Loan Forgiveness, Forbearance, and Deferment

When it’s time to pay back your student loans, you may hear terms like loan “forgiveness,” “forbearance,” and “deferment.” But what do they mean – and how do they apply to you? Here’s a quick summary:

Some loans can be cancelled

One benefit of federal student loans is the potential to have part – or all – of or your loan cancelled. The following programs come with some pretty stringent requirements but it’s worth your time to find out if you’re eligible:

  • Forgiveness (or “cancellation”): means your loan balance is eliminated or reduced by a certain amount. For example, if you:
    • Are a teacher working in a qualified low-income school, you may be eligible for up to $17,500 of forgiveness on your Federal Direct Loans.
    • Work for a qualified government organization, nonprofit, or certain public-interest employers, you may be eligible for 100% loan forgiveness.
  • Discharge: The federal government may dismiss the remaining balance of your federal student loans due to specific circumstances, such as:
    • A permanent disability
    • Closure of the school where you received your loans

For more information, check out Forgiveness, Cancellation, and Discharge.

Putting loan payments on “pause”

If you’re struggling to make your student loan payments – but you don’t qualify for loan forgiveness or discharge – there may be a short-term solution to help you avoid default:

  • Forbearance: Lets you pause your student loan payments or temporarily reduce the amount you pay. You are still responsible for the interest that accrues on your loans.
  • Deferment: Allows you to temporarily stop making payments on your loans. You may or may not be responsible for paying interest that accrues during the deferment period.

Long-term payment relief?

If your federal student loan payments are high compared to your income but forgiveness, deferment, and forbearance don’t apply to you, you may want to consider:

  • Income-driven repayment (IDR) plans. IDRs can reduce your monthly payment. Most federal student loans are eligible for at least one of four income-driven repayment plans.
  • Refinancing: Consolidating multiple student loans into one loan with a lower interest rate can help reduce your monthly payment and/or the amount you pay over the life of the loan.

Resources that have done the research for you

The following resources provide an easy-to-understand summary of loan forgiveness, repayment, and refinancing options along with potential advantages and disadvantages to consider:


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