Dealing with a lot of debt can be very stressful. As you pay off your debt, you might wonder how to get out of student loan debt. When you think about how to get out of paying back your student loans legally, like by filing for bankruptcy, you won’t be the first person to wonder if there is another way. The truth is that it’s hard to get out of your student loans by filing for bankruptcy, but it’s not impossible. There are other paths to cut back on how much money you have to pay back, like federal forgiveness programs or plans that make monthly payments more affordable, like income-driven repayment plans.
Legal Ways to Avoid Paying Back Student Loans
Programs for Debt Forgiveness
If you have federal student loans, a few programs can help you get your money back. These programs could help you get out of paying some of your student loan debt because they will forgive your debt after a certain number of years.
The qualifying conditions for each forgiveness program vary.
Forgiveness of teacher loans
This federal student loan forgiveness program cancels the debts of teachers who have a lot of experience. As long as teachers meet the qualifications, they could get up to $17,500 or $5,000. This loan forgiveness program is open to teachers who have worked in the field for five years.
Forgiveness of public-sector debt
This class is for people who work for the government. People who want to be eligible for Public Services Loan Forgiveness (PSLF) must meet the program’s eligibility requirements, such as:
- Working for an eligible organization, such as the US federal, state, municipal, or tribal government.
- Work-full.
- Direct Loans or Direct Consolidation Loans
- Make 120 eligible payments.
Many people who want to get their loans forgiven through the Public Service Loan Forgiveness (PSLF) program will have to meet a lot of rules. The Federal Student Aid website, which the US Department of Education runs, says that people who use it should show that they work at least once a year or change jobs. This is to ensure that the borrower is still on track and paying the right amount. If you wish to learn more about the Public Service Loan Forgiveness program, check out SoFi’s page on it.
The payment plans are based on income.
When borrowers have a federal student loan, income-driven repayment plans make their monthly loan payments depending on how much money they make each month. Between 10% and 20% of your monthly income may be capped for income-driven repayment plans, depending on which one you select and how much money you make each month.
When a borrower is in an income-driven repayment plan, the length of time they have to pay back their debt can range from 20 to 25 years.
Income-based repayment plans help make loan payments more affordable for people who take out loans. If you extend the loan terms, you might pay more interest over the life of your loan than if you used a different payment plan.
It’s possible that any debt leftover at the end of the term could be forgiven. Be aware that the IRS may tax the amount that was forgiven.
Discharge for Disability
If you have a long-term disadvantage, you may be able to get your federal student loans back. But it’s still very hard to get a total and long-term disability discharge. You need to fill out forms and show the Department of Education that you can’t make money now or in the future because of your disability so you can get money. To do so, you need to get an evaluation from a doctor, show that you are getting Social Security Disability Insurance, or show that you have proof from Veterans Affairs.
To apply for a disability discharge, you must be unable to work for 60 months. If a doctor says that your disability and inability to work will last at least 60 months, you can’t apply for disability discharge until then. Some private student loans don’t even let you get rid of your loans if you’re permanently unable to work. If you’re permanently disabled and want to get out of private loans, you might have to take your lender to court to get them to do it.
Temporary Help: Delaying or Forbearing
This option won’t eliminate student loan debt, but it might be a good option for people who can’t afford to pay their federal student loans each month. Forbearance and deferment let people put off their payments if they meet certain requirements. Interest may still be owed even if your loan is deferred or forbearance. This dangle on the type of loan you have.
However, applying for one of these options can help people avoid missed payments and the risk of defaulting on their student loans. There are several points to take into account about private student loans. They don’t have the same benefits as federal student loans. On the other hand, some may have their reasons for liking them. SoFi, for example, has Unemployment Protection, which lets people who qualify pause their loan payments if they lose their position through no fault of their own and can’t find another job.
Refinancing your student loans
You can’t get clear of your student loans by taking this option, but it could help you pay off your student loans more quickly. There is the possibility that if you refinance your student loans, your interest rate could be less than it is now. This could make your monthly payments lower or save you money on interest over the life of your loan.
People who require to refinance their student loans can also change the length of the term. Private lenders like SoFi can help you refinance both your federal and private student loans, but you should know that in doing so, you give up some of the protections that federal student loans give you, like income-based repayment plans.
Bankruptcy: A Last-Resort Option
Bankruptcy is a legitimate way to eliminate debt, but student loans rarely discharge bankruptcy. When someone registers for bankruptcy, they may be able to get rid of their student loans if they can show “undue hardship.”
It can have long-term effects on a person’s credit score if they file for bankruptcy. This is usually the last thing someone wants to do. Before deciding to file for bankruptcy, think about other options, like talking to a credit counselor or consulting with a qualified lawyer who can give advice that is specific to the person’s situation.
