How to get out of student loan debt? You aren’t the first student borrower to ask the question. You may also wonder whether you can declare bankruptcy or apply for financial crisis assistance for your student loan debt.
Unfortunately, there is no magic solution to make your student loan responsibilities vanish. The federal government does provide loan forgiveness or discharge, but only under particular circumstances.
If you’ve received student loans from the federal government, you’ve signed the dotted line and entered into a legally binding agreement. This agreement stipulates that you will repay the loan in full, on time, plus any accumulated interest, or face the consequences. However, even the Federal Student Aid office understands that there may be some circumstances that warrant loan forgiveness or cancellation.
What are the circumstances for the available loan forgiveness programs and how might they help you get out of paying student loans? Lets take a look.
How to Get Out of Student Loan Debt
Public Service Loan Forgiveness
Open to graduates with Direct Loans who’ve made 120 full, on-time payments. To be eligible, you must work full time for a qualifying employer, which includes government organizations at any level of government and non-profit organizations.
Other types of loans become eligible if you consolidate under a Direct Consolidation Loan. Eligible borrowers should complete the application form and submit it by mail to the U.S. Department of Education.
Teacher Loan Forgiveness
Open to teachers who have worked full time at a qualifying low-income school or educational service agency for a minimum of five consecutive years. The Teacher Loan Forgiveness program is available for Direct Subsidized and Unsubsidized Loans up to $17,500.
In some cases, applications may still be accepted if you did not complete a full academic year. See the Federal Student Aid website for more details on eligibility.
School Closure Discharge
Open to students holding Direct Loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans and whose school closes during the course of their study. The closure must have disrupted the completion of the program.
You may still be eligible even if you withdrew within 120 days of the closing. If you have completed all coursework, but not received a diploma, you are no longer eligible for this specific loan discharge.
False Certification Discharge
Open to students who were falsely approved for a loan, when in fact they did not qualify. For example, if you were approved for a loan yet they did not meet the school's eligibility requirements, you may qualify to have the loan discharged. This also includes instances where you were approved for a loan, yet you would never have met the employment requirements for the occupation in question.
Income-Driven Repayment Discharge
Open to borrowers who have completed a minimum 20 years of Income-Driven Repayment Plans. There are currently five different income-driven repayment plans under this program. If you have made repayments for 20 or 25 years, but you still haven't fully paid off your loan, the federal government forgives the remaining amount.
Even if there are times when your income-driven repayment plan was operating with a $0 a month payment, this still counts towards the 20 to 25 years of repayment.
Undue Hardship Discharge
Undue hardship is technically filing for bankruptcy. Under normal circumstances, student loans are not included in the standard bankruptcy proceedings, however, there is a good case to be made for their inclusion.
If you can prove undue financial hardship based on continued student loan repayments during the bankruptcy proceedings, there is a chance they could be included and permanently discharged. Filing for bankruptcy is a long-lasting decision with significant financial consequences, and it should not be taken lightly.
Total and Permanent Disability Discharge
Open to those who have received a total and permanently disabled discharge. If you qualify, you will no longer be required to pay off your federal student loans or complete your TEACH Grant service obligation.
Applicable in cases where either the borrower dies, or the student on whose behalf the PLUS loan was taken out for dies. To complete the application for discharge process, a proof of death must be submitted. The death discharge also applies if the parent who has taken out the PLUS Parent loan passes away.