Debt Forgiveness: Is it What It Seems?

You may have heard about debt forgiveness or student loan forgiveness and wondered how it works. Or maybe you’ve just heard that getting rid of your student loans is possible, and you want to know how. We can help!

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This article will explore what debt forgiveness means and who qualifies for it. We’ll also look at the different types of student loan debt relief programs available today to make an informed decision about whether this is right for you.

What is debt forgiveness?

Debt forgiveness is a process where a lender cancels your debt. This means that you no longer pay back the loan, but it doesn’t mean that you get to keep the money. The lender may still require you to pay taxes on this forgiven debt, so it’s important to consult with a tax professional if you’re considering debt forgiveness.

Debt forgiveness can be an option for people who are struggling to pay off their student loans and other types of consumer debt (credit card payments, medical bills, and so on). If you’ve been unable to repay your debts after making regular payments for several years or if it would take too long for you to pay off all of your debts due to financial hardship or unemployment, then debt relief may help reduce or eliminate the amount that you owe.

People in these situations may qualify for debt forgiveness

  • If you are in default on a federal student loan, you may qualify for debt forgiveness.
  • If you qualify for a federal student loan forgiveness program, your debt will be forgiven after making 120 on-time payments (10 years).
  • If you have a permanent disability, your loans may be discharged if the Social Security Administration determines that because of it, you are unable to perform a substantial gainful activity.
  • If you’re unemployed and looking for work but can’t find any employment or have taken steps to improve your job prospects without success (for example, by getting new training or education), then under certain conditions (including income limits), some types of federal student loans may be eligible for discharge. To determine whether this applies to circumstances surrounding potential unemployment or underemployment related to financial hardship, contact lenders directly as they have different requirements regarding what qualifies applicants who are seeking forgiveness due to financial hardships including unemployment status.”

How do I know if I qualify?

There are several ways to qualify for student loan forgiveness. You may qualify if you:

  • Are you a student loan borrower and meet certain criteria?
  • Are you in default or in a repayment plan that will not pay off your loans within 20 years?

The Department of Education lists all the requirements for each program on its website.

Understanding what debt forgiveness means, who qualifies, and how to apply can help you make the best decision for your situation.

What is debt forgiveness?

Debt forgiveness is when a creditor forgives (cancels) the remaining balance on a loan that you can’t afford to repay. It’s more common with federal student loans, but some private creditors will also offer this option if they feel they’re losing too much money on your account.

Who qualifies for debt forgiveness?

Generally speaking, anyone who’s in financial hardship or struggling to pay their loans could potentially qualify for debt forgiveness. You’ll need to meet specific criteria before your request will be considered by your lender or servicer (the company responsible for collecting payments). What these criteria depend on is which type of loan you have and whether it’s private or federal—there are different rules for each type.

How do I apply for debt forgiveness?

If you want to see if it’s possible for someone else like the government or creditor organization to give out funds – whoever issued them originally – then speak with them directly about what options there are available before making any big decisions such as consolidating all debts into one payment plan which may seem appealing at first glance since many people do not realize how much interest rates can change over time so make sure read carefully through all fine print details given during contract signing process because once signed there usually no turning back – definitely something worth considering carefully before signing anything!

Who Qualifies for Debt Forgiveness?

Depending on the context, debt forgiveness can be a positive or negative thing. When it comes to federal student loans, debt forgiveness means that your loans will be discharged or canceled. This could take place either because of an act of nature (such as a hurricane) or through bankruptcy proceedings. In most cases, however, it’s due to financial hardship—a circumstance where you’ve been unable to pay back your loan for at least three years and have made regular efforts to contact the lender throughout that time period.

There are some types of debts that do not qualify for federal student loan forgiveness programs: credit card debt; payday loans; private student loans; and car payments (though there may still be options available).

To apply for federal student loan forgiveness, get in touch with your servicer right away so they can start working on the process once they receive approval from the Department of Education.

Debt Forgiveness is Not Always What it Seems.

Debt forgiveness is not always the best option. While it can be a good option for some, debt forgiveness is not something that everyone should pursue.

Debt forgiveness is not a free pass to stop paying your debts or avoiding your creditors altogether. In fact, depending on how much unpaid debt you have and the type of forgiven debt, you may end up owing taxes on the forgiven amount. If this happens and you don’t pay those taxes voluntarily, it’s likely that your federal income tax refund will be used to pay them off instead (you’ll get that money back when you file next year).

Can I Get a Debt Consolidation?

Debt consolidation is a good option if you have multiple loans, such as credit card debt and student loans.

If you can’t pay off all your debts, debt consolidation could help you save money on interest. You can consolidate your student loans with a private lender and get a lower interest rate than what the federal government offers. The downside is that it will cost more money in the long run if you don’t qualify for student loan forgiveness or some kind of repayment plan through the Department of Education (DOE). You also must be aware that many private lenders don’t offer flexible repayment plans like those offered by DOE, so it could mean another group of people who struggle to pay back their debts after consolidating them with these companies.

It’s always important to look into a lender and its qualifications.

It’s always important to look into a lender and its qualifications. Is the lender legitimate? If so, how long has it been operating? What is their track record? Are they licensed by state law or is there any indication that they might be breaking the law in some way (i.e., scamming customers)? You also should look at what is available in the marketplace at large—what are other lenders offering, especially when it comes to loan terms and interest rates?

In addition, it’s important for you to consider whether this particular loan makes sense for your situation as well as whether it would be better off to go with something else instead. For instance:

  • Would I be better off paying off my debt through another method such as consolidation or refinancing?
  • Will repaying this debt cause me more stress than what I already have going on (i.e., job loss).

Who can apply?

In order to qualify, you must have a student loan and be in default. In addition, you must have a low income and high debt burden (more than 1/3 of your gross monthly income).

How to Apply

You can apply for debt forgiveness in one of several ways. You may:

  • Apply online, using a government website. This is the easiest method for most people who are comfortable using their computers and accessing the internet.

Applying for debt forgiveness takes time, but it’s an option if you are struggling to pay off your student loans.

  • It takes time to apply for debt forgiveness.
  • You should be careful about which lender you choose, as there are different qualifications for each one.
  • You may be eligible if you meet the qualifications established by your loan servicer or other financial institution, such as a bank or credit union.
  • To apply for debt forgiveness, contact your lender directly and ask about their specific requirements.


As we’ve seen, debt forgiveness is not the best option for everyone. It can be a great relief to those who are struggling with their student loans or other types of debt, but it’s important to do your research before applying. If you think you may qualify, we encourage you to speak with an expert at Student Loan Hero today so they can guide you through this process and help determine if additional repayment options might be right for your financial situation.