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Reducing Your College Debt

While federal loans to help pay for college are a very important resource to help many students pursue a college degree, the end result will be college debt that must be repaid with interest. Many students facing debt upon graduation or leaving school look for ways to help reduce their college debt in order to make their payments lower and ease the financial burden of repayment. One legitimate way to reduce your college debt and lower the overall amount of money you will have to repay on your loans is loan forgiveness. Those who do not qualify for loan forgiveness can consolidate their student loans for a lower monthly payment or defer their loans to pay back later. Let's take a closer look at these options.

Loan Forgiveness

Loan forgiveness is a debt reduction method in which all or part of a student loan is cancelled in cases where the college or university failed to provide certain services, or in cases where students enter high-demand work fields, or provide extensive volunteer service or military service.

You may be eligible to have all or part of your student loan forgiven/cancelled if your situation matches any of the following circumstances:

  • Your college or university closed within 90 days of your enrollment, making it impossible for you to complete your degree
  • Your loan documentation was subject to forgery or fraud
  • Your college or university failed to adequately evaluate how you might benefit from its coursework before you began a degree program
  • You become permanently disabled
  • You, or your parent or guardian, dies

If you think you may be eligible for loan forgiveness due to one or more of these conditions, contact the issuer of your loan for details and guidance.

Loan Forgiveness for Public Service Employees

The Public Service Loan Forgiveness Program was created in 2007 to encourage college graduates to enter full-time employment in public service jobs. Under the terms of the program, the remaining balance of eligible federal student loans can be forgiven if the borrower has made at least 120 payments on time while being employed full time in a qualifying public service job. Specific criteria for this program include:

  • Borrowers must make at least 120 on-time, full, scheduled monthly payments on Direct Loans after October 1, 2007.
  • All payments must be made under a qualifying repayment plan.
  • Borrowers must be employed full-time at a qualifying public service job at the time of all payments and at the time the loan balance is forgiven.
  • Only federal loans received under the William D. Ford Federal Direct Loan Program are eligible.
  • Federal Family Education Loans and Perkins Loans can be consolidated into a Direct Consolidation Loan (see below) in order to qualify (visit for more information). Only payments made under the consolidated loan will count toward the 120 payment requirement.

Loan Forgiveness for Military Service

The Army National Guard offers up to $50,000 of qualifying student loans to be forgiven for enlisted students. Loans must be federal loans administered by the U.S. Department of Education. State and private loans are not eligible. Specific eligibility requirements vary based on type of enlistment and other factors. Visit for more details.

Loan Forgiveness for Teaching

The National Defense Education Act allows students to have part of their federal Perkins Loan forgiven.

  • Students must become full-time teachers in an elementary or secondary school serving low-income students.
  • 15 percent of the loan can be forgiven for the first and second years of teaching service, 20 percent for the third and fourth years, and 30 percent for the fifth year of service.
  • Be sure to check with the appropriate administrative offices within the school districts you may serve to see which schools qualify for the loan forgiveness program.

The William Winter Teacher Scholar Loan forgives one year of student loans in exchange for one year of service for qualifying students with degrees in education and who teach in Mississippi. Learn more about this program by contacting:
Mississippi Office of State Student Financial Aid
3825 Ridgewood Road
Jackson, MS 39211-6453
phone: (601) 982-6663

Loan Forgiveness for Legal and Medical Studies

Doctors, therapists, physicians and lawyers who agree to practice for a certain number of years in areas that lack adequate medical care or legal services may qualify for student loan forgiveness through several organizations. Start by contacting the following reputable organizations known to provide student loans and/or loan forgiveness for legal and medical service:

  • National Association for Public Interest Law
  • National Health Service Corps
  • California Office of Statewide Health Planning and Development (other similar agencies may provide loan forgiveness in your state)
  • American Physical Therapy Association
  • American Occupational Therapy Association


Loan Consolidation

Borrowers who do not qualify for loan forgiveness can also consider loan consolidation. A Direct Consolidation Loan allows borrowers to combine multiple federal student loans into one loan, so they only have one monthly bill to pay rather than several. This one monthly payment helps reduce the amount of out-of-pocket monthly expense because the consolidated loan gives borrowers up to 30 years to repay the loan. While this can mean immediate loan simplification and monthly savings, it can also greatly increase the total amount you will pay over the life of the loan. So, it's important to make sure you understand all of the financial consequences of taking out a consolidation loan, and exhaust ALL loan forgiveness options before choosing a consolidation loan. Criteria for consolidation loans include:

  • Eligible loans include most federal student loans, including subsidized and unsubsidized Direct and FFEL Stafford Loans, Direct and FFEL PLUS Loans, Supplemental Loans for Students (SLS), Federal Perkins Loans, Federal Nursing Loans, Health Education Assistance Loans, and sometimes existing consolidated loans (note that PLUS Loans made to the parents or guardians of dependent students cannot be transferred to the student through consolidation).
  • Private or alternative student loans are not eligible.
  • Borrowers who default on loan payments will need to meet certain requirements before consolidation is available to them.
  • Once loans have been consolidated, they cannot be separated back into individual loans again (the individual loans are paid off when you consolidate).

Pros of Consolidation

  • Lower monthly payment
  • Streamlined billing (one monthly payment versus one per loan)

Cons of Consolidation

  • Longer to pay off your loan (up to 30 years)
  • Increased total expense over the life of the loan
  • Loss of any borrower benefits offered under the original loans, which may include interest rate discounts, principal rebates, or cancellation benefits
  • No option to reverse consolidation

If you don't really need to lower your monthly loan payments, it's important to carefully consider the reasons for loan consolidation. Do be sure to compare the total cost over the life of your loans if you continue to pay them individually and the total cost if you were to consolidate. This, and making sure you understand all loan consolidation terms, will help you make an informed decision.

Loan Deferment & Forbearance

Students and graduates who are having trouble making their loan payments due to their current financial situation may also qualify for loan deferment, forbearance, or other relief. As soon as you realize that you will have difficulty making full or on-time payments you should contact the servicer of your loan (which can be found on the U.S. Department of Education's National Student Loan Data System at


Deferment is a temporary suspension of loan payments. You may qualify for certain situations, including:

  • Economic hardship
  • Re-enrollment in school
  • Unemployment
  • Military personnel called into active duty

You will not need to pay interest during the deferment period on subsidized Direct, FFEL, Stafford Loans, or Perkins Loans. You will be responsible for accrued interested during the deferment period for unsubsidized Direct or FFEL Stafford Loans.
If you think you may qualify for deferment, contact your student loan servicer (see details above) and continue to make payments on your loan until you have been notified that the loan deferment has been granted to avoid late fees or defaulting on your loan.


Those who are experiencing financial trouble may receive postponement or reduction of payments on a temporary basis, a practice known as forbearance. Those who are not eligible for deferment may be eligible for forbearance. All loans (both subsidized and unsubsidized) are subject to accrued interest during the forbearance period. Forbearance can be granted at up to 12 months at a time over three years. Apply directly with your loan servicer and be sure to continue to make loan payments until you have been notified that the forbearance has been granted.

Changing Repayment Plans

The Federal Family Education Loan Program and the Federal Direct Student Loan Program allow borrowers to change their repayment plans to fit new financial situations. Changing these plans may lower your payments and make it easier to repay your loans. Contact your loan servicer for details.

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