Contact Your Student Loan Servicer To Discuss Options
Your first point of contact should be your student loan servicer. You may not be a fan of your student loan servicer, but the first step is to discuss your financial situation and explore options. You dont have to commit to any options immediately, but its important to convey you need help paying your student loans. Ignoring your financial situation or hoping your student loan debt will disappear are not viable options.
Final Thoughts On Student Loan Forgiveness And Discharge
If youre struggling with student debt, it might be tempting to walk away from your loans without paying them back. However, ignoring your debt will only make a tough situation worse, since going into default comes with a host of bad consequences that could hurt your finances for years to come.
Instead of ignoring your debt, learn legitimate ways for getting out of student debt without paying the entire balance yourself. Forgiveness programs could offer relief, as could student loan assistance offered by your state, university or employer.
And if you have special circumstances, such as a closed school or permanent disability, you may want to apply to certain programs to get your loan discharged. Make sure to read over the details of any forgiveness or discharge program to ensure youre on track toward meeting all the criteria.
Even if you cant qualify for any of these options, look for other ways to manage your student loans. For example, there are some relatively easy side hustles out there that can pull in some cash for extra payments, which can help you get rid of your debt faster and save money on interest.
You can also look into student loan refinancing to see if you could snag a lower interest rate on your debt or trim your monthly payment amount. By researching your options, you could save yourself a good deal of money.
Be Strategic About Your Debt
Effectiveness level: Medium
The first step to repaying your loans faster is to add more money to your student loan payment. But how you apply that extra money could make a big difference, too.
For all student loans, it makes the most sense to pay off the highest interest loans first. This is called the debt avalanche method, where you pay just the minimum on all but the student loan with the highest rate.
You might be best off targeting private student loans first, too, before focusing on federal student loan repayment. Repaying private student loans often means higher interest rates and less-flexible repayment terms compared to federal student loans. Private loans can have variable interest rates as well, meaning your rate could rise over time.
An alternative approach is called the snowball method. This involves paying off your loans with the lowest balances first. Although you wont save as much on interest, you might get a psychological boost from closing out an account.
Choose whichever method will motivate you to keep working toward your goal of paying off student loans faster.
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Get Your Employer To Reimburse Your Student Debt
You probably do not know, but some employers offer loan repayment options. I do not mean tuition reimbursement, but actually get rid of your student loan debt without you paying a dime. This is called loan repayment assistance.
I always ask employers about it, whenever I interview for a new job. If you are already in an existing job, you can call your HR department to inquire whether they have such an offer.
Often, this is done annually. You will not get your full student debt balance paid off. However, there will be monetary contribution to the balance per year. This is in the form of loan repayment assistance.
Depending on how long you work for the company, I figured you can avoid paying student loans this way. This is the more years you work for such a company, the more your student debt decreases. Am I right?
Assistant Professor Of Economics
No matter what you want to do with your life, I guarantee that youll need an education to do it, President Barack Obama said in a 2009 national address to students. Such guidance is regularly told to Black people: The way to get out of poverty and achieve middle class status is to get a college degree.
But a college degree does not eliminate the income gaps between white and Black workers. Black students finance their education through debt, and thus college degrees actually further contribute to the fragility of the upwardly mobile Black middle class. And because education does not achieve income parity for Black workers, the disproportionate debt Black students are taking to finance their education is reinforcing the racial wealth gap. Today, the average white family has roughly 10 times the amount of wealth as the average Black family, while white college graduates have over seven times more wealth than Black college graduates.
Most analysts believe there is a student debt problem in the United States, and even conservative scholars acknowledge some debt must be forgiven. Tuition is outpacing students ability to pay, and the share of students taking out loans to finance their degrees rose from roughly half to over two-thirds from 1993 to 2012, according to the Pew Research Center. Between 1993 and 2020, the average loan amount grew nearly three-fold, surpassing $30,000.
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How To Get Rid Of Private Student Debt
One of the few ways to get rid of private student debt is through discharge bankruptcy. Its an arduous and expensive process. Youll have to file Chapter 7 or Chapter 13 bankruptcy, then file an additional lawsuit known as an adversary proceeding. Youll likely need a bankruptcy attorney throughout the process, which can cost thousands.
If youre having difficulty making payments, your best option is to contact your private loan holder about renegotiating your payment or taking a short-term payment pause.
