Loan Forgiveness
The cancellation of part or all of a borrower's remaining debt, most commonly for federal student loans.
What is Loan Forgiveness?
Loan forgiveness is the partial or complete cancellation of a borrower's remaining loan balance by the lender or a government program, eliminating the obligation to repay the forgiven amount. Federal student loan forgiveness programs are the most prominent examples in the US. Key programs include Public Service Loan Forgiveness (PSLF), which forgives remaining federal loan balances after 120 qualifying payments for borrowers employed full-time by a government or nonprofit organization; and income-driven repayment (IDR) plan forgiveness, which forgives balances remaining after 20–25 years of qualifying payments. Forgiven student loan amounts may be taxable income depending on the program and applicable law.
Example
A public school teacher with $80,000 in federal student loans who enrolls in an income-driven repayment plan and works full-time for a qualifying public school for 10 years could have their entire remaining balance forgiven under Public Service Loan Forgiveness. As of 2024, the PSLF program has forgiven over $62 billion in student loan debt for more than 870,000 borrowers.
Source: Federal Student Aid — Public Service Loan Forgiveness