There are still many ways to pay off student loans.
Friday’s Supreme Court decision to suspend President Biden’s loan forgiveness program will be a huge disappointment to the public. 43 million people Who could have benefited if debts of up to $20,000 were canceled, but millions of borrowers have already benefited, thanks to the many instruments still available.
Even if the Supreme Court disapproves of the plan, it won’t change the laws and regulations that already provide refuge for many federal student-loan borrowers.
Below is a list of ways to get rid of your federal student loan balance without paying it off in full. (The rules are different and generally much stricter for private student loans that are not provided by the government.) It includes many quotes from other articles, FAQs, and commentaries we have published on these topics. increase.
Too many people don’t know that they are eligible for one or more of these programs. If you know someone struggling with student loan debt, suggest the borrower consider all last options.
Repayment according to income
This overarching mechanism to pay off debt, or write it off if you can’t pay it in full after decades, has the greatest potential for most people. It’s also pretty confusing.
The most basic mechanism is as the name suggests. Monthly payments are based on your income. If you can’t afford a standard payment (according to the federal government’s definition of affordability), your payment will be reduced and a formula will determine the exact amount. If you have paid your income for 20 or 25 years (depending on your repayment plan, there are several types) and you haven’t paid off the balance, the government will write off the rest of your debt.
The US Department of Education explains how this works on the website.
Aside from the court-disapproved debt cancellation plan, the Biden administration has proposed a more generous, income-driven repayment plan that could come into effect soon, although legal challenges to the plan are possible. is. My colleague Tara Siegel Bernard wrote a guide on this proposal in January.
The Department of Education is adjusting credits earned by millions of people towards debt cancellation for those who are counting 20 or 25 years. For example, if you have ever deferred or deferred payments, you may benefit from having additional months or years counted toward your total eligible payment years. If you take advantage of the payment suspension due to the pandemic, which is due to end this year, the month you didn’t pay: still count For 20 years, 25 years.
Ann Kearns wrote about the Department of Education’s efforts in March.
Public service loan exemption
The once-struggling loan forgiveness program, where government and non-profit employees write off balances after ten years of payments, has improved in recent years.
During those 10 years, you must work full-time in a qualifying job, pay off so-called direct federal loans, make payments on an income-based repayment plan, and meet payment deadlines. Hundreds of thousands of teachers and social workers have been debt forgiven recently, thanks to Biden administration adjustments like the one Anne wrote about.
We have summarized many of the program changes in our 2021 column. In our 2022 column, you can read the profiles of some of the people who eventually cleared their balances. In May, I wrote about a 28-year-old woman who helped her retired mother write off her debts.
Closed schools or schools with poor grades
For years, the Department of Education has maintained a method of canceling student loan debt that allows for a “borrower’s defense.” This will allow people to petition the government if they believe the school has misled them, committed an illegal act, or violated state laws regarding loans or services the school was supposed to provide. .
During President Donald J. Trump’s tenure, the Department of Education tried to tighten rules and slow down the process. Under President Biden, the Department of Education has loosened rules further. In 2022, students who borrowed money to attend for-profit or chain-run schools such as Westwood University, Corinthian University, DeVry University, and ITT Institute of Technology (including schools that have closed entirely), among others. Many of them had their outstanding debts written off.
The Department of Education has a good spokesperson for defending debtors on the website.
bankruptcy exemption
Yes, you can get rid of your student loan debt by filing bankruptcy. No, it’s not easy.
Certain legal standards must be met before a debt can be written off in court, and it must be shown that repayment would cause “undue hardship.” It often involves claiming that it is “certainly hopeless” to pay off the debt. A lot depends on the judicial circuit you’re on, and even the judge who hears your case.
However, it is not impossible to completely forgive the debt. Last year, the Biden administration made some changes to make this process a little easier, and Tara wrote about it in November.
discharge of the disabled
If you are injured in any of the followingcomplete and permanentYou can exempt the debt by saying.
If the Social Security Administration or the Department of Veterans Affairs has classified you as disabled, this is enough for automatic ejection.Mental illness may be an eligibility condition, Social Security Administration explains why on the website.
Otherwise, According to the Ministry of Education, a doctor has been continuing for at least 5 years that you are “predictably unable to engage in substantially beneficial activities due to a physical or mental disability” that could lead to death , or to be expected. Last at least 5 years.
Last year, the Ministry of Education made it a little easier to qualify for disability status and explained the changes. new release.
death
This is not what most people would choose as a solution to their debt burden. Still, if you’re a young person wondering about federal PLUS loans that relatives borrowed to pay for their education, you might wonder if the debt will go away with the person who took it.
To do. The federal government makes no claims on their property and you will not inherit the balance.