Dont Wait To Start Paying
It is never too early to start paying back your student loans, even if you havent yet graduated. Most lenders give borrowers a six- to nine-month grace period from when you graduate or leave school until when you need to start paying your loans back. The grace period is there to help you to find the right repayment plan that fits your needs and land a job so you are more financially stable.
However, just remember that during any grace period, interest is still accumulating on your loan and the amount that you owe is climbing. So, forget waiting for the grace period to be over instead, start paying your loan back as soon as possible. If youre working a part-time job, consider taking even 10% of your paycheck to pay down your debt. Chipping away at it when you can will definitely help in the long run.
If you are waiting to see what the current presidential administration will do about loan forgiveness, you should still continue to make payments to reduce your balance.
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Find Out Your Payoff Date
Check out our Student Loan Payoff Calculator, where you can enter in your monthly payment, loan balance and interest rate for each student loan youve got. Youll see the date youll pay off each loan if you keep making those minimum payments. You might not like what you see at first, but dont worry. Move straight to point #3 to see what happens if you get focused on paying more than the minimum.
Find State Assistance For Your Student Loans
Many states also offer various student loan forgiveness programs for your student loans. 46 out of 50 states offer at least one program, with some states offering many different programs to cover a wide variety of loan types, employment, and more. In fact, Kansas offers student loan forgiveness of up to $15,000 for just living in certain parts of the state.
Before you give up on not qualifying for Federal loan forgiveness programs, check your state and see if they offer any incentives or assistance: Student Loan Forgiveness by State.
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Teacher Loan Forgiveness Program
Student loan forgiveness for teachers is neither generous nor easy to qualify for. Teachers can have up to $17,500 of their federal direct and Stafford student loans forgiven by teaching for five complete and consecutive academic years at a qualifying low-income school or educational service agency.
Even if you were unable to complete a full academic year of teaching, it may still be counted toward the required five academic years if you completed at least half of the academic year your employer considers your contract requirements for the academic year fulfilled for the purposes of salary increases, tenure, and retirement and you were unable to complete the academic year because you either returned to postsecondary education in an area of study directly related to the five academic years of qualifying teaching service, had a condition covered under the Family and Medical Leave Act of 1993, or were called to over 30 days active duty as a member of a reserve component of the U.S. armed forces.
If you have had an outstanding balance on a direct loan or an FFEL on or after Oct. 1, 1998, then you will be ineligible for the program. Additionally, only loans made before the end of your five academic years of qualifying teaching service will be eligible for Teacher Loan Forgiveness.
Before You Change Your Repayment Plan
If youre considering applying to an income-based repayment plan, its important to calculate your potential payments using the official repayment estimator before switching. In some cases, your payments could be larger than what they would be under a 10-year standard repayment plan.
Choosing an income-driven plan can help lower your payments and make them more manageable. Youll likely pay more interest over time under one of these plans but it could be a lifesaver if youre having trouble making payments.
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Pay Off Student Loans With The Debt Snowball
The debt snowball method has helped a ton of people dump their debt, and it can work for student loans too. First, list all your loan debts from smallest balance to largest. Start paying on the smallest student loan balance first. Throw any extra money you have into paying off that first debt while still paying the minimums on everything else.
Once youve paid off the first debt, move to the second-smallest balance. Take everything you were putting toward the first one and add it to the minimum of the second balance. Once that debt is paid, move on to the next one and repeat the process until youre finally out of debt. Boom.
You might be thinking, Nopethis is going to take forever! Dont get it twisted. Most people that go all in on this plan pay off their debt in 18 to 24 months! Thats not quite forever, is it? My favorite thing about working the debt snowball method is that youll feel the progress youre making as each student loan disappears. Knocking those smaller loans out first will give you a couple of quick wins and help you stay motivated to crush the bigger student loans fast!
Just make sure you dont pocket the extra payment money as you pay off each loan. Keep the momentum going by rolling that money into the next loan payment.
Pro tip: Dont do this on your own. Take Financial Peace University and learn how to work the plan thats changed almost 10 million lives. This course will show you how to get rid of your student loans as fast as humanly possible!
Employer Student Loan Benefits
A recent ruling by the IRS opened the door for employers to offer a new type of benefit to its employees: student loan payment matching. This works within the employers 401 plan.
