Waking up to find student loans wiped out is a common fantasy for many borrowers. For a lucky few eligible for student loan forgiveness programs, this dream can become a reality.

You might love the idea of getting free money to repay student debt — until you see the fine print, that is. The process to have your student loans written off isn’t likely to be quick, easy, or painless.

But is student loan forgiveness worth it?

For some people, student loan forgiveness and assistance programs can be a huge help in getting out of debt. Yet for other borrowers, pursuing forgiveness can be a bigger headache than they’re willing to deal with.

Here are five reasons student loan forgiveness might not be worth it.

1. You might wait 25 years for student loan forgiveness

Depending on the student loan forgiveness program you pursue, you might be waiting decades to have your student loans forgiven. The longest period for student loan forgiveness is 25 years, under certain income-driven repayment plans:

• The Revised Pay As You Earn (REPAYE) Plan requires 25 years of repayment to qualify for student loan forgiveness for borrowers using the plan to repay any graduate school loans.
• The Income-Based Repayment Plan grants student loan forgiveness after 25 years of repayment for borrowers who took out their first student loan before July 1, 2014.
• The Income-Contingent Repayment Plan requires 25 years of repayment for forgiveness for all borrowers.

Other student loan forgiveness programs offer to write off student loans much sooner. The Teacher Student Loan Forgiveness program offers debt forgiveness after just five years of full-time teaching work. The Public Service Loan Forgiveness (PSLF) program requires just 120 qualifying monthly payments, which can be made in 10 years.

The sooner you can erase your student debt, the more likely it is that banking on student loan forgiveness will pay off. But if pursuing student loan forgiveness means waiting 20 or 25 years to qualify, consider all your other options before proceeding.

2. You could wind up paying more

Under forgiveness programs, the amount of student loans written off is not what you initially owe, but rather any student loan balance remaining after the payments you’ve made. If you get student loan forgiveness after 25 years, for example, this will only wipe out what’s left after you’ve made 300 student loan payments.

This forgiven portion of your student loans might be smaller than you’d hoped. Not only that, but repayment plans that make student loan forgiveness beneficial can actually set monthly payments that are less than your student loan interest charges. In this case, interest accrues and can be added to the principal, increasing your balance. As a result, the total principal and interest repaid over the life of the loan might also be higher.

Consider a borrower who has $40,000 in student debt and earns just $28,800 out of college, enrolled in the REPAYE income-driven repayment. According to the Consumer Financial Protection Bureau (CFPB), such a borrower would repay $48,370 on a standard 10-year repayment plan. Under REPAYE, however, the total principal and interest repaid would be nearly $20,000 more, at $68,156.

IDR forgiveness provides a nice guarantee that you won’t be repaying student loans for longer than 25 years. But projecting your costs with a student loan IBR calculator can help you figure out whether or not you’re likely to come out ahead.

3. Your career choices (and pay) might be limited

Some student loan forgiveness assistance provides relief and erases student debt, but only if you’re willing to make a specific employment commitment. Here are some examples of student loan forgiveness programs with requirements tied to your work:

• Teacher Loan Forgiveness requires five years of full-time employment in an underserved community.
• PSLF requires 120 payments made while you’re working in a qualifying “public service” job; this includes working for a government agency or a 501(3)(c) nonprofit organization.
• National Health Service Corps (NHSC) and many state governments offer loan repayment assistance for lawyers, dentists, physicians, nurses, and other skilled workers that are in high demand. They usually require two or more years of employment in an underserved area to qualify for forgiveness.
• Military student loan forgiveness can also be an option to get some student loans repaid. The Active Duty Health Professions Loan Repayment Program provides up to $120,000 in loan repayment assistance over three years of service.

All of these programs can provide student loan forgiveness, but only if you meet the employment commitments — yet the employment offered isn’t always the most advantageous. They often require relocation and can keep you from choosing or changing jobs as you wish, as well as limit career opportunities later on.

Additionally, jobs that qualify you for student loan forgiveness often pay far less than what you could earn elsewhere. Fulfilling the employment requirements could mean missing out on higher pay, and the amount of debt forgiven won’t always be enough to cover this discrepancy in earnings.

Seeking student loan forgiveness that’s tied to employment can make sense if these programs already align with your career goals. If not, you should take some time weighing the tradeoffs against the benefits.

4. You can get taxed for forgiven student loans

Student loan forgiveness isn’t always free, either. Many forms of student loan repayment assistance or forgiveness are considered a type of taxable income. This means that you’ll be responsible for paying tax on the balance of your forgiven student loans.

Here are the types of student loan forgiveness that would likely come with a tax bill:

• IDR forgiveness: After making the 20 to 25 years of payments required to qualify for forgiveness through an IDR, the remaining balance is forgiven. But the IRS still considers it income, and it will increase your tax liability.
• Some student loan repayment assistance programs (LRAPs): If you participate in a student loan repayment assistance program, the help you get paying off your student debt could also be considered taxable income. Consider a physician’s assistant who joins the military and takes advantage of an applicable LRAP. This loan assistance is treated as bonus pay — and therefore taxable income — with the net after-tax amount then applied to student debt.

Other forms of student loan forgiveness are tax-exempt, however. Any student loans forgiven through PSLF are not taxable, for instance.

Additionally, IRS rules state that certain LRAPs can provide student loan forgiveness or assistance tax-free:

• The National Health Service Corps Loan Repayment Program
• Educational loan repayment programs funded by the Public Health Service Act
• State LRAPs or forgiveness programs for health professionals working in underserved areas

It might not always be obvious which loan forgiveness programs will shield you from tax liabilities later on. Make sure you investigate and understand the possible tax implications of a student loan forgiveness or assistance program before enrolling — so you won’t unexpectedly owe thousands on forgiven debt later.

5. You won’t have any guarantees

Lastly, student loan forgiveness can be risky simply because life doesn’t always turn out the way we plan or prefer. Even if you’ve made all the right choices and followed a student loan forgiveness program to a T, there are no guarantees that you’ll receive forgiveness.

Errors can mess up your student loan forgiveness. Some loan forgiveness programs and LRAPs are complicated to the point of being ridiculously confusing. This can make it tricky to get it right when qualifying and applying for these types of loan assistance. With PSLF, for example, you could jeopardize your eligibility if you fail to consolidate certain student loans, and you could delay forgiveness if you miss payments or defer debt.

Student loan servicers have also caused problems for borrowers, according to a recent report from the Consumer Financial Protection Bureau. Borrowers complained that servicers didn’t clarify if the borrower qualified for PSLF, and that servicers did not process consolidations or changes to repayment plans in a timely fashion. Servicers even enrolled borrowers in payment plans that were ineligible for PSLF, despite the borrower expressing interest in the forgiveness program.

The future is foggy for many student loan forgiveness programs. PSLF, in particular, has had a rocky start. The first borrowers just barely received forgiveness through PSLF in early 2018, yet recent federal budget plans included proposals to end PSLF for borrowers taking out loans in upcoming years, for example.

The proposals were axed from the final budget, and PSLF seems safe (for now), but changes might still be made to this or other similar programs. Borrowers should be optimistically cautious about counting on student loan forgiveness and watch out for policy changes that could affect them.

Along with looking into your student loan forgiveness options, it can be worthwhile to compare them to other student loan strategies. Making extra payments on student debt can help you knock it out faster and pay less interest, for instance. Refinancing student loans can be another option to lower student loan rates and costs.

Only by exploring and comparing different student loan repayment paths can you find the best option for your current circumstances and future plans.

TAGS: COLLEGE, Student Loan Refinance, Student Loans