Americans paid down a record amount of credit card debt during the pandemic. But their student loan debt remains at an all-time high without an end in sight.
Is it possible for you to get out of your student loan debt without paying?
The answer is maybe. But it depends on several things. So here are some options for getting out of your student loan debt without paying it (or at least not paying all of it).
How can I get rid of student loans without paying?
Federal student loan borrowers have a few different options for getting out of student loan payments. The options available to you depend on your loan, job status, and sometimes the school you attended.
- Move to a different country. Ex-pats who earn less than $100 thousand per year may be able to exclude their income on their federal tax return, effectively reducing their discretionary income to zero. The federal government offers borrowers loan repayment programs based on their income. Those same plans will forgive loan balances after 20 to 25 years of payment. An ex-pat can pay nothing towards their loan balance using one of those plans and have it forgiven. They will owe taxes on the amount forgiven, however.
- Income-driven repayment plans. The IBR, ICR, PAYE, and REPAYE plans offer borrowers a monthly payment based on 10 to 20 percent of their discretionary income (family size and adjusted gross income) for the next 20 or 25 years (depending on the plan). After that, the remaining federal loan balance is forgiven.
- Public Service Loan Forgiveness Program. The PSLF Program forgives the Direct Loan balance for borrowers who work in the public sector. You qualify if you work for the government (local, state, federal, and military service) or a nonprofit organization. You must make 120 qualifying payments while working full time for a PSLF qualifying employer before your balance is forgiven. Borrowers with loans made under the Federal Family Education Loan Program (FFELP) and the Federal Perkins Loan Program must apply for a Direct Consolidation Loan to qualify for this student loan forgiveness program.
- Teacher Loan Forgiveness Program. Teachers who work five consecutive years at a low-income school (elementary or secondary) or an educational service agency may qualify for forgiveness of up to $17,500 of their Direct Loans or Stafford Loans.
- Federal Perkins Loan Cancellation. You're eligible for Perkins Loan Cancellation or Discharge if you're a teacher, firefighter, or law enforcement officer. A portion of your balance is canceled each year for five years. Meanwhile, you're eligible for Perkins Loan Discharge if you become disabled or die.
- Loan Repayment Assistance Programs. Over 20 states and several law schools help borrowers make their monthly payments through LRAPs. Every program has different rules, but many require lawyers to have incomes under specific limits and fulfill certain service requirements. Some LRAPs cover private student loans. Lawyers can check the American Bar Association for a list of state LRAPs. Contact your school to see if it offers an LRAP.
- Closed School Discharge. You can have your federal loans discharged if your school closed while you were attending (or soon after you withdrew).
- Total and Permanent Disability Discharge. You can apply for a TPD discharge if either your doctor, SSA, or VA determines that you're 100% disabled. A TPD discharge will forgive your entire federal student loan balance, and you won't have to pay income taxes on the amount forgiven.
- Bankruptcy. Despite what you've been told, filing bankruptcy on student loans is possible. But it's difficult for most federal student loan borrowers to prove they have an undue hardship.
How to get rid of private student debt?
There are limited options to get rid of private student loan debt without paying. Lenders typically don't offer student loan forgiveness programs. And many won't agree to discharge your loans if you're permanently disabled. If you're struggling to repay your private student loans, check out these alternatives to forgiveness:
- Leaving the country. Unlike federal loans, private student loans have a statute of limitations. While leaving the country doesn't stop your lender from collecting or reporting negatively to the credit bureaus, the statute of limitations may run out while you're abroad. Your co-signer remains at risk of a lawsuit if they live in the United States.
- Refinancing. A lower interest rate can save you thousands on your private student loans. Plus, it may offer you a lower minimum payment each month. You'll need a good credit score (680+) and stable income to be eligible for student loan refinancing.
- Negotiating a student loan settlement. A settlement usually becomes an option for private student loans after you default. A settlement can save you 40-60% of your loan balance. You'll usually save more if you pay in a lump sum versus monthly payments.
- Filing bankruptcy. It's typically easier to prove financial hardship to get a private student loan bankruptcy discharge than to do the same for federal loans. And even if you don't get a full discharge, bankruptcy courts may allow you to get a partial discharge or negotiating a settlement.
Need help with your loans? Let's talk.
If you want to develop a strategy to get rid of your student loans, I'm here to help. My entire law practice is dedicated to helping borrowers with federal and private student loans.
Schedule a free 10-minute call with me today. We'll work together to develop a plan that allows you to meet your future goals.