This could be especially beneficial to you if youve been putting off contributing to your 401 plan because of your student loan debt.
While this decision is fairly new, and few companies offer the benefit of student loan payment matching, it may become more prevalent in years to come. If youre in the market for a new job, you may consider looking for an employer who offers this benefit.
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How Can I Get Rid Of Student Loans Without Paying
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Theres no simple way to get rid of student loans without paying. But for federal student loans, there are forgiveness programs available after you make payments and meet other qualifications.
The most easily accessible student loan forgiveness programs include:
Public Service Loan Forgiveness: After 10 years of making payments while working full time for a qualifying government or nonprofit employer, the rest of your loan debt is forgiven. Its tough to qualify, and youll need to submit an employment certification form every year in the 10 years it takes to qualify so you stay on track.
Forgiveness through income-driven repayment: This is your best option to keep payments manageable. Your monthly bill amount is set at a portion of your income, and after 20 or 25 years, your remaining debt is forgiven.
Teacher Loan Forgiveness: After teaching full time for five consecutive years at a qualifying low-income school, you could see up to $17,500 of your loans forgiven.
Find out about additional forgiveness programs.
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Refinance If You Have Good Credit And A Steady Job
Refinancing student loans can help you pay off student loans fast without making extra payments.
Refinancing replaces multiple student loans with a single private loan, ideally at a lower interest rate. To speed up repayment, choose a new loan term thats less than what’s left on your current loans.
Opting for a shorter term may increase your monthly payment. But it will help you pay the debt faster and save money on interest.
For example, refinancing $50,000 from 8.5% interest to 4.5% could let you pay off your student loan debt nearly two years faster. It would also save you about $13,000 in interest, even with payments that stay about the same.
Youre a good candidate for refinancing if you have a credit score in at least the high 600s, a solid income and a debt-to-income ratio below 50%. You shouldn’t refinance federal student loans if you want or need programs like income-driven repayment and Public Service Loan Forgiveness.
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Lower Your Interest Rate Through Discounts
Most lenders will offer a 0.25 percent to 0.5 percent discount if you set up automatic payments on your loan.
In addition, private lenders may offer other interest rate discounts if you meet certain criteria, like making a certain number of on-time payments or taking out another loan with the same company. If you have private student loans, contact your lender and ask about any opportunities for interest rate reductions or discounts.
Revised Pay As You Earn Repayment Plan
Much like PAYE, under this plan, your monthly payments are 10% of your discretionary income. Your outstanding balance is forgiven if you haven’t repaid the loan in full after 20 or 25 years. The following types of loans are eligible for REPAYE:
- Direct Subsidized and Unsubsidized Loans
- Direct PLUS loans made to students, and
- Direct Consolidation Loans that do not include PLUS loans made to parents.
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Take Advantage Of Tax Deductions
The federal government offers a student loan interest deduction on your taxes for interest paid during the year on qualified loans. The law allows you to deduct up to $2,500, depending on your adjusted gross income. The deduction is available for both federal and private student loans.
You can claim this tax deduction if youre legally required to pay interest on a qualified student loan and your filing status is not married filing separately. There are also adjusted gross income limits for this program, which are set annually. You do not need to itemize to claim this deduction.
Those who qualify for the deduction will generally save a few hundred dollars on their income taxes, which could help with student loan repayment. If you pay less in taxes, this could free up some extra money to pay down your debt. Its a good idea to speak with a tax advisor to make sure youre taking advantage of any relevant tax benefits related to your education, says Ferastoaru.
Canceling Student Loans To Get Rid Of Student Loans
In some situations, you can get rid of your student loans altogether, which is referred to as student loan “forgiveness,” “cancellation,” or “discharge.” You must meet very specific criteria. Sometimes, you can cancel part of the loan, but not the entire loan.
What’s the Difference Between Loan Forgiveness, Cancellation, and Discharge?
If your federal student loans are forgiven, canceled, or discharged, you don’t have to pay them. People often use the terms “loan forgiveness,” “loan cancellation,” and “loan discharge” interchangeably, but the federal government uses these descriptions in specific ways.
“Forgiveness” or “cancellation” refers to situations when borrowers don’t have to make loan payments because of their occupation. A “discharge” happens when the borrower doesn’t have to make payments due to other circumstances, like a total and permanent disability or school closure.
The circumstances in which you might be able to cancel your student loan include:
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