How to Shed Student Debt

Programs that forgive federal loans can help ease the burden.

Graduating from college with thousands of dollars in loans is a heavy burden. But take heart: A loan-forgiveness program can lighten the load. Note, however, that most programs cover only federal student loans. And if the program does not involve a work requirement, the amount forgiven is generally considered taxable income.

1 Sign up for the income-based repayment plan. For borrowers with high debt relative to income, monthly payments are reduced, and any remaining debt is forgiven after 25 years. The Obama administration has proposed shortening the time frame to 20 years.

2 Work in a public-service job. Any remaining debt will be forgiven after you have worked full-time in public service for ten years and made 120 payments, beginning on or after October 1, 2007. You benefit only if your payments have been reduced through an income-linked repayment plan (see above). Student loans must be made through the federal Direct Loan program -- as opposed to private lenders, such as Sallie Mae -- but you can get around this restriction by consolidating your loans into the Direct Loan program. For details on both income-based repayment and public-service loan forgiveness, go to

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3 Work in an underserved area. If you enter a profession such as teaching, health services, social work or clinical research, you could qualify for loan forgiveness through one of several programs. But before you make a years-long commitment, be sure the program has the resources to make good on its promise.

4 Work at a national service organization. A stint in AmeriCorps or its member organizations, including Vista, makes you eligible to receive a Segal AmeriCorps Education Award, worth up to $5,350 in 2010. You can use the award to pay for further education or to repay your student loans. The Peace Corps also rewards you for service by canceling up to 70% of federal Perkins loans.

For more information, go to

Jane Bennett Clark
Senior Editor, Kiplinger's Personal Finance
The late Jane Bennett Clark, who passed away in March 2017, covered all facets of retirement and wrote a bimonthly column that took a fresh, sometimes provocative look at ways to approach life after a career. She also oversaw the annual Kiplinger rankings for best values in public and private colleges and universities and spearheaded the annual "Best Cities" feature. Clark graduated from Northwestern University.