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.
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.
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.
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.
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.
This kind of loan cancellation benefit is offered to eligible employees in the government and non-profit sectors.
Some loan forgiveness programs are available for borrowers in specific professions like teachers, nurses and military or defence services.
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.
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.
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.
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.
