I think we can all agree that student loan debt can be a burden for most. But did you know you may be able to get these loans discharged, legitimately?
So are there any legitimate student loan forgiveness programs available out there?
Short answer: Yes.
More complex answer: It’s complicated.
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While looking for the legit ways to get your loan discharged you also have to watch out for student loan forgiveness scams as there are a lot of them claiming they can get your debt forgiven, watch out for those. Before we get into legit ways you can get loan forgiveness, here’s what you need to know.
Student Loan Forgiveness options have been around for some time now when President Obama reformed part of the Direct Loan program in 2010 by signing the Health Care and Education Reconciliation Act of 2010.
Student Loan Forgiveness programs have been set into place in order to help aid former students in paying for their education following graduation (sadly, these programs are only applicable to students with federal student loans, not private). Getting loan forgiveness is a lengthy process that only applies under certain circumstances.
How to Get Rid of Student Loans through Student Loan Forgiveness Programs
The average college undergraduate comes out of college roughly $30,000 in debt. Business professionals and other higher education students who borrowed money had a median debt load of $41,000.
This does not include the averages for law school or medical school graduates whose debt averages are much higher. Should you pay those student loans early, refinance your student loans, or bet on student loan forgiveness under Biden?
Here are legitimate programs that could help you get your loans forgiven:
1. Public Student Loan Forgiveness Program
If you are employed by a U.S. federal, state, local, or tribal government or not-for-profit organization, you might be eligible for the Public Service Loan Forgiveness Program.
The Public Service Loan Forgiveness program (PSLF) is a very well-known pathway for college graduates struggling with hefty student loan debt. PSLF was created in 2007 in order to encourage graduates to pursue full-time work in public sectors including nonprofits and government organizations. Public sector positions typically offer lower salaries than their private counterparts. The plan requires all graduates to make 120 on-time payments for 10 years while working with a federal “income driven” repayment plans such as PAYE, REPAYE, IBR and ICR.
Since the earliest PSLF will go into effect in 2017 we are on the cusps of seeing the economic impact of PSLF. That impact will have further influence the continuation of PSLF for younger Millennials who graduated later. PSLF is a completely new program. There has yet been anything that has set any figure or data points on the consequences of this government loan forgiveness program.
Now, this may be cynical of but does anyone else see the danger here?
Government programs are always shifting. These programs change constantly every year when congressmen and lawmakers make their revisits and revisions. There is a lot of fine print in the PSLF paperwork that essentially translates, in layman’s terms, “if everything goes to plan.” 10 years is a very long time to hope for “if everything goes to plan.” One simple proposal can alter the entire contract – the entire program!
In fact, it’s already happening. A lawsuit from the American Bar Association against the Department of Education accuses the DOE of misleading public sector lawyers on the contents of PSLF.
“It’s clear that the Department of Education changed the rules in midstream,” Rives wrote. “That action forces public service employees to gamble with their financial futures and run the risk of being saddled with crushing, interest-enhanced debt.”
If the Public Service Loan Forgiveness program is cut or you suffered a job loss and can’t make those on-time payments, the interest that accrues during will make your total repayment balance even higher. There are a lot of ‘what ifs' in a 10-year long program. What if you’re unable to find public sector work? What if you were injured and unable to work? Can a categorization change in your employer excludes itself from the definition of public service? Is your job really guaranteed for 10 years? Are all of your payments being submitted on-time? What if you become disqualified from PAYE/REPAYE/IBR or ICR? In addition, be cautious that the current geopolitical landscape in America with a Republican house and senate will burden the future of PSLF program as well.
There is no official “grandfathering” in PSLF like you would on your cable bill rates. No surprise here – cable companies want to keep you as a paying customer. Public loan service forgiveness programs have no interest in keeping you as a customer. The bottom line here is that those loans are yours; at the end of the day, that is your signature on the dotted line. If you have no interest in working in the public sector for at least 10 years do not treat PSLF as a pliable program. If you are able to be debt free within 10 years on a manageable payment plan then it is much safer for you to tackle your student debt head-on in order to avoid the crushing consequences of a shaky program.
Only enroll in PSLF only as a last resort. Do not put all your eggs in one basket. PSLF is not the only solution to your student loan debt. Financial literacy is a better solution. Check out all of the free resources our blog has to offer for how to combat student loans head on. It's possible to pay off your student loans. You can hear real stories from millennials that have done on this site!
2. Disability Discharge
Total and Permanent Disability Discharge is available to federal student loan borrowers who are disabled and unable to engage in any substantial gainful activity (employment) because of a physical or mental impairment. The discharge would provide you with relief on your student loans by removing the debt completely that is under your name. You must be able to prove to the Department of Education (DoE) that you are in fact permanently disabled.
Few options to prove your disability
- If you have received a notice of award for SSDI or SSA you can submit this to the DoE to review. The notice must state that you are permanently disabled, as well as having your next review between 5-7 years. If your next review is less than 5 years, you will not qualify for disability discharge.
- Your physician can submit a certified form stating that you are totally and permanently disabled. The physician would need to state what is your disability, how long its expected to last, and whether he or she believes you are unable to engage in gainful activity due to your disability.
- If you are a veteran, the Veterans Affairs office can provide documentation to you that you are unemployable due to a service-related injury.
Your disability must have lasted, or is expected to last at least 60 months, or is expected to result in death.
3. School Closure
The closed school discharge is available if you attended a school that closed while you were enrolled or if you withdrew 120 days before the school’s closure. (Note that the period changed from 90 days to 120 days as of July 1, 2014).
Only loans received at least in part on or after January 1, 1986, may be discharged. FFEL and Direct Stafford loans, PLUS, and Perkins loans are eligible. Consolidation loans are trickier.
A consolidation loan usually consists of a number of underlying loans. If any of these underlying loans could be canceled, you can apply for a closed school cancellation for these loans only. If granted, you will receive a credit for the amount of the underlying loans related to the closed school.
4. Borrowers Defense to Repayment (BDR)
The Obama administration introduced the Borrower Defense to Repayment (BDR) rule as a way to provide debt relief to students defrauded by their school.
The legislation was prompted by the closing of Corinthian Colleges, which left approximately 16,000 students with debt and no degree. Although borrowers have been able to seek loan forgiveness from fraudulent colleges since 1995, BDR makes the application process much easier.
For-Profit Schools went through several investigations between 2010 and 2016. What the investigations revealed that in some cases the colleges had over 50% dropout rate, they were overcharging students, using illegal recruitment tactics, misleading students about their accreditation and especially job placement. Some colleges were even encouraging students to forge documents to get approved for loans they should never have gotten. At this point, these schools have cost the taxpayer around $24 billion dollars.
In the six months prior to leaving office, the Obama administration forgave nearly 28,000 loans.
Is Student Loan Forgiveness Real?
With the options available there is a high chance that you could get rid of student loans or more formally get your student loan debt forgiven, it just a matter of taking the time and knowing your options.
Good luck getting those student loans discharged!