Student Loan Forgiveness if you Consolidate? Here’s How

Federal consolidation loans qualify for different forgiveness programs depending on your situation.

Student loan consolidation combines your loans into a single loan with a lower monthly payment and can lead to loan forgiveness. While student loan forgiveness might seem far-fetched, the Biden administration has introduced several fixes that have improved existing government programs. Those changes have led to the Education Department forgiving $25 billion in federal student loan debt. And it will push millions more borrowers to relief if the courts allow the Education Department to implement President Joe Biden’s loan cancellation plan.

Most federal consolidation loans are eligible for these loan forgiveness programs. Still, you may need to consolidate a second time, depending on the type of loan you have. You can complete the consolidation loan application online on the Federal Student Aid website, StudentAid.gov.

Unfortunately, private loans aren’t eligible for the programs listed below. Lawmakers are working to change that, but for now, you’ll want to explore other strategies for managing those debts.

Related: Are FFEL Consolidation Loans Eligible for Forgiveness?

Joint-spousal consolidation loans are eligible for many of these forgiveness options after President Biden signed the Joint Spousal Separation Act into law earlier this year. The Education Department is working on a de-consolidation application specifically for federal student loan borrowers who previously combined their loans with a spouse.

1. Public Service Loan Forgiveness

‍The Public Service Loan Forgiveness (PSLF) Program promises tax-free forgiveness to full-time nonprofit and government employees — including active duty military service members — after a decade of work and 120 qualifying payments.

Eligible consolidation loans:

• All Direct Consolidation Loans and other Direct Loans.

• FFEL Program Loans, including FFEL Consolidation Loans and loans that paid off Parent PLUS Loans. But you must consolidate the loan a second time into the Direct Loan program.

• Federal Perkins Loans, but only if consolidated into a Direct Loan.

Learn More: PSLF Qualifying Employers List

2. Limited PSLF Waiver

The PSLF Waiver temporarily expanded the public service program by counting payments borrowers made on Federal Family Education Loans, under ineligible repayment plans, late payments, and payments for less than the amount due. The waiver, which ended Oct. 31, 2022, has canceled nearly $30 billion in student loan debt for over 240 thousand borrowers, according to the U.S. Department of Education.

Eligible consolidation loans:

• Direct Consolidation Loans, but not loans that paid off Parent PLUS Loans. Parent borrowers remain eligible for the PSLF Program after making 10 years’ worth of student loan payments under the income-contingent repayment plan.

• FFEL Consolidation Loans, if consolidated into a new Direct Consolidation Loan.

Learn More: Should I Consolidate My Student Loans for PSLF?

3. Income-driven repayment plan forgiveness

Each of the four income-driven repayment plans — IBR, ICR, PAYE, and REPAYE — cap your monthly payments at 10-20% of your discretionary income and wipe away the remaining loan balance after 20 or 25 years. Pursuing income-driven repayment forgiveness makes sense if your student loan debt is over 1.5 times your annual salary because it’s unlikely you’ll make a dent in the balance without great sacrifice.

Learn More: When Will Student Loan Repayment Resume?

4. IDR Waiver

In April, the Education Department announced it would use one-time waivers and account adjustments to retroactively credit millions of borrowers with more payments toward loan forgiveness for public service work and through income-driven repayment options.

The IDR account adjustment will count the months you’ve spent on deferment (except for in-school deferment) before 2013 and time spent in long-term forbearances that lasted 12 straight months or over 36 cumulative months.

Eligible consolidation loans:

• All federal Direct Consolidation Loans, including those that paid off Parent PLUS Loans.

• FFEL Consolidation Loans, if consolidated into a new Direct Consolidation Loan.

1. Total and Permanent Disability

If you can’t work due to a permanent physical or mental disability, you may qualify to have your student debt canceled. To be eligible for a total and permanent disability discharge, you must provide documentation from your doctor, the Social Security Administration, or the Veterans Administration proving your disability.

Eligible consolidation loans:

• All federal Direct Consolidation Loans, including those that paid off Parent PLUS Loans.

• FFEL Consolidation Loans, if consolidated into a new Direct Consolidation Loan.

Private student loan borrowers rarely have any forgiveness or cancellation opportunities. Banks and online lenders make money from the interest you pay each month. Those financial institutions would lose money if they wrote off your balance.

If you can’t keep up with the payments, ask your loan servicer about available repayment programs.

You can also look to refinance for a lower interest rate and longer repayment term. The key to getting the best terms when refinancing is credit. The better your credit score, the more likely it is that private lenders will give you a competitive offer.

Learn More: Refinance Student Loan Lenders

Student loan forgiveness is possible for consolidated federal loans. But watch out for scams and get out of default. Forgiveness isn’t typically an option for defaulted loans.

Let’s talk if you’d like help getting the right strategy for your loans. I’ve helped thousands of borrowers figure out the right plan that lets them buy a home, retire, and live their life without worrying about their student debt.

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