How to Get Rid of Student Loan Debt?

HomeFinancial

How to Get Rid of Student Loan Debt?

It can be difficult to manage a large debt load. It is normal to wonder how you can get rid of student loan debt as you pay off your debt. It's not u

Different benefits of using a Personal Loan EMI Calculator
Tips To Save Money On Your Home Loans
18 myths uncovered about financial advisors

It can be difficult to manage a large debt load. It is normal to wonder how you can get rid of student loan debt as you pay off your debt. It’s not unusual for someone to wonder if there is a legal way to pay off student loans.

It is not easy to get out of student loans through bankruptcy. You have other options, such as federal forgiveness programs, or options that make monthly payments less expensive, like income-driven repayment plans.

Legal Ways to Avoid Student Loan Repayment

1. Programs for Loan Forgiveness

There are several loan forgiveness programs that may be available for federal student loan borrowers, depending on their eligibility. These programs can help you avoid paying student loan debt by allowing you to forgive the balance of your loan after a specified number of years.

Every forgiveness program has its own eligibility criteria.

Forgiveness of Teacher Loans

The federal student loan forgiveness program forgives loans for highly qualified teachers. Teachers who meet the eligibility criteria may be eligible for up to $17500 or $5,000 depending on their teaching subject. After five years of service, teachers are eligible for the loan forgiveness program.

Public Service Loan Forgiveness

This program is for public servants. To be eligible for Public Services Loan Forgiveness, (PSLF), applicants must meet the following eligibility requirements:

* Working for a qualified organization; this includes the U.S. Federal, State, Local, or Tribal Government or a qualified non-profit organization

* Full-time work

* Have Direct Loans or a Consolidation Loan

* 120 qualifying payments for an income-driven repayment program

To qualify for PSLF, borrowers who are interested will need to meet strict criteria. Federal Student Aid, which is operated by the U.S. Department of Education, recommends that participants document their employment at least once a year or whenever they change jobs. This is done to make sure that the borrower continues to be on track and makes qualified payments.

2. Income-Driven Repayment Programs

Federal student loan repayment plans that are income-driven tie monthly loan payments to borrowers’ income. Your monthly payment may be between 10% and 20% depending on your eligibility.

Income-driven repayment plans have a repayment period of 20-25 years depending on which plan they are enrolled in. Borrowers can make their loan payments more affordable by using income-driven repayment plans. The loan terms can be extended, but this could lead to higher interest rates over the loan’s life than on other repayment plans.

Any remaining loan balance can be forgiven at the end of the loan term. The IRS may consider the forgiven amount taxable income.

3. Disability Discharge

If you have a permanent disability, it may be possible for federal student loans to be canceled. It is still difficult to get a discharge for total and permanent disability. Fill out the forms and prove to the Department of Education that your disability prevents you from earning an income.

You will need to submit evidence from Veterans Affairs or get an evaluation by a doctor in order to do this. You cannot apply for disability discharge if you are disabled for at least 60 consecutive months.

Private student loans don’t always allow you to cancel your loan if you are permanently disabled. You may need to sue your lender if you are permanently disabled and want to get rid of your private loans.

4. Temporary Relief: Deferment and Forbearance

Although this option will not eliminate student loan debt, it may be worth considering for those borrowers who are struggling to make their monthly student loan payments. If borrowers are eligible, they can choose to forbear or defer their payments.

The type of loan you have may determine if interest continues to accrue, even if the loan is being deferred or forbeared. These options are available to help borrowers avoid missing payments or defaulting on loans.

Private student loans do not offer the same benefits as federal student loans. However, some private student loans may have their own benefits. This allows qualified borrowers to stop paying their loan payments if their job is lost.

5. Student Loan Refinance

This option will not eliminate student loans. However, it can make them more affordable. Refinancing student loans can help you qualify for a lower interest rate. This can lower your monthly payments or save you money over the loan’s life.

Refinances with private lenders can be done to extend the term of student loans. Private lenders such as SoFi are able to refinance federal student loans and private student loans. However, this can cause you to lose certain protections like income-based repayment programs.

6. Bankruptcy Filing: The Last Resort

Although bankruptcy is an option to pay off debts, it is very rare for student loans to be discharged in bankruptcy. If a borrower can show “undue hardship”, they might be eligible to have student loans discharged through bankruptcy.

Filing for bankruptcy can have a long-lasting impact on a person’s credit score. It is usually a last resort. You should consider other options before considering bankruptcy. This includes consulting with a qualified attorney or talking to a credit counselor who can offer advice tailored to your personal situation.

In a nutshell

It can be difficult to pay off student loan debt. In very rare cases, student loans cannot be discharged through bankruptcy. There are some options available to help ease student loan debt. For federal student loans, there are deferment and forbearance. This may be beneficial for those who have short-term problems repaying their student loans. Income-driven repayment plans, which tie monthly loan payments to income, may also be an option. This can make monthly payments easier.

Another option is refinancing. Qualifying borrowers might be eligible for a lower interest rate, which could reduce the amount of interest accrued over the loan’s life. Refinancing federal student loan debts is not an option for everyone. They lose federal benefits such as income-driven repayment plans and federal loan forgiveness programs, deferment, forbearance, and income-driven repayment plans.

COMMENTS