Student Loan Forgiveness for Financial Hardship

Credible takeaways

The Biden administration was considering a hardship student loan forgiveness program but withdrew its proposal at the end of 2024.
Loan forgiveness is still available for public servants and teachers once they meet specific work requirements.
You may have your loans discharged in various situations, including disability, death, school closure, and more.
Alternatives to loan forgiveness include income-driven repayment plans, loan deferment or forbearance, and repayment assistance programs.

If you're facing financial hardship, various forms of student loan relief are available to help ease the burden. While the Biden administration was considering a hardship loan forgiveness program proposal, it withdrew that proposal at the end of 2024.

The good news is that other forms of loan forgiveness and payment relief are available if you're facing financial hardship or struggling to repay your loans. Here's what you need to know.

What was Biden's financial hardship forgiveness plan?

In October 2024, the U.S. Department of Education under the Biden administration proposed a rule that would forgive some or all of a borrower's student loan debt if they faced financial hardship related to their loans.

“The regulatory proposal would base eligibility for financial hardship forgiveness on a set of 17 factors that are predictive of default, including debt-to-income ratios, repayment status, dropping out of college, borrower age and disability, the number of years in repayment, and receipt of means-tested public benefits,” explains Mark Kantrowitz, a financial aid expert and author of “How To Appeal for More College Financial Aid.” However, “financial hardship” wasn't very well defined in the draft regulations, he says.

Less than two months later, the Department of Education withdrew the proposal, citing operational challenges. Kantrowitz says the decision was probably influenced by the low probability that President Donald Trump's administration would implement the forgiveness plan after he took office in January 2025.

Current student loan refinance rates

Can I still get student loan forgiveness?

The Department of Education is no longer pursuing its financial hardship forgiveness proposal, but other federal student loan forgiveness programs are still available. Some of these options may help if you're struggling financially.

Public Service Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) program is available to borrowers who work in government and non-profit jobs. To qualify, you must:

Work full-time (at least 30 hours) for a qualifying employer.
Make 120 qualifying monthly payments under an income-driven repayment plan.
Have federal Direct Loans or consolidate other federal loans into a Direct Consolidation Loan.
Certify your employment each year.

After meeting these requirements, the remaining balance on your federal student loans is forgiven tax-free.

Teacher Loan Forgiveness

The Teacher Loan Forgiveness (TLF) program allows teachers to have as much as $17,500 of their federal loans forgiven after teaching full-time for five consecutive school years in a low-income school or educational service agency.

The forgiveness amount you qualify for depends on the subject you teach. Highly qualified math, science, and special education teachers are eligible for the entire $17,500, while other subject areas may qualify for as much as $5,000 in forgiveness.

Note:

A teacher can pursue both TLF and PSLF forgiveness, but not simultaneously during the same period of teaching. For example, if you’re pursuing TLF, your payments during those five years won’t count toward your 120 payments necessary for PSLF.

Income-driven repayment forgiveness

If you're facing financial hardship, one of the easiest ways to get relief is to sign up for an income-driven repayment (IDR) plan. These plans limit your payments to a certain percentage of your income:

IDR plans require that you make payments for 10 to 25 years, depending on the plan and the loan type. Once you've made the required number of payments, your remaining loan balance will be forgiven.

If you're already enrolled in an IDR plan and your financial situation has changed, you don't have to wait for your annual IDR recertification date to update your payment amount.

“Even if you're not due to renew your income yet, you can file for a new payment immediately that is based on your current income,” says Robert Farrington, the founder of The College Investor. “Your student loan payment for the next year will then reflect that.”

Perkins Loan Cancellation

The Perkins loan program ended in 2017, but if you still have a Perkins Loan and work in education, you may qualify for up to 100% loan cancellation. Instead of receiving forgiveness all at once, your loan balance is reduced gradually:

15% after your first and second years of service
20% after your third and fourth years
30% after your fifth year

Loan discharge

The Department of Education offers other options for canceling or discharging student loans. You may qualify in these situations:

You're totally and permanently disabled.
Your school closed.
Your school misled you.
You're a parent PLUS loan borrower and any of the above situations apply to your child.
You're the victim of a fraudulent loan.
You've declared bankruptcy, and the court finds that repayment of your loan would impose undue financial hardship on you.
The primary loan borrower passes away.

Alternative relief options for financial hardship

Many student loan borrowers aren't eligible to have their loans forgiven. However, there are some alternatives to consider if you're struggling to make loan payments.

Deferment and forbearance

Federal student loan deferment and forbearance allow you to pause payments for a set period of time if you're experiencing financial hardship. The table below breaks down the various situations where deferment and forbearance can each be used:

Deferment	Forbearance
Economic hardship	Financial difficulties, including medical expenses or income change
Unemployment	AmeriCorps service
Cancer treatment	Service that would qualify you for partial Department of Defense loan forgiveness
Graduate fellowship enrollment	Medical or dental internship or residency
School enrollment	National Guard service
Qualifying military service	High loan payments compared to your income
Post-active duty military service	Working towards Teacher Loan Forgiveness (TLF)
Parent PLUS loan borrower with a student in school
Rehabilitation training program enrollment

Loan repayment assistance programs

Loan repayment assistance programs (LRAPs) help borrowers in public service, healthcare, law, education, and other high-need fields pay off their student loans. These programs are typically offered by state or federal agencies and require a service commitment in exchange for loan assistance.

State programs: Many states offer LRAPs for teachers, healthcare workers, and lawyers who work in underserved areas. Check with your state's higher education agency or professional licensing board for details.
Federal programs: Programs like the National Health Service Corps (NHSC) Loan Repayment Program and the Department of Justice Attorney Student Loan Repayment Program provide loan assistance for qualifying professionals.

Note:

Most LRAPs focus on federal student loans, though some may assist with private student loans. Before applying, confirm eligibility requirements, service commitments, and whether private loans qualify.

Employer Tuition Reimbursement

Employer-sponsored educational assistance programs can help cover tuition costs or pay down student loans tax-free. Under IRS guidelines, employers can provide up to $5,250 per year in tax-free education benefits, including student loan repayment. Both direct payments to lenders and reimbursements to employees qualify. Check with your employer's HR department to see if they offer this perk.

FAQ

What qualifies as a financial hardship for student loan relief?

Open

The definition of financial hardship for student loan relief depends on the program you're considering. For example, you can apply for federal loan forbearance for any hardship you're facing, but you'll have to explain your situation to your loan servicer and have it approved. Other programs may have more specific hardship requirements.

What happens if I don’t qualify for loan forgiveness?

Open

If you're not eligible for loan forgiveness, you must keep making your required payments. However, relief options like income-driven repayment, deferment, and forbearance may help lower or temporarily pause your payments if you're struggling financially.

Are private student loans eligible for forgiveness?

Open

Private student loans are not eligible for federal forgiveness and discharge programs. However, some private lenders will forgive your loans in very select situations, such as permanent disability or death.

Can student loan forgiveness affect my credit score?

Open

Student loan forgiveness can affect your credit score in different ways. If your loans are forgiven, it may shorten your credit history and reduce your credit mix, which could cause a temporary drop. However, if you continue managing other credit accounts responsibly, your score is likely to remain stable or improve over time.

Meet the expert:

Erin Gobler

Twitter

Erin Gobler has covered personal finance for more than 10 years, with expertise on mortgages, student loans, and credit cards. Erin's work has been featured by Fox, Business Insider, GOBankingRates, Newsweek Vault, and CNN.