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Forgivable Loans for Grad School

written by: Kate Henschel•edited by: Amanda Grove•updated: 11/30/2010

When planning out financial aid for graduate school, it is important to have an idea of how you are going to pay back the debt you incur. Finding a loan that may be forgiven is one way of decreasing money owed after graduation.

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    The Good News...and the Bad News

    The good news is that there are loans out there than may be forgiven following completion of your degree. When a loan, or a portion of a loan, is forgiven, it means that you are no longer responsible for paying that money. It essentially disappears from your debt.

    Now, the bad news. Not all loans are forgivable. And those that are potentially forgivable are not automatically forgiven simply by receiving a degree. There is usually some sort of stipulation, or catch, involved with making your debt simply go away.

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    Which Loans are Forgivable?

    Your best bet in getting loans forgiven is to apply for Perkins and Stafford loans. These loans are federal loans, and there are more programs available through which these loans may be forgiven. You must first file a FAFSA form in order to find out if you qualify for a federal loan through your school.

    In order to qualify for a Perkins loan (a fixed, low-interest rate loan), you must be able to demonstrate serious financial need. Subsidized Stafford loans are also an option for students who demonstrate financial need. Students who do not qualify for a subsidized loan (meaning the government pays the interest while you are in school) may still qualify for an unsubsidized loan. Although payments will not be due until after you graduate, you will be responsible for the interest that accrues while you are studying. It may be possible to receive more financial aid through the government if you are separated from your parents' assets and you are no longer claimed as a dependent on their income taxes.

    Many private loans from banks and other financial institutions are often not forgivable, and they tend to have a higher interest rate. While the government has an interest in promoting education, the banks are typically more concerned about making money. There are programs, however, that will forgive loans regardless of their type.

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    How to Get Loans Forgiven

    One of the best ways to get loans forgiven is to choose a career that is desperately needed in poor and under-serviced areas. By agreeing to work as a teacher, doctor, nurse or other qualifying career in areas such as inner cities and Native American reservations, you can qualify to have a portion of your federal loans forgiven for each year you work. Peace Corps volunteers can also have a portion of their Perkins loans forgiven by volunteering overseas in developing countries.

    Programs such as AmeriCorps offer educational grants upon completion that may be used for future study or to pay back existing loans, regardless of the type of loan. Many other public service programs have loan repayment programs for qualifying employees. Requirements and regulations vary greatly, so it is best to contact the program directly to discuss loan forgiveness or repayment options.

    Some universities offer forgivable loans to students they deem exceptional candidates to become future professors at the school. Typically, a percentage of the loan is forgiven after each year of teaching at the university. A word of caution: receiving a forgivable loan from the university is NOT a guarantee they will hire you after you complete your degree.

    By doing a bit of research before starting your degree and being willing to work in under-served areas or in public service positions, you may be able to get a portion of your debt forgiven and make obtaining your graduate degree a bit more affordable.