Economies around the globe are struggling with inflation and economic experts now say we should worry more about recession, not inflation; in short, Gen Z and millennials should prepare for the worst economies they have ever seen.

The major side-effect of bad economies is that it lowers people’s purchasing power, and since we can’t afford basic things, we turn to loans. About 7 million people, especially student loan borrowers default on their loans. The inability to repay loans doesn’t just affect creditworthiness, it can be a major source of stress, anxiety, inability to achieve financial goals, and participating in get-rich-quick schemes like gambling.

What Are Loan Forgiveness Schemes?

The government and some organizations understand how hard and sometimes, impossible loan repayments can be, so they create loan forgiveness programs. These programs help break the debt cycle by discharging a significant portion of it and sometimes even the entire thing. This relieves you from the stress of having to repay huge loans while still trying to afford necessities, and gives you to freedom to have financial goals like buying a house, investing, etc.

The downside to loan forgiveness schemes is that their applications can be very complex and overwhelming. So, in this guide, we will be looking at what loan forgiveness forms are and how to use them to get out of debt.

What is Loan Forgiveness?

Loan forgiveness happens when a lender agrees to fully or partially cancel a borrower’s debt. This reduces the financial burden on borrowers struggling to repay their loans.

Also, most organizations that forgive loans expect some form of service as payment for the loans. For example, loan forgiveness schemes for medical students help graduates with high student loan debt pursue careers in public service. It can also help get professionals to work in underserved areas on the condition that their loans will be discharged.

Types of Loans Eligible for Forgiveness

Loan forgiveness programs are typically geared at exchanging repayment for a service. So, the borrower’s loan has to meet certain criteria to qualify for loan forgiveness. Here are some common eligibility criteria:

• Loan type: Only specific loan types have forgiveness schemes. For example, federal student loan forgiveness programs are available for borrowers who work in public service, complete a certain number of years of income-driven repayments, or experience school closure or loan servicer misconduct.
• Borrower status: Your loan repayment history and employment status are major factors to qualify for loan forgiveness. If you typically default on loans or are not in certain professions, you might not qualify for loan forgiveness.
• Time commitment:  You can’t just collect a loan and apply for forgiveness immediately. Before qualifying for loan forgiveness you must have repaid your loans to a certain extent and your finances show you are struggling to repay your loans.
• Application process: You also have to apply with the loan forgiveness program and get accepted into the program.

Understanding the Loan Forgiveness Form

A loan forgiveness form is an official document submitted to a lender or loan servicer to request the cancellation of a remaining loan balance. The form has several sections that help the lender capture necessary information about the borrower, let’s look at them:

Key Sections:

• Personal Information: This collects your name, address, and contact information.
• Loan Information: This collects information about the loan you want to be forgiven. You will enter the loan type, originating lender, and current loan servicer.
• Employment/Income Details: Information about your employment history and current income, depending on the specific forgiveness program requirements.
• Certification and Signature: This allows you to certify the accuracy of the information provided and sign the form. This means you agree to the terms and conditions of the loan forgiveness application and could face legal issues if you intentionally falsify information.

Common Requirements:

You will need the following documents for loan forgiveness application:

• Proof of Identity: Driver’s license, passport, etc.
• Loan Documentation: Copies of promissory notes, loan statements, etc.
• Employment Verification: employment letters, referee letters, or bank statements to show salary payments.
• Tax Returns: Copies of your federal tax returns for specific years.
• Program-Specific Documentation: Additional documents may be needed depending on the forgiveness program (e.g., proof of public service employment for Public Service Loan Forgiveness).

Step-by-Step Guide to Completing a Loan Forgiveness Form

• Preparation: The first thing you need to do is know everything you need  (e.g., documentation, eligibility confirmation) to apply. This information is typically available on the program’s website, you can also call their helpline to confirm.
• Filling Out the Form: fill out all the form fields- personal, employment, and loan information. After that, read and accept the terms and conditions of the loan forgiveness program and sign.
• Common Mistakes to Avoid: According to Business Insider, the most common mistakes are misspelling words, not meeting eligibility criteria, and not providing the right document. So, carefully proofread your application, and check loan programs to ensure you qualify for them and have the right documents to apply for them.
• Submission Process: After carefully filling out the loan forgiveness form, and proofreading it to ensure you are applying correctly, submit your form. You will get a response on your application status.

Free Loan Forgiveness Form Template

According to Business Insider, only 6.7% of eligible borrowers apply for PSLF, and of those, 98% are denied. Having a loan forgiveness form template with clear instructions provides a standard applicants follow to apply for the program and reduces the chances of applications getting rejected. This helps applicants have a smooth application process by providing only the right information.

What Are the Benefits of Using a Template:

• Saves Time: Using a template saves you the time and effort you would have put into creating a new loan forgiveness form from scratch.
• Organization: When reading the loan forgiveness form template, applicants get to know what they need to have a complete application. For loan service, you can also add instruction text to help applicants navigate the process more easily.
• Accuracy: Using a pre-designed and vetted template also ensures you collect all the information you need during the application process. This prevents the need to call applicants to send additional documents.

Template Sample

Many loan servicers provide downloadable forms and resources on their websites. Check your loan servicer’s website for a dedicated section on loan forgiveness and see if they offer a downloadable template. If they don’t,  use this free loan forgiveness form template.

How to Use the Template 

1. Download and Open: Download the template and open it with Microsoft Word or Google Docs.
2. Fill in the Blanks: Carefully fill in the requested information.
3. Customize (Optional): While the template provides a framework, you can add specific details relevant to your situation.
4. Proofread: Double-check all information for accuracy before submitting.

FAQ about the Template

Here are some commonly asked questions regarding loan forgiveness form templates:

• Is the template guaranteed to work for my loan? No, templates serve as a starting point. Always refer to the official application instructions provided by your loan servicer.
• What if the template has missing information? Loan forgiveness programs can have specific requirements. Supplement the template with details mentioned in the official program guidelines.
• Should I consult a financial professional? For complex situations, consider consulting a financial professional familiar with loan forgiveness programs.

Tips for a Successful Loan Forgiveness Application

Only a few loan forgiveness applications get accepted, and following these best practices increases your chances of being one of them:

• Organize Your Documents: Go through the application criteria and get all the documents you need for a successful application.
• Double-Check Your Information: The top reason for loan forgiveness application rejection is misspelling. So, carefully proofread your entry, loan forgiveness programs are very strict about information accuracy.
• Seek Professional Help if Needed: Having financial advisors or consultants can significantly make your applicant process smoother. They have a broader knowledge and experience with the process, so they can guide you.
• Follow-up: Check your email, mail, and loan service website to monitor your application status. Most loan forgiveness programs have multiple steps after submitting the form, e.g. an interview after the application to judge your fit for the program, reference check with employers, etc.

The Bottom Line

Loan forgiveness forms help you apply and qualify for various forgiveness programs that significantly reduce or eliminate your loan debt. This lifts a huge financial weight off your shoulders and gives you the luxury of having financial goals other than loan repayments.

However, loan forgiveness applications can be quite strict; follow the steps in this article to make the application process smoother and avoid common pitfalls. We have also added a free template to get you started and good luck with your application process!  If you found this helpful, share this article with friends, family, or colleagues applying for loan forgiveness.