At a time when the true severity of the student debt crisis is being revealed, students are becoming hyper-conscious about what money they borrow, where they go to school, and what professions they aim for. As we explained earlier in the month, certain professions provide better pay offs than others — an attractive quality for students not looking to be in debt indefinitely. But what many young people don’t realize is that there are other options to escaping student loans.
However, because of the variety of programs, requirements, and qualifications these forgiveness and discharge options entail, many students feel overwhelmed by the dizzying amount of information and prerequisites. Luckily, Saltmoney.org breaks down these alternatives in its hefty e-book titled “60+ Ways To Get Rid Of Your Student Loans.” Download the book to dig into all 60, but here we highlight eight options that we believe many student borrowers can benefit from:
1. Community Service
The first option you have under a forgiveness plan is community service. But before we go any further, we should go over what student loan forgiveness actually means. Loan forgiveness occurs when the forgiving party (such as the government) decides that the borrow has adequately paid his or her loan by giving back to the community in a way they’ve specified. So in terms of community service, students have the option of completing a term of service with Americorps.
Loans that qualify for this option include Stafford loans, Consolidation loans, Parent loans, Grad PLUS loans, Perkins loans, and state-funded loans. As long as a student signs up to receive the Segal Americorps Education Award before serving with AmeriCorps, he or she can receive the award upon completion of a term of service, and can receive up to the maximum Pell grant allotment for the current year.
Students also have the option of becoming a member of the U.S. military. This is also part of the student loan forgiveness sphere, but contains many different programs, including the Active Duty Health Professions Loan Repayment Program, Army Student Loan Repayment Program, Military Reserve Health Professionals Loan Repayment Program