Can My Student Loan Be Forgiven?

Young people getting started in their careers may be the poster children for college debt, but a growing percentage of older Americans are being bogged down by student loans.

Of the $1.6 trillion in student loan debt owed by Americans in 2020, people 50 and over accounted for about $340 billion, up from $47.3 billion in 2004, according to the Federal Reserve Bank of New York.

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Such financial obligations can put a damper on retirement savings, says Ben Reynolds, founder of “Sure Dividend,” a newsletter for long-term investors. “People close to or in retirement who are unhindered with student loans don't have the burden of maintaining those monthly payments, freeing up more money for retirement accounts and investments,” Reynolds says.

The federal government now offers up to $20,000 in student loan forgiveness. One way to relieve some of the burden is through the Public Service Loan Forgiveness (PSLF) Program, which lets borrowers who work in public sector jobs — such as government, public education and law enforcement — have their outstanding loans forgiven after they have made 10 years’ worth of payments. Here's what you need to know to take advantage of public service loan forgiveness.

Understanding the requirements

In order to receive student loan forgiveness, you were obligated to make 120 on-time qualifying payments, meaning the payment had to have been for the total monthly amount owed and paid within 15 days of the due date. Under new rules announced October 6, any prior payment made will count as a qualifying payment, regardless of loan type, repayment plan, or whether the payment was made in full or on time. All you need is qualifying employment. (AARP members can get free answers via SAVI, a student loan debt repayment tool). 

This change will apply to student loan borrowers with Direct Loans, those who have already consolidated into the Direct Loan Program, and those who consolidate into the Direct Loan Program by Oct. 31, 2022. 

While you typically don't get credit for months you don't make a payment, that's not the case during the pandemic. To provide relief to borrowers during the COVID-19 crisis, student loan payments and interest have been suspended until 60 days after June 30, 2023. (The suspension could also end a bit earlier if litigation over student debt forgiveness has been settled.) However, those months will count toward PSLF even if you don't pay a cent.