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Student loan debt is at an all-time high, with 44 million Americans carrying a combined total of $1.5 trillion in student loans.
If you’ve ever struggled to make your student loan payments while still paying your rent on time, you’re not alone. The good news is there may be some student loan relief out there for you, and it doesn’t include robbing a bank. Here are seven legal ways you can get out of paying your student loans.
1. Public Service Loan Forgiveness
If you work in the public sector, you may be eligible to have your loans forgiven through the Public Service Loan Forgiveness program. To qualify, you must make on-time monthly payments for 10 years under a qualifying repayment plan while being employed full-time with a public service employer or volunteering full-time with AmeriCorps or Peace Corps. Qualifying employers include:
- Government organizations (federal, state, local, or tribal)
- Not-for-profit organizations that are designated as tax-exempt 501(c)(3) under the tax code
- Not-for-profit organizations that aren’t designated as 501(c)(3), but have a primary purpose to provide public services (emergency management, public safety, public health, public education, etc.)
While this sounds simple, early data shows that 99% of Public Service Loan Forgiveness program applications have been denied. Rejected applicants were usually paying under a non-qualifying repayment plan, had the wrong type of student loans, or were working for a non-qualifying employer.
If this forgiveness program is an option for you, make sure it’s the best option before signing on. While you’ll have your loans forgiven after 10 years, you might be able to repay your loans even earlier than that by choosing a job with higher pay or opting for a non-qualifying repayment plan that allows you to make larger monthly payments.
2. Teacher Loan Forgiveness
Teachers rejoice! If you teach at a low-income school or educational agency, you may qualify for the federal Teacher Loan Forgiveness Program. There are many nuances to the qualification requirements, but to start, you must have taught low-income students full-time for five consecutive years. The amount that qualifies for forgiveness will vary depending on the subject area you taught. Most subjects will qualify for up to $5,000 in loan forgiveness. However, if you taught mathematics, science, or special education, you may qualify for up to $17,500 of student loan relief.
3. Perkins Loan cancellation
Depending on your employment or volunteer service history, you may qualify for partial or full cancellation of your federal Perkins Loans. Those who have served as firefighters, nurses, military personnel, or volunteered with the Peace Corps, among other service professions, may be eligible for loan cancellation. In addition, the Teacher Cancellation program may cancel up to 100% of your Perkins Loans if you served as a public or nonprofit elementary or secondary school teacher for low-income families.
4. Income-driven repayment plans
Income-driven repayments plans are exactly what they sound like -- your monthly payment is determined based on a percentage of your discretionary income. This makes your payments more affordable and allows the remaining balance to be forgiven at the end of your repayment period, which is typically 20 or 25 years. Your monthly payment requirements will change over the course of your loan as you are required to submit income documentation each year.
While this lowers your monthly payments, it’s not the best way to save money over the life of your loan or pay off your student loans early. These repayment plans are usually best for people who can’t make their minimum payment.
5. Disability discharge
If you have a total and permanent disability (TPD), you may qualify to have your federal student loans discharged. To apply for a disability discharge, you must provide documentation of your TPD from the U.S. Department of Veterans Affairs (VA), the Social Security Administration (SSA) or a physician.
The VA and SSA have internal processes for receiving a disability determination. However, you can also qualify for TPD discharge by having a physician certify that you’re unable to engage in gainful employment due to a physical or mental impairment that may be expected to result in death or has lasted or expected to last for at least 60 months.
6. Bankruptcy discharge
Your federal student loans may qualify for bankruptcy discharge if you declare Chapter 7 or Chapter 13 bankruptcy. The bankruptcy courts must also determine that your student loan payments would cause undue hardship to your family. There is no single test for determining undue hardship, which makes qualifying even more difficult.
Keep in mind that this relief option is extremely rare, so you’ll need to explore other relief options or switching repayment plans if the court doesn’t discharge your loans.
7. Get an employer who will pay off your loans
If you don’t qualify for student loan relief programs through the government, explore repayment options with your employer. Many companies are now offering student loan assistance as a workplace benefit in an effort to attract and retain recent graduates. While they probably won’t pay off your entire student loan debt, they can certainly help make a dent in your overall total.
Each company determines its repayment program, from the amount of each monthly payment to the duration of the program. Many companies offer tiered student loan repayment programs in which you receive more money the longer you’ve been with the company.
You should explore each student loan relief opportunity more deeply to determine if you qualify. Depending on the program, it may require quite a bit of a paperwork trail, but it could be worth the effort if you are able to get out of paying your student loans.