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Student Loan Forgiveness: How It Works

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Created on
March 27, 2023


What’s Inside

Have you availed of a student loan in India to pursue education abroad? If your answer is ‘yes’, you may have heard of President Biden’s Public Service Loan Forgiveness (PSLF) program. Learn more about student loan forgiveness and how it works.

Student Loan Forgiveness: An Introduction

It is a program or scheme that removes the burden of repaying the funds from student loan borrowers. Such loan forgiveness programs come with strict eligibility criteria and clearly lay out the kinds of loans eligible for this benefit. Typically, loans availed from private lenders are not covered. 

Student loan forgiveness is primarily popular in the USA. President Biden’s latest loan waiver program was introduced in the wake of pandemic-driven financial constraints American student borrowers face. In India, however, government-backed student loan forgiveness programs do not exist as of March 2023. 

How Does Student Loan Forgiveness Work?

Certain kinds of loans are earmarked as eligible borrowings in a student loan forgiveness program. After that, a part or all of these loans are forgiven, meaning that the borrower no longer needs to repay the principal of the forgiven component or the interest due thereon. 

Although all kinds of student loans can theoretically be forgiven, the government can decide which types to waive off or cancel. As a result, student loans availed from government institutions (known as federal loans in the USA) are generally forgiven, while private loans are often not. 

Types of Student Loan Forgiveness Programs

Different types of student loan forgiveness programs may be available to students. Here are some common variants of this scheme and the details of how they work.

Income-Driven Repayment Forgiveness

The loan payments are set at a percentage of your monthly income. After 20 to 25 years, the unpaid balance remaining, if any, will be forgiven. 

Public Service Loan Forgiveness

This kind of loan cancellation benefit is offered to eligible employees in the government and non-profit sectors. 

Profession-Based Loan Forgiveness

Some loan forgiveness programs are available for borrowers in specific professions like teachers, nurses and military or defence services. 

Forgiveness in Case of Specific Scenarios 

Here, the loan is forgiven in the case of specific scenarios. For instance, if the borrower files for bankruptcy, suffers a total and permanent disability, or passes away, the loan balance is waived.

Efficient Loan Planning

While waiving your student loan sounds ideal, the Indian government does not currently offer this option. The next best thing, of course, is to plan your repayments smartly and reduce the overall financial burden of your EMIs. 

Fi Money's EMI calculator can help you get started with this. You can also use the AI-powered analyser tool from Fi to monitor your expenses and optimise your savings. This will help you pay off your student loan faster.

Frequently Asked Questions 

How do I get loans forgiven?

If you have availed of a loan in India for higher education (whether in India or abroad), no student loan forgiveness program is active in India. However, if you have availed of an education loan in the US, you can get your loan forgiven if you qualify for this benefit. 

Who pays for student loan forgiveness?

In the case of student loan forgiveness programs introduced by a country's government, the government will pay for the amounts waived. To meet these costs, governments will either have to reduce their spending or raise their taxes or other sources of revenue. 


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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