Millions of Americans are struggling under the weight of large student loan debt levels. Even if people did not complete their degrees, the loans they took out to pay for their educations must still be repaid in most instances. According to the Federal Reserve, consumer debt has reached $3.7 trillion in the U.S. Of that amount, almost $1.4 trillion is owed on student debt, leaving many people seeking student debt relief. Fortunately, there are multiple options for people who have large student loan debt balances for getting relief.
Federal student debt relief programs
There are several debt relief options available from the federal government for people who are struggling with student debt. According to the Federal Trade Commission, the Department of Education offers several different programs that may provide help, including the following:
With loan deferments and forbearances, people are able to temporarily cease making payments. They should be aware that interest may continue accruing during their deferment or forbearance periods, increasing their debt levels, however.
2. Income-contingent repayment plans
One option that many debtors find helpful is an income-contingent repayment plan. With these plans, monthly payments are based on the amount of money that borrowers make each month and are normally significantly lower than the payments they might otherwise have to pay.
3. Loan consolidation programs
In a student loan consolidation plan, all of a person’s federal student loans are consolidated into one federal loan. The life of the loan payment period is lengthened, making the payment smaller. People may end up paying more interest through loan consolidation than they otherwise might, however.
4. Loan discharge or forgiveness
If certain rare circumstances apply, people may be able to have their outstanding loan balances forgiven or discharged. These may include:
Federal Student Aid reports that teachers who borrowed student loans after Oct. 1, 1998, may have up to $17,500 of their student loan balances discharged if they teach in low-income schools for five years. People who have jobs in public service may have their loan balances forgiven if they have made 120 consecutive payments on their direct federal loans.
- Becoming totally disabled
- a school’s falsely certifying a borrower
- a school failing to repay the government when a student withdraws
- If the school closed
- Having certain jobs
In certain cases, student loan balances may be discharged through bankruptcy. Forbes reports that Congress has made it quite difficult to do so, however. In order to have student loans discharged in bankruptcy, borrowers must prove that repaying their loans would place an undue hardship on them. There is a test that courts apply in order to determine whether or not a borrower has met the undue hardship requirement called the Brunner test. To meet this test, a debtor must show that he or she has made good faith efforts towards repaying his or her student loans but has experienced a long-term issue that stops them from being able to repay their loans.
Ordering student loan payments
Some people attack their student loan debt by reordering their payments. With this approach, they arrange their loans from the highest interest rate to the lowest. They then pay only the minimum payments on all but the highest interest rate student loan. After that one is paid off, they move on to the next loan on the list. Others try to increase how much they make and devote the extra income to repaying their loans until the balances are paid down or off.
Having a heavy student loan debt burden is difficult for most people. There are a variety of different ways that people may be able to get relief from their student debt, however. People may want to review their options and choose the approach that they believe will best help them in their particular cases.