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As you’ve probably heard, student loan debt is a growing problem. Americans now owe more than $1.2 trillion on student loans, more than they collectively owe on credit cards or car loans. Only mortgage debt is higher.
While it may seem that student loans are a problem isolated to students, they affect all of us. Student debt can prevent graduates from doing the typical things that stimulate our economy, from buying furniture, houses and cars to starting their own businesses.
Which leads us to today’s reader question. It’s about getting out from under student loan debt without having to actually pay it back.
How does someone get student loan forgiveness? — TC
Before we tackle this week’s question, here’s a TV news story we recently did about going to college without debt. It’s too late for this advice to help TC or other college grads, but it may help a future student you know.
Now let’s answer TC’s question, starting with an explanation of what debt forgiveness is about.
What is student loan debt forgiveness?
As you might imagine, once you borrow money for school, you generally have to pay it back, even if you never attended a class, don’t finish your education, don’t like the education you received, don’t get a job or are unhappy with the loan terms.
But when you have a loan forgiven, canceled or discharged, it means you’re off the hook. Let’s take a look at each of these methods to eliminate debt. You can learn more about each at this page of StudentAid.ed.gov.
Having student loans canceled, forgiven or discharged
The following is a list of all the ways you can escape student loans. You’ll note that most apply only to loans issued or guaranteed by the government. If your loans are from private lenders, you’ll have a lot fewer options.
Disability discharge. If you have a Direct, Federal Family (FFEL) or Federal Perkins loan, or a loan paid under the TEACH program, it’s possible to have it discharged if you become permanently and totally disabled.
In order to have a debt discharged, you’ll have to send proof of the disability (like certification from a doctor) to the Department of Education. Go here for more information. You can also have the above types of loans discharged by the death of the borrower.
Bankruptcy discharge. You may have heard that you can’t eliminate student loan debt by filing bankruptcy. Not true. While it’s certainly not as easy to eliminate student loan debt through bankruptcy as other types of debt, it does happen. The key is proving “undue hardship.”
You need to meet three conditions to get an undue hardship discharge in bankruptcy, and you’ll need to meet all three. From the StudentAid.ed.gov website:
- If you are forced to repay the loan, you would not be able to maintain a minimal standard of living.
- There is evidence that this hardship will continue for a significant portion of the loan repayment period.
- You made good-faith efforts to repay the loan before filing bankruptcy (usually this means you have been in repayment for a minimum of five years).
As you can see, the bar is set high for those trying to discharge their debt in bankruptcy. But if you think you can meet the requirements, a talk with a bankruptcy lawyer might prove valuable. Read more about this option here.
Closed school discharge. You can get out of Direct and FFEL loans if your school closes and you don’t complete your course of study, or one similar, at another school. There are requirements, like the closure must happen within 90 days of your withdrawal.
School ripoff discharge. While it’s unlikely you’ll encounter fraud or bad information from a community college or university, the odds increase when dealing with for-profit centers of learning.
If your school forges your signature on an application or loan request, your loan was improperly certified, or you were certified as eligible for a profession for which you really weren’t eligible because you weren’t mentally, physically or legally able to do it, you might get your Direct or FFEL loan discharged.
Teacher loan forgiveness. If you’ve taught full time at a low-income elementary school, secondary school or educational service agency for a minimum of five consecutive years, you might get as much as $17,500 of Direct or Stafford loans forgiven.
You might also get teacher loan forgiveness for federal Perkins loans. Find out about that program here.
Public service forgiveness. Jobs other than teaching might also earn forgiveness on Perkins and other types of loans.
Some members of the military, the Peace Corps and Head Start might qualify, as well as some nurses, law enforcement, and child or family service workers. The amount of forgiveness depends on the type and length of service, type of loan and when it was taken out. Learn more here.
The fastest way to find out if you qualify for forgiveness
As you can see, loan discharge and forgiveness are complicated. The links in this article will take you to information that can help, but if you find your eyes glazing over, try calling your loan servicer. They might be able to tell you in seconds what you’ll find out on your own in hours.
Another good source of free information, as well as assistance if you’re having trouble paying your student loans, is the Student Loan Alliance. You can find them at StudentLoanHelp.org.
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