There are still many ways to pay off your student debt.
Friday’s Supreme Court decision to block President Biden’s loan relief program will be a huge disappointment to the 43 million people who could have benefited from up to $20,000 in debt relief, but millions of borrowers have thanks a grab bag already get relief methods that are still available.
That’s because the Supreme Court’s rejection of the plan doesn’t change the laws and regulations that already provide a way out for many federal student loan borrowers.
On Friday afternoon, the White House announced a new attempt to allow loan termination using what it calls the Higher Education Act’s “settlement and compromise power.” This effort will take months at least, and its scope and number of people who could benefit is not yet clear.
Below is a list of ways you can pay off your federal student loan other than paying it off in full. (Non-government private student loans have different rules, and they’re generally much stricter.) It includes many citations for other articles, FAQs, and explanations we’ve published on these subjects.
Too many people don’t realize that they are eligible for one or more of these programs. If you know someone who is struggling with student loan debt, suggest that the borrower explore all options.
Income dependent repayment
This collection mechanism for paying off debt—or canceling it if you can’t pay it off in full after a few decades—holds the greatest potential for most people. It’s also quite confusing.
Basically, it works as it sounds: your monthly payment depends on your income. If you can’t afford to make a standard payment (according to the federal government’s definition of affordability), pay less and a formula will work out the exact amount. If you haven’t paid back your balance after 20 or 25 years of income-related payments (depending on the repayment plan – there are different types), the state forgives the remaining debt.
The US Department of Education explains how this can work on its website.
The Biden administration has proposed a much more generous form of income-contingent repayment – separate and separate from the court-rejected debt relief plan – that could take effect soon, although legal challenges to that plan are also possible. My colleague Tara Siegel Bernard wrote a guide to the proposal in January.
For those just about to turn 20 or 25, the Department of Education is adjusting the credits millions of people have earned for debt relief. For example, if you are ever in forbearance or deferral, you could benefit if additional months or years were applied to the total years of eligible payments. And if you’ve taken advantage of the pandemic payment break, which is scheduled to end this year, the months you didn’t make payments will still count toward your 20 or 25 years.
Ann Carrns wrote about the Department of Education’s efforts in March.
Public Service Loans
The once-battered loan forgiveness program, which takes government and nonprofit employees off the balance after 10 years of payment, has improved in recent years.
During this decade, you must work full-time in a qualifying job, repay what is called a federal direct loan, make those payments under an income-tested repayment plan, and meet the payment deadline. Thanks to Biden administration adjustments like the one Ann wrote about, hundreds of thousands of teachers and social workers have recently become debt-free.
I have summarized many program changes in a column for 2021. In a column from 2022, you can read profiles of several people who have permanently wiped their balances. In May, I wrote about a 28-year-old woman who was helping her retired mother pay off her debts.
Closed or underperforming schools
For years, the Department of Education has maintained a way of canceling student loan debt that allows for a “borrower’s defense.” This allows people to petition the government if they believe their school has misled them, committed wrongdoing, or violated a state law related to the loan or the services to be provided by the school has.
When President Donald J. Trump was in office, the Department of Education tried to tighten the rules and slow down the process. Under President Biden, the Department of Education softened the rules. In 2022, many students who borrowed to attend non-profit schools or schools run by chains like Westwood College, Corinthian Colleges, DeVry University, and ITT Technical Institute (amongst other schools that have closed altogether) have been turned away relieved of their debts.
The Department of Education has a good explanation of borrower defenses on their website.
insolvency relief
Yes, you can pay off your student loan debt by filing for personal bankruptcy. No, it’s not easy.
In order to settle your debt in court, you must meet a certain legal standard – proof that repayment constitutes ‘undue hardship’. Often this involves arguing that there is a “certainty of hopelessness” that you will ever pay off your debt. A lot will depend on the jurisdiction you are in and even the judge hearing your case.
However, full debt relief is not out of the question. Last year, the Biden administration made some changes to make the process a bit easier, and Tara wrote about it in November.
dismissal for disability
In the case of “total and permanent disability” you can pay off your debts.
If the Social Security Administration or the Department of Veterans Affairs classifies you as disabled, that should be sufficient for an automatic discharge. Mental illness can be a qualifying medical condition, and the Social Security Administration explains how on its website.
Otherwise, according to the Department of Education, a doctor would have to certify that you are “unable to engage in any significant gainful employment because of a physical or mental impairment that is likely to result in death” and that you have been doing so for at least a year Fall is at least five years or can be assumed to last at least five years.
The Ministry of Education made the qualification for disabled people a little easier last year and explained the changes in a new version.
The debt will not go on
As a young adult, if you are wondering about the PLUS federal loans your relatives have taken out to fund your education, you may be wondering if the debt will be extinguished on the person or persons who borrowed it.
It does. The federal government will not claim their estate and you will not inherit the balance.