Works (formerly the National Association for Public Interest Law) at 2120 L Street, NW, Suite 450, Washington, DC 20037-1541 (phone 1-202-466-3686 or fax 1-202-429-9766).
The US Department of Health and Human Services offers loan forgiveness programs through the National Health Service Corps and the Nursing Education Loan Repayment Program. These programs offer loan forgiveness to physicians and registered nurses who agree to practice for a set number of years in areas that lack adequate medical care (including remote and/or economically depressed regions).
The US National Institutes of Health's NIH Loan Repayment Programs repays up to $35,000/year of student loan debt for US citizens who are conducting clinical medical research.
If you're a California resident, contact the Office of Statewide Health Planning and Development (State Loan Repayment Program, Primary Care Resources and Community Development Division, 1600 Ninth St., Room 440, Sacramento, CA 95814; 1-916-654-1833). Other states may have similar programs.
Many hospitals and private healthcare facilities use loan forgiveness to recruit occupational and physical therapists. Contact the American Physical Therapy Association (1111 North Fairfax St., Alexandria, VA 22314-1488; 1-800-999-2782) or the American Occupational Therapy Association (P.O. Box 31220, 47200 Montgomery Lane, Bethesda, MD 20824-1220; 1-301-652-2682).
Other loan repayment programs for medical school students include:
• The National Institutes of Health (NIH) Educational Loan Repayment Programs include the NIH AIDS Research Loan Repayment Program, NIH Clinical Research Loan Repayment Program, NIH General Research Loan Repayment Program.
• Nicholas J. Pisacano MD Memorial Foundation Inc. (American Board of Family Practice)
• American Academy of Family Physicians Foundation
• Disadvantaged Health Professions Faculty Loan Repayment Program
• Indian Health Service (IHS) Loan Repayment Program
• US Air Force, Army, and Navy Financial Assistance Programs
The American Association of Medical Colleges (AAMC) maintains a database of state and other loan repayment programs for medical school students.
Other Paths to Forgiveness
Students who complete a bachelor's degree at Baker University's College of Arts and Sciences may be eligible for the school's loan forgiveness program. Contact Baker University, P.O. Box 65, Baldwin City, KS 66006-0065; 1-913-594-6451.
Students who receive the Michael Murphy Loan to study law enforcement, law, probation and parole, penology, or other related fields are eligible to work off one-fifth per year as a State Trooper (or related law enforcement official) in Alaska. Contact the Alaska State Troopers, Director's Office Scholarship Fund, 5700 East Tudor Rd., Anchorage, AK 99507; 1-907-269-5511.
Maryland state and local government employees who earn less than $40,000 gross annually may be eligible for a loan assistance/repayment program to study law, nursing, physical and occupational therapy, social work and education. Contact the Maryland State Scholarship Administration, 16 Francis St., Annapolis, MD 21401; 1-410-974-2971 x146.
Federal Government Loan Forgiveness Programs
Perkins loans and Stafford Loans can be cancelled for full-time service as a teacher in a designated elementary or secondary school serving students from low-income families, special education teacher (includes teaching children with disabilities in a public or other nonprofit elementary or secondary school), qualified professional provider of early intervention services for the disabled, teacher of math, science, foreign languages, bilingual education, or other fields designated as teacher shortage areas, employee of a public or non-profit child or family service agency providing services to high-risk children and their families from low-income communities, nurse or medical technician, law enforcement or corrections officer, staff member in the educational component of a Head Start Program, service as a Vista or Peace Corps Volunteer and service in the Armed Forces (up to 50% in areas of hostilities or imminent danger).
See also the US Department of Education's pages on Cancellation/Deferment Options for Teachers and Cancellation for Childcare Providers, as well as the Teacher Loan Forgiveness Form.
Secondary school math and science teachers, and elementary/secondary school special education teachers who commit to working in high-need schools for five years can obtain up to $17,500 in Stafford loan forgiveness. They must teach full time for five consecutive years in a qualifying low-income school and be "highly qualified". (The Taxpayer-Teacher Protection Act of 2004, HR 5186, increased the amount of forgiveness from $5,000 to $17,500 on October 30, 2004.)
Visit the HRSA web site for information on Nursing Education Loan Repayment
The Federal Student Loan Repayment Program allows federal agencies to establish loan forgiveness programs to help recruit and retain employees. This is technically a loan repayment program and not a loan forgiveness program, as the agencies make payments directly to the loan holder and the payments represent taxable income to the employee. The agencies can repay up to $10,000 in Federal student loans per employee per calendar year, with a cumulative maximum of $60,000 per employee. Employees must agree to work for the agency for at least 3 years. For more information, see the Student Loan Repayment Program FAQ. This program is authorized by 5 USC 5379 (alternate link) and 5 CFR 537. Federal Employee Student Loan Assistance Act (P.L. 108-123, 11/11/03) increased the repayment limits to $10,000 per employee per year and $60,000 per employee cumulative. (The federal government's jobs site is located at www.usajobs.opm.gov. They also have a site focused on jobs for recent graduates.)
Taxability of Loan Forgiveness
Under current law, the amount forgiven represents taxable income for Federal income tax purposes in the year it is written off.
There are, however, a few exceptions. If the student loans were forgiven by a tax-exempt educational institution, the forgiveness is excluded from gross income if the student is not employed by the educational institution, the forgiveness is contingent upon the student working for a specific number of years in certain professions and the student's employment fulfills a public service requirement (e.g., Community Service Loan Forgiveness programs). The Taxpayer Relief Act of 1997 extended this treatment to include loans forgiven by tax-exempt charitable organizations. See Chapter 5 of IRS Publication 970 for more information.
There are proposals to make other forms of student loan forgiveness non-taxable, such as the forgiveness of income-contingent repayment balances after 25 years, but none have become law yet.
Individual states may have different treatments of loan forgiveness for state income tax purposes. For example, Pennsylvania does not treat loan forgiveness as taxable income. See Cancellation of Indebtedness Student Loan Forgiveness, Pennsylvania Personal Income Tax, PIT-00-093, July 12, 2000.
