Six Ways You Can Still Cancel Your Student Loans

There are many other ways to clear your student loans.

The Supreme Court’s decision to block President Biden’s debt forgiveness plan will come as a major disappointment on Friday. 43 million people Up to $20,000 could benefit from debt cancellation, but millions of borrowers have already received relief through more available methods.

That’s because the Supreme Court’s rejection of the plan would not change laws and regulations that already give many federal student loan borrowers an escape route.

The following is a list of ways to avoid paying off your federal student loan balance in full. (The rules for private student loans that don’t come from the government are different, and are generally more strict.) It includes many citations to other articles we’ve published on these topics, frequently asked questions, and explanations.

Many people do not know that they are eligible for one or more of these programs. If you know someone struggling with student loan debt, suggest that the borrower review every last option.

Income-based repayment

This catwalk mechanism for repaying the loan — or canceling it if you can’t pay it off in full after two decades — has the highest potential for most people. It is also very confusing.

At its most basic, it works the way it sounds: your monthly payment depends on your income. If you can’t pay the standard rate (as defined by the federal government’s affordability), you’ll pay less, and a formula determines the appropriate amount. If you don’t repay your balance after 20 or 25 years of paying income (depending on the repayment plan – there are several types), the government cancels the remaining loan.

The US Department of Education explains the various ways this can work on its website.

The Biden administration has proposed a more generous form of income-based repayment — except for a separate and court-sanctioned debt cancellation program — that could take effect soon, though legal challenges to the plan are also possible. My colleague Tara Siegel Bernard wrote a guide to the proposal in January.

For those in the middle counting 20 or 25 years, the Department of Education adjusts the credits earned by canceling millions of people’s loans. If you’ve ever been in forbearance or deferment, you may benefit from counting extra months or years toward the total number of years of qualifying payments. If you’ve received a pandemic payment suspension that’s due to end this year, those months you’re not making payments They will count more Towards your 20s or 25s.

Ann Carnes wrote about the academic initiative in March.

Public Service Loan Forgiveness

A once-stuck loan forgiveness program — if government and nonprofit employees clear their balance after 10 years of payments — has been upgraded in recent years.

During that decade, you must work full-time at a qualifying job, repay what’s called a Direct Federal Loan, and pay into an income-driven repayment plan. Hundreds of thousands of teachers and social workers have recently been debt-free thanks to Biden administration fixes like the one Ann wrote about.

I have summarized several changes to the program in the 2021 column. You can read the profiles of many people who have cleared their balances in the 2022 column. In May, I wrote about a 28-year-old who helped his retired mother pay off her debt.

Closed or underperforming schools

For years, the Department of Education has maintained a way to cancel student loan debt that allows for “borrower protection.” It allows people to petition the government if they believe their school misled them, engaged in misconduct, or violated state law regarding credit or the services the school is supposed to provide.

President Donald J. While Trump was in office, the Department of Education sought to tighten rules and slow down the process. Under President Biden, the Department of Education relaxed the rules a lot. In 2022, many students who took out loans to attend for-profit schools or those run by chains such as Westwood College, Corinthian Colleges, DeVry University and ITT Institute of Technology (including schools that have closed entirely) will have their loan balances wiped out.

The Department of Education has a good explanation of borrower protection on its website.

Bankruptcy Discharge

Yes, you can pay off your student loan debt by filing personal bankruptcy. No, it’s not easy.

In order to clear your debt in court, you must meet a certain legal standard — proving that repayment would create “undue hardship.” Often, it can be argued that there is a “lack of confidence” that you will ever pay off your debt. It depends on the judicial district you are in and the judge hearing your case.

But total discharge of debt is not possible. Last year, the Biden administration made some changes to make the process a little easier, and Tara wrote about it in November.

Disability Discharge

If you are disabled in some way”Total and permanent,” you can write off your loan.

If the Social Security Administration or the Department of Veterans Affairs classifies you as disabled, This should be enough For automatic discharge. Mental illness can be a qualifying condition, and the Social Security Administration explains how on its website.

otherwise, According to the Department of EducationThe physician must certify that death has been “expected” and has continued for at least five years or is “inability to engage in substantial gainful activity due to physical or mental impairment” that is foreseeable. Lasts at least five years.

The Department of Education eased the disability eligibility a bit last year, and it explained the changes A new release.

Death

This is not something most people choose as a solution to their debt burden. However, if you’re a teenager wondering about a federal PLUS loan your relatives took out for your education, you might wonder if the person or people who took out the loan will die.

It does. The federal government won’t make a claim on their estate, and you won’t receive a back payment.