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What to know about student loan cancellation for nurses

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Looking for a Student Loan Discount for Nurses? This guide covers different forgiveness programs, how to qualify, and alternative options. (iStock)

Nursing school can get expensive. Nearly 70% of nursing students take on student debt to fund their degrees, and many expect to owe $ 40,000 to $ 55,000, according to data from the National Student Nurses’ Association. If you are attending nursing school or are a recent graduate, you may be able to ask for your student loan forgiveness.

The best student loan forgiveness option for you will depend on your degree, the type of student loan you have, and where you plan to practice nursing.

This guide will cover how student loan forgiveness works, loan forgiveness programs for nurses, and alternative options to consider.

You can use Credible to compare student loan refinance rates in minutes.

What is student loan forgiveness and how does it work?

With student loan cancellation, all or part of your loan balance is written off, which means you don’t have to pay it off. If you have federal student loans, you can find federal forgiveness programs to provide you with some form of debt relief. But no similar program exists for private student loan borrowers.

Student loan waiver for nurses: national programs

Here are three national student loan exemption programs for nurses.

Cancellation of the Federal Perkins loan

  • What it is – This federal program allows borrowers in certain areas, such as education, law, and nursing, to cancel all or part of their Perkins loans.
  • How it works – If you have a Perkins loan, you may be eligible for 100% forgiveness of your student loans after five years of qualifying service.
  • Eligibility criteria – To be eligible you must have a Perkins loan (schools stopped issuing new ones in 2017) and you must be working full time as a nurse.
  • How to register – You must apply to the school that issued your Perkins loan or to your school’s Perkins loan service.

National Health Service Corps Loan Repayment Program

  • What it is – The National Health Service Corps loan repayment program repays student nurses loans (federal and private) for health professionals working in underserved areas.
  • How it works – After working for at least two years in a certain field, you can have up to $ 25,000 of your loans canceled if you work part time. If you work full time, you can get up to $ 50,000 from your canceled loans. You will not be taxed on the canceled loan amount.
  • Eligibility criteria – To be eligible for the pardon, you must work at least two years (full time or part time) as a registered nurse or nurse practitioner, in a clinical practice in an area of ​​shortage of health professionals, or HPSA. Or, you can work as a nursing teacher at a qualified nursing school.
  • How to register – You can apply on the NHSC website. As of October 2021, the application process has been closed, but you can register to be notified when it reopens.

Public Service Loan forgiveness program (PSLF)

  • What it is – PSLF is a federal program that offers federal student loan exemption to borrowers who work in the public or non-profit sector.
  • How it works – After making 120 eligible payments, your student loan balance is canceled. And the IRS does not consider the taxable income of the remitted amount.
  • Eligibility criteria – To be eligible, you must be working full time for a government or non-profit organization.
  • How to register – Complete the PSLF Loan Remittance Form and mail or fax it to the US Department of Education.

If you are not eligible for a student loan cancellation program, you can use Credible to compare student loan refinance rates from private lenders without affecting your credit.

Student loan waiver for nurses: other options

If you’re a nurse looking for student loan forgiveness, here are three more options to consider.

Indian Health Service Loan Repayment Program

  • What it is – This loan repayment program is offered by Indian Health Service, a federal health care program for Alaska Natives and American Indians.
  • How it works – With this program, you can receive up to $ 40,000 in student loan forgiveness in exchange for a two-year commitment to work at an Indian Health Service facility. Thereafter, you can renew your contract annually until all your loans are repaid.
  • Eligibility criteria – To be eligible, you must commit to working for two years at a facility that serves American Indians and Alaska Natives.
  • How to register – You can apply on the IHS website.

Military student loan discount for nurses

  • What it is – Some branches of the military offer student loan exemption programs.
  • How it works – If you join the military, you may be eligible for a loan forgiveness. For example, if you join the military as an active-duty medical professional, you may be entitled to $ 120,000 ($ 40,000 each year for three years) to pay off your student loans. As a member of the US Army Reserve Team, you could receive up to $ 60,000.
  • Eligibility criteria – To be eligible, you must become a nurse in the military or in another branch of the military.
  • How to register – Contact the branch of the military you wish to join for more information.

State specific loan exemption for nurses

  • What it is – Some states have their own student loan waiver programs for nurses.
  • How it works – For example, the Louisiana State Loan Repayment Program provides loan forgiveness to nurses who work in areas of health worker shortages, work full time, and meet other requirements.
  • Eligibility criteria – Requirements vary by state, but you must be licensed to practice in a certain state to be eligible for its loan cancellation programs.
  • How to register – The application process varies by state.

Pros and Cons of Student Loan Cancellation for Nurses

While canceling the student loan can help save you money, it can have its downsides as well.

Benefits of student loan cancellation for nurses

  • Free up money for other expenses – If some or all of your student loans are canceled, it can help you save money for other financial goals, like buying a home, building an emergency fund, or saving for retirement.
  • You will not be taxed on the amount remitted – If you have loans forgiven by the end of 2025, you will not pay federal income tax on the forgiven amount.

Disadvantages of canceling student loan for nurses

  • Could limit your earning potential – Some forgiveness programs require you to be in a specific job for a minimum amount of time before receiving forgiveness. This could mean taking a lower paying job while still fulfilling your service obligation.
  • Your debt may increase – Interest continues to accumulate on your loans while you wait for them to be canceled. If you only pay the minimum balance but ultimately don’t qualify for a loan cancellation program, you could end up with a much higher loan balance.

Alternatives to student loan forgiveness for nurses

If you don’t think your student loan waiver or student loan assistance is right for you, consider these other ways to save money on your student loans.

Income Based Repayment Plan

If you have a federal student loan, the Department of Education offers four types of IDR plans that you may be eligible for. Each plan lets you make monthly student loan payments based on a percentage of your discretionary income and your family size. Repayment terms vary from 20 to 25 years.

Once the repayment term is over, any remaining balance is canceled. This remitted amount was previously taxable. But under current federal law, there is no tax on the canceled student loan amount until 2025.

Refinance your student loans

When you refinance your student loans, you take out a new loan from a private lender to pay off all or part of your current federal or private student loans. Your new loan usually has different terms and potentially at a lower rate. If you receive a lower rate, you will save on interest.

For example, suppose you have 10 years to pay off a $ 50,000 student loan with an interest rate of 7%. If you refinanced into a 10-year loan for the same amount at 4% interest, you could save $ 8,918. On top of that, your monthly payment would drop from $ 581 to $ 506.

But think carefully before you refinance a federal loan with a private lender – it will mean the loss of federal protections such as IDR plans and loan forgiveness.

To see how much you could save through refinancing, you can use a student loan refinance calculator.

If you decide that refinancing is the right solution for you, Credible makes it easy for you to compare student loan refinancing rates from various lenders.