Alabama Student Loan Forgiveness Programs

Do you live in Alabama and are struggling with student loan debt? Finding financial stability can be tough, especially when you’re just starting your career.

But there’s hope!

Alabamians qualify for several student loan forgiveness programs designed to help them get on track toward a more secure future.

Related: State Programs for Student Loan Forgiveness

Understanding student loan forgiveness

Student loan forgiveness is the cancellation or discharge of a borrower’s student loan, either partially or entirely.

Offered through designated programs and conditions, forgiveness aims to support graduates and parents who’ve taken loans for higher education. These programs ease student loan debt burdens and incentivize borrowers to work in specific fields or industries, particularly in underserved areas.

For example, a teacher might receive loan forgiveness for working in a low-income school district, helping to alleviate their debt while also providing valuable educational services to the community. Alternatively, a borrower enrolled in an income-driven repaymentIncome-Driven Repayment (IDR)A category of federal student loan repayment plans that calculate monthly payments based on income and family size rather than loan balance. Any remaining balance can be forgiven after 20–25 years of qualifying payments. plan could qualify for forgiveness after making payments for 20 or more years, offering long-term financial relief.

Related: Income-Based Repayment Plan Forgiveness

Types of Student Loans Eligible for Forgiveness

Various student loan forgiveness programs are available, depending on the loan type and specific conditions borrowers need to meet.

The two main categories of loans eligible for forgiveness include:

Federal student loans

Offered by the U.S. Department of EducationU.S. Department of Education (ED)The federal agency that oversees federal student aid programs, issues regulations for federal student loans, and is the ultimate lender on Direct Loans., federal loans typically have lower interest rates and more flexible repayment options compared to private loans.

Each program has distinct eligibility criteria and forgiveness terms.

State-specific loans

Some states offer their own student loan programs with unique forgiveness options for residents. Alabama has a state-specific loan forgiveness program designed to encourage graduates to pursue specific careers in the state, which we will discuss in the next section.

Related: How to Apply for Student Loan Forgiveness

Alabama State-Specific Loan Forgiveness

The Alabama Math, Science, and Technology Education Program (AMSTEP) encourages graduates to work in specific fields within the state. This loan forgiveness program aims to address workforce shortages in Alabama by incentivizing qualified individuals to pursue careers in these high-demand fields. Related: Student Loan Forgiveness for Alabama Nurses

Eligibility criteria

• Must be a resident of Alabama
• Must have earned an undergraduate or graduate degree in a qualifying field (math, science, or technology) from an accredited Alabama institution
• Must be employed full-time in a qualifying field within the state of Alabama
• Must not be in defaultDefaultThe status of a federal student loan after the borrower has failed to make required payments for 270 days. Default can trigger collection actions such as wage garnishment, tax refund offset, and damage to credit reports. on any federal or state educational loans
• Must apply to the Alabama Commission on Higher Education (ACHE) within one year of graduation

Forgiveness amounts

• Up to $5,000 per year for undergraduate degree holders
• Up to $10,000 per year for graduate degree holders
• Maximum forgiveness of $20,000 for undergraduate degree holders and $40,000 for graduate degree holders

Forgiveness duration

• Forgiveness is granted annually based on continued eligibility
• Recipients must annually apply to ACHE to renew their forgiveness benefits

How to apply and contact information

Interested teachers can apply for the AMSTEP program by contacting the Alabama Commission on Higher Education (ACHE). You can find detailed information about the application process, deadlines, and required documentation on the ACHE’s official website or by contacting their office directly.

Alabama Commission on Higher Education (ACHE)

P.O. Box 302000

Montgomery, AL 36130-2000

Phone: (334) 242-1998

Website: www.ache.edu

Alabama State Board of Education (ALSBE)

P.O. Box 302101

Montgomery, AL 36130-2101

Phone: (334) 242-9700

Website: www.alsde.edu

Funds are limited, and recipients are selected based on funding and the number of applicants each year.

Federal student loan forgiveness programs for Alabama residents

1. President Joe Biden’s Nationwide Forgiveness Program

Eligibility criteria:

• Income limits: Individuals with an annual income during the pandemic under $125,000 or married couples/heads of households with an income under $250,000 may be eligible for (1) Up to $20,000 in federal student loan cancellation for Pell Grant recipients; or (2) Up to $10,000 in federal student loan cancellation if they did not receive a Pell Grant.
• Qualifying time period: Forgiveness applies only to loans taken before July 2022.
• Loan types: Only federally held student loans are eligible. This excludes some Federal Family Education Loans (FFEL) and most Perkins loans.

Forgiveness amounts and application process:

• If Biden’s plan survives legal challenges, eligible borrowers can submit an application via the Federal Student AidFederal Student Aid (FSA)The office within the U.S. Department of Education that manages federal grants, work-study, and student loans. It runs the FAFSA, the StudentAid.gov website, and oversees the federal loan servicers. website.
• Forgiveness is automatic for many borrowers, requiring only basic personal information.
• Borrowers can request a refund for any payments made on federally held student loans during the payment pause (starting March 13, 2020), ensuring they receive the full $10,000 or $20,000 refund without penalty.

2. Income-Driven Repayment Account Adjustment

Eligibility criteria:

• Starting in spring 2023, borrowers who have been paying their federal student loans for 20 years or longer will see their remaining debt discharged under the IDR Waiver.
• Millions more will move significantly closer to forgiveness when their accounts are updated in 2024.

Forgiveness amounts and duration:

• The IDR account adjustment allows every month spent in student loan repayment or on pause — regardless of whether any student loan payments were made — since leaving school to count toward forgiveness, applied one time only.
• About 40,000 borrowers with older loans will see their balances wiped clean starting in spring 2023, and over 3.6 million borrowers are expected to receive at least three years of more credit toward IDR forgivenessIDR ForgivenessThe forgiveness of any remaining federal student loan balance after a borrower has completed 20 or 25 years of qualifying payments under an income-driven repayment plan, depending on the specific plan..

3. Public Service Loan ForgivenessPublic Service Loan Forgiveness (PSLF)A federal program that forgives the remaining balance on Direct Loans after 120 qualifying monthly payments made while working full-time for a government or qualifying nonprofit employer. Program (PSLF)

Eligibility criteria:

• Work full-time for a qualifying public service organization, such as the federal government, a non-profit organization, or a state university like the University of Alabama.
• Make 120 qualifying payments under a qualifying repayment plan. Payments do not have to be consecutive but must be made on time.

Forgiveness amounts and duration:

• After making 120 qualifying monthly payments, borrowers can apply for PSLF to have the remaining balance of their Direct Loans, including Parent PLUS Loans, forgiven.
• The forgiven amount is not considered taxable income.

4. Teacher Loan ForgivenessTeacher Loan ForgivenessA federal program that can forgive up to $17,500 of Direct or FFELP loans for teachers who complete five consecutive years of full-time teaching at a low-income school or educational service agency. Program

Eligibility criteria:

• Teachers must work full-time for five consecutive academic years in a low-income school or educational service agency.
• Must have taken out their federal Direct or Stafford Loans after October 1, 1998.

Forgiveness amounts and duration:

• Highly qualified math and science teachers in secondary schools and special education teachers can receive up to $17,500 in loan forgiveness.
• Other eligible teachers may receive up to $5,000.
• Forgiveness is granted after completing the required five consecutive years of teaching service.

5. Military Service Loan Forgiveness Programs

Eligibility criteria:

• Various programs are available for eligible military service members, including the Army Loan Repayment Program (ALRP), the Navy Loan Repayment Program (NLRP), and the National Guard Loan Repayment Program (NGLRP).
• Each military student loan forgiveness program has its own eligibility criteria, such as the length of service, loan type, and qualifying military occupation.

Forgiveness amounts and duration:

• The forgiveness amounts and duration varies by program and branch of service.
• For example, the Army and Navy Loan Repayment Programs offer up to $65,000 in loan repayment assistance, while the National Guard Loan Repayment Program provides up to $50,000.
• These benefits are usually disbursed yearly over a specified period, depending on the service member’s commitment to the military branch.

Alternatives to Student Loan Forgiveness for Alabama Residents

Loan Consolidation Overview:

• Loan consolidation involves combining multiple federal student loans into a single Direct Consolidation Loan.
• This simplifies loan management by having a single monthly payment and can lower monthly payments by extending the repayment term.

Benefits and considerations:

• Access to more repayment plans and forgiveness programs.
• Simplified loan management with a single monthly payment.
• Potential for lower monthly payments.
• Extending the repayment term might result in paying more interest over the life of the loan.

Loan RefinancingRefinancingTaking out a new private loan to pay off one or more existing student loans, usually to lower the interest rate or change the repayment term. Refinancing federal loans into a private loan eliminates federal benefits like IDR and PSLF. Overview:

• Loan refinancing involves obtaining a new loan with a private lender to pay off existing federal or private student loans.
• The goal is to secure a lower interest rate or adjust repayment terms, potentially reducing the overall cost of the loan.
• Use an online marketplace like Credible to shop with multiple lenders simultaneously without a hard credit check.

Benefits and considerations:

• Significant savings in interest payments over time.
• Reduced monthly payment amount.
• Loss of access to federal benefits, including income-driven repayment plans, loan forgiveness programs, and deferment or forbearance options.
• Important to evaluate the benefits of refinancing against potentially losing federal protections.

Income-Based RepaymentIncome-Based Repayment (IBR)A federal income-driven repayment plan that caps monthly payments at 10% or 15% of discretionary income, depending on when the loans were taken out. Remaining debt is forgiven after 20 or 25 years of qualifying payments. Plans Overview:

• Income-based repayment plans, such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent RepaymentIncome-Contingent Repayment (ICR)The oldest federal income-driven repayment plan, with payments generally set at 20% of discretionary income or a fixed 12-year amount, whichever is lower. It is the only IDR plan available to Parent PLUS borrowers after consolidation. (ICR), adjust monthly payments based on the borrower’s income and family size.
• These plans can provide relief for borrowers experiencing financial hardship.

Benefits and considerations:

• Significantly lower monthly payments, providing financial flexibility for borrowers.
• Forgiveness of remaining loan balance after 20 or 25 years of payments (depending on the specific plan and when the borrower took out their loans).
• Forgiven amounts may be considered taxable income.
• May result in paying more interest over the life of the loan due to the extended repayment period.

Bottom Line

Navigating student loan forgiveness programs and alternatives can feel overwhelming, but having clear guidance and easy-to-follow steps can make a significant difference in managing your student loan debt.

We’d love to hear about your experiences with student loan forgiveness programs and any tips you might have for fellow borrowers.

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