Legitimate Student Loan Forgiveness Companies & Programs

Complete, immediate student loan forgiveness might seem like a scam — and it often is. The government has programs that forgive federal student loan debt. But few of those programs work quickly. And none ask you to cough up more cash to apply for relief. Yet, that’s what these debt relief companies promise they can deliver if you dig into your wallet to pay their upfront fees.

Student loan forgiveness is free. You don’t have to pay to get your loans forgiven under any existing student loan forgiveness program offered by the federal government. In fact, the U.S. Department of Education has hired private companies to help you with your student loans at no added cost.

So who are these student loan servicers? What forgiveness programs can they help you qualify for? And what red flags should you look out for if you hire help to get your debt forgiven?

You have seven options for working with a legitimate student loan forgiveness company that has a contract with the government:

• Aidvantage

• ECSI

• ED/Financial

• Great Lakes

• MOHELA*

• Nelnet

• OSLA

These companies on this list oversee the Education Department’s forgiveness programs for federal student loans. If you have FFEL, or Federal Family Education Loans, with AES or Navient, you must consolidate them into a Direct Consolidation Loan before qualifying for most forgiveness and cancellation options. You’ll need to do the same for any Perkins Loans you borrowed.

Similarly, if you have defaulted on federal student loans, you must work with the Default Resolution Group to reinstate your account before qualifying for most forgiveness programs.

Private student loans aren’t eligible for federal student loan forgiveness programs — even if you refinanced federal loans with a private lender like Sallie Mae, Citizens Bank, or Discover. But many lenders will wipe out your loans if the primary borrower can no longer work due to a permanent mental or physical disability.

Related: Can Private Student Loans Be Forgiven?

* The Education Department switched management of the PSLF Program from FedLoan Servicing to MOHELA in July 2022. As of November, all accounts were automatically moved to MOHELA. The transfer process didn’t change repayment terms or eligibility for forgiveness plans available on the loans.

Although it won’t be a quick fix, the Education Department offers many debt relief options that can clear your balance. Many of these programs require you to meet certain criteria over several years of payments. Three of the most common loan forgiveness programs are listed below.

Note: The IRS won’t send you a tax bill at the end of the year if your loans are erased under these forgiveness or discharge programs. Due to a change in law, student loan forgiveness is tax-free until 2026.

Biden’s student loan cancellation

In August, President Biden announced a broad student debt cancellation plan that covers most Americans with loans. Pell Grant recipients, who are the majority of borrowers and come from low-income households, will get up to $20 thousand in relief. Everyone else will get $10 thousand.

The plan set off a flurry of legal challenges across the country, each singing the same tune: the president lacked the authority to wipe out debt with the stroke of a pen, and the plan is unfair.

The Biden administration cast many of those cases aside, but two persisted and put the proposed relief on hold. The Supreme Court will hear the lawsuits in February and deliver its decision a few months later. Legal experts believe that the justices will rule the plan is illegal. If that happens, borrowers will need to look to other slower but more robust forgiveness options to get their remaining balance forgiven.

Income-driven repayment forgiveness

Federal student loans are unlike any other loan that you’ve borrowed. Your mortgage, car loan, and private student loans all require payments soon after the money is disbursed and generate a monthly bill for an amount that repays the entire loan balance plus interest over a set number of years with few deferment or forbearance options.

In contrast, the government lets you postpone payments until after you leave school. If you can’t afford the bill, you can enroll in one of the department’s income-driven repayment plans that cap your monthly payments at a fraction of your discretionary income. These IDR Plans also promise to write off your remaining balance after 20 to 25 years.

No other debt has that benefit. Not credit cards. Not bank loans. Nothing.

There’s just one problem: IDR Forgiveness was broken.

An investigative report from NPR revealed that over 4 million borrowers had been in repayment for over 20 years, but only 32 had gotten a student loan discharge. The problems were many. Student loan servicers pushed borrowers into long-term forbearances and deferments instead of income-based repayment. They did not warn that consolidating their loans would reset the time needed to get their debt forgiven. And they did not track how many payments a borrower made under an IDR plan.

A fix is on its way. Last April, the Education Department announced a plan to retroactively count payments made under any repayment plan and time spent in certain periods of deferment and forbearance. The department has begun reviewing borrowers’ accounts. It expects to finish its count this summer and provide a status update to borrowers on StudentAid.gov.

About 40 thousand people will have their balance immediately forgiven. Millions more will be pushed several years closer to the finish line.

Related: How the IDR Waiver Works

The IDR Waiver & Account Adjustment is open to all federal student loan borrowers, but parents who borrowed loans to cover their children’s college costs will likely need to consolidate to meet the eligibility requirements. Read more about Parent PLUS Loan Forgiveness During Covid.

Public Service Loan Forgiveness

Full-time employees of government agencies and some nonprofit organizations can get their entire loan balance forgiven tax-free after making 120 qualifying payments. PSLF benefits teachers, firefighters, health professionals, law enforcement personnel, and so on.

Like IDR Forgiveness, the PSLF Program was broken for years. The White House took action last October and made changes that have led to tens of thousands of borrowers getting over $24 billion in relief. More will join them as the department continues reviewing the payment history of PSLF applicants who submitted an employment certification form before the Oct. 31, 2022, deadline.

Related: How the Limited PSLF Waiver Works

All federal student loan borrowers with a public service job are eligible for relief. To qualify, you must have Direct Loans and switch to one of the income-driven repayment plans — Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE). You’ll need to make 120 monthly payments under that plan while working for a qualifying employer. Visit the Federal Student Aid site, StudentAid.gov, to check the type of loans you have and to apply.

Related: Are Parent PLUS Loans Eligible for PSLF?

Other loan forgiveness programs are available, such as the Teacher Loan Forgiveness Program, Perkins Loan Cancellation, Total and Permanent Disability Discharge, and Borrower Defense to Repayment Discharge, but few borrowers qualify for them. Those that do would typically benefit more from the programs listed above.

In addition, many states — including Arizona, Illinois, Massachusetts, and New York — have loan repayment assistance programs (LRAPs) that they offer teachers, nurses, pharmacists, doctors, lawyers, and so on. Those state programs cover a portion of an eligible borrower’s monthly payments during the year. For example, Texas has a loan repayment program for teachers that pays up to $2,500 per year for up to five years on federal and private education loans. The program is open to science, math, and language arts teachers working in a critical shortage area.

Related: Student Loan Repayment Assistance Programs

Similarly, the military offers service members and veterans loan forgiveness up to $50 thousand to pay off their loans in exchange for a multi-year service commitment. Read more about military student loan forgiveness programs.

The Biden administration also changed its policy for defending student loan undue hardship cases in bankruptcy. The new guidance is expected to help make it easier for deserving borrowers to get a discharge without having to produce a cache of documents and go through a rigorous trial where they answer questions that dig into their work experience, living expenses, and spending habits. Read more about the new student loan bankruptcy guidelines.

Student loan forgiveness scams are everywhere. Even before Biden announced his plan to cancel up to $20 thousand in federal student loans, shady callers were already dialing borrowers offering “special access” to official-sounding federal programs. I’ve gotten letters, emails, and phone calls from scammers promising me I qualified for a “pandemic grant,” “stimulus forgiveness program,” or “Biden loan forgiveness.”

The letters and calls sound legit. But they’re not. Legitimate companies don’t promise that your debt will be wiped out if you hire them and pay their fees. The process doesn’t work that way.

For example, to qualify for IDR Forgiveness, you must make at least 240 student loan payments under one of the IDR plans. That process can’t be sped up, no matter how much money you pay for help.

Red flags to look out for are unsolicited calls that demand upfront fees and ask for your FSA ID and Social Security Number to “prequalify” you for forgiveness. Another common scam is to use “strong advertising language” such as:

• “Act immediately to qualify for student loan forgiveness before the program is discontinued.”

• “Your student loans may qualify for complete discharge. Enrollments are first come, first served.”

• “Student alerts: Your student loan is flagged for forgiveness pending verification. Call now!”

“Though the U.S. Department of Education (ED) may reach out to highlight temporary programs like the limited PSLF waiver, aggressive advertising language like the above will not come from ED or our partners.”

Think you may have been scammed? Do these three things:

1. Change your FSA ID password.

2. Contact your loan servicer to revoke any power of attorney or third-party authorization you signed.

3. Contact your credit card company or bank to stop payment to the student loan debt relief business.

You can also file a suspicious activities report with the Federal Student Aid Feedback System.

The Federal Trade Commission has received over 30 thousand complaints related to student loan debt relief, including scam calls, in 2022.

Student loan forgiveness is free, but as the adage goes, “You get what you pay for.” Historically, the quality of help student loan servicers delivered to borrowers can be categorized at best as “shaky.” At worst? Criminal.

Thousands of complaints and lawsuits have been filed against many of these companies over the years by borrowers, consumer advocacy groups, and state attorney generals, with a common thread: servicers provided incorrect advice that cost people thousands of dollars in interest and slowed their progress toward forgiveness programs.

In the last two years, the White House has increased its oversight and cracked down on servicers, prompting a few, most notably FedLoan Servicing and Navient, to wave the white flag and exit the business. Despite that effort, when you call your student loan servicer for help, the advice you receive can vary greatly depending on who answers the phone.

When you have tens of thousands of dollars of forgiveness hanging over your head, finding every advantage you can get makes sense. Not only can the right help put you in a position to get the maximum relief, but it also can offer you something more valuable: peace of mind.

Here are three organizations to consider for information, advice, or both:

• Student Borrower Protection Center

• The Institute of Student Loan Advisors

• National Consumer Law Center

You can also book a call with me. I’ve helped thousands of borrowers get all or part of their student loan debt forgiven — no matter their profession or personal situation.

Refinancing with a private lender to get a better interest rate makes sense if two things are true:

• You don’t work in one of the jobs that lead to loan forgiveness after a few years of making payments.

• You have a high annual income, making it likely that you’ll repay your loans before they’re forgiven under an IDR plan.

Compare different student loan refinancing interest rates and repayment terms with several lenders at once using an online marketplace like Credible. You’ll get the best rates and terms if you have a high credit score and enough money to cover your other debts. If not, you’ll need a cosigner who meets both criteria.

Legitimate student loan forgiveness companies exist, but to get the best help quickly, you might need to hire a student loan lawyer or business that has highly trained experts on staff.

No matter what you do, look out for scammers trying to profit from the student loan forgiveness hoopla that’s in the news.

UP NEXT: How to Apply for Student Loan Forgiveness