North Carolina is home to nearly 10.5 million people, as of the 2020 census, and also boasts one of the most educated workforces in the entire country. Home to a booming technology scene across the Research Triangle Park surrounding Raleigh, as well as global universities such as Duke, Wake Forest, and The University of North Carolina, North Carolina has a lot going for it.
Along with its highly educated workforce, however, comes student debt - and a lot of it. North Carolinians carry an average of around $37,000 in debt per borrower, and cumulatively, the state has about 1.3 million borrowers that owe a total of about $48 billion in loans.
Millennials across the state have been forced to put off buying homes and starting families as a result, but fortunately, North Carolina has introduced a number of student loan forgiveness programs to aid college graduates across the state.
North Carolina student loan forgiveness
As of June 2022, North Carolina's student loan borrowers have access to the following forgiveness programs:
NC State Loan Repayment Program for Mental Health Professionals
NC LEAF Loan Assistance Repayment Program
Forgivable Education Loans for Service
Let's take a dive into these programs one by one.
1. North Carolina State Loan Repayment Program for Mental Health Professionals (SLRP)
Offering the potential for up to $50,000 in forgiveness, the program is administered by the North Carolina Office of Rural Health. The intent of the NC SLRP is to assure that those living in rural and underserved communities across the state still have access to psychiatric and behavioral health services when they are needed.
You'll be eligible for the program if you are a LCSW, LCMHC, LMFT, PNS, HSP, PA, NP, MD, DO, LCAS, or LPA.
Those accepted into the program will be matched based on their professional needs as compared to community needs across the state, and participants could be placed into any of the following practice settings:
Federal Qualified Health Centers (FQHCs)
Rural Health Centers
County Health Departments
Mental Health Hospitals
Alcohol/Substance Abuse Treatment Centers
The NC SLRP program requires a two-year commitment to receive your forgiveness, which will not be treated as taxable income. If you're considering applying, you can do so online using these directions.
According to the NC DHHS website, you can direct any further questions or inquiries to one of the following individuals:
Maya Sanders - 919-527-6476 or Maya.Sanders@dhhs.nc.gov
Clint Cresawn - 919-527-6496 or Clint.Cresawn@dhhs.nc.gov
Karen Cliarmis - 919-527-6452 or Karen.Gliarmis@dhhs.nc.gov
The NC SLRP is a great program for healthcare providers that qualify. But from our past experience, you'll likely want to consider other forgiveness programs that you qualify for before committing. You may find a federal program, like the NHSC forgiveness programs, for example, that comes with more loan repayment assistance with less of a service requirement.
2. NC LEAF Loan Assistance Repayment Program
Next up is the NC LEAF program, designed to incentivize lawyers to take public service jobs that often pay less than other attorney roles in the private sector. Under the program, practicing attorneys that earn less than $50,000 annually (or $90,000 jointly) may be eligible to receive student loan forgiveness if they meet the following requirement criteria:
Have a J.D. degree from an ABA-accredited law school
Are licensed and in good standing with the North Carolina Bar
Must have at least $10,000 in outstanding student loan debt
Work full-time in public service law field, including work for a 501c(3) nonprofit, federal, state, or local government, or any organization that offers legal assistance to the poor
Those that qualify for the program may receive $400 per month (up to $4,800 per year) to alleviate some pressure from their student loan repayment. To receive these funds, applicants are expected to show proof that they have applied for other assistance programs first.
3. Forgivable Education Loans for Service
Qualified students in North Carolina may be eligible for the NC Forgivable Education Loans for Service program. The program, offered by The College Foundation of North Carolina, awards up to $7,000 for those pursuing certificate programs, associate's degrees, and bachelor's degrees. Those working towards master's degrees and doctoral degrees are eligible to receive up to $14,000.
To be eligible to receive these forgivable loans, you’ll need to:
Be a resident of the state of North Carolina (and qualify for in-state tuition rates)
Have a minimum 3.0 high school weighted GPA
Register with the Selective Service System (draft for males once they turn eighteen)
Not be in default or delinquent on any loan or grant obligations
Those that receive forgivable loans through the program also need to be willing to work in North Carolina in a career that is designated as having a critical shortage of employees.
The CFNC website can provide more program details. Those working towards master's degrees and doctoral degrees are eligible to receive up to $14,000.
Federal student loan forgiveness for North Carolinians
Oftentimes, many state student debt programs provide assistance to the most educated in society – doctors, lawyers, and other healthcare professionals. But just because you don’t work in one of these careers does not mean that you are out of luck.
North Carolinians have the entire portfolio of federal student debt assistance programs available to them as well. Among these programs are:
Teacher Loan Forgiveness
Perkins Loan Cancellation
Let's quickly explore these five programs one by one.
1. Income-Driven Repayment
North Carolinians struggling to make their monthly federal payments in full may opt to participate in one of the federal government's four income-driven repayment (IDR) plans:
Income Contingent Repayment
Typically, these plans will limit your monthly payments to between 10% and 20% of your discretionary income, as determined by the federal government's formula that takes into account your geographic location, household size, and income.
Please note that there is a new IDR plan, SAVE, that will replace REPAYE. Current REPAYE enrollees will start to be migrated over in the Summer of 2023, and the other IDR plans are set to be phased out in time.
2. Public Service Loan Forgiveness
Oftentimes known as PSLF, Public Service Loan Forgiveness is an option for residents of The Tar Heel State that work in public service or for most governmental agencies.
PSLF requires participants to make 120 qualifying monthly payments under a qualifying income-driven repayment plan (from above). After making these 120 payments, over 10 years, the remainder of your qualifying federal student debt will be forgiven.
3. Teacher Loan Forgiveness
The next federal program to consider is Teacher Loan Forgiveness - TLF for short. Teachers in NC may be eligible to receive up to $17,500 in repayment assistance if they:
Teach full-time in a classroom role for at least five consecutive and complete academic years
Have qualifying Direct Subsidized, Unsubsidized, or Stafford loans (both subsidized and unsubsidized)
Are fully licensed as a "highly qualified" teacher
Meet other requirements as required
4. Perkins Loan Cancellation
North Carolinians with outstanding Perkins Loans may be eligible to have them forgiven over a period of five years if they meet certain eligibility requirements, including eligible employment or volunteer service.
Those that qualify will have their debt forgiven according to the following schedule:
15% after both the first and second year
20% after third and fourth year
30% after the fifth year
These programs represent the main federal forgiveness programs offered through the United States Department of Education. And while each of them carries very detailed qualifying criteria, they can all work wonders for those that qualify.
Do note that in most instances you cannot "double-dip" and utilize federal and state forgiveness programs at the same time. You can use both, at different times, but you should evaluate in which order you should use them, depending on the program's terms and the amount of student debt you have.
One other thing that you'll want to note is that any type of forgiveness in NC is generally considered to be taxable income.
Is loan forgiveness taxable in North Carolina?
In some states across the country, student loan forgiveness may be treated as taxable income for those that reside there. North Carolina is, unfortunately, one of those states. This doesn't mean that the assistance you'll receive isn't worth it, not by a long shot, but it does mean that you'll need to prepare accordingly.
In the Tar Heel State, forgiveness is treated as taxable income.
This means that, if you earn forgiveness through any of the programs mentioned here, you may owe the state government 4.75% of the amount, since North Carolina has a flat state tax rate.
For instance, should you receive $25,000 in assistance from the new SAVE plan, this could trigger a state tax bill of nearly $1,200.
There is an exception to this law though, for those that earn relief through PSLF.
Tips on applying for loan forgiveness
When evaluating the student loan forgiveness programs on this list, we recommend that you follow these tips in advance of completing an application.
1. Gather the documentation needed to apply
No matter what program you decide to apply for, you're going to need to gather financial documentation - and a lot of it. A good starting point would be to locate your:
Promissory notes, terms, interest rates, and monthly payments for each of your loans
W-2 history and a recent paystub
SSN
Other pertinent information
You'll want to be sure to review the actual application before you gather the documentation too. Some state applications will ask for references, essay responses, or cover letters. And you'll want to be sure that you don't leave this for the last minute.
2. Check out scholarship and grant programs
When my wife and I applied to college, online scholarship and grant type programs were harder to find and locate. Time has changed, and now there are a litany of websites that can help you earn a little extra money to pay for school.
The College Foundation of North Carolina has a great scholarship search that you can use to find and apply for college scholarships and grants.
Some of our favorites are the NC Community College Grant, NC Reach, and the Penn Family Scholarship.
Our opinion
The best way to prevent yourself from ending up in a student loan mess is to take as little debt out as possible. The above scholarship and grant programs can play a role in this, but so can picking a school in your price range. But in the event that these decisions are in your past, we recommend that you explore any and all of the student loan programs on this list.
If you're not a healthcare professional, you'll have fewer options, but there are still federal avenues to pursue. Only after you've exhausted all of your repayment assistance options should you consider refinancing with a private lender.
Get our student loan forgiveness calculator
It can be really hard to figure out which student loan strategy may be the best option for you. To help you make your decision a little easier, we built a student loan calculator that will help you decide between the following strategies:
Income-Based Repayment
Pay as You Earn
Revised Pay as You Earn
Public Service Loan Forgiveness
Private Refinancing
Federal Consolidation
And more strategies
Our calculator will help you:
Find your project debt-free year
Gauge your monthly payments under each strategy
Understand how much in forgiveness you may earn
Save tens of thousands of dollars off your student loan repayment
Student loan forgiveness in nearby states
What if you don't qualify for forgiveness?
No matter how you frame it, certain NC residents simply won't qualify for any of the programs that we've covered here. If you don't qualify for any loan assistance, it is likely due to one of two factors:
You have private student loan debt that does not qualify for federal and state based student loan forgiveness programs.
You have federal loans, but don't qualify for any programs due to your career choice or income.
Either way, that's okay because you are not out of options. If either of these two criteria explain your situation, it may be worth your time to consider refinancing your student debt.
Refinancing comes with the possibility to lower your monthly student loan payments or decrease your interest rate. And depending on prevailing rates at the time, plus the loan term that you choose, it is possible to achieve both. Splash Financial and LendKey are great lenders to start with, in large part because they actually are not lenders at all.
In fact, they are better described as student loan marketplaces that can quote you a refinancing interest rate based on many lenders within their networks. The best part is that this process takes less than two minutes and doesn't even impact your credit score.
Don't forget to check out our list of first-time NC homebuying programs!
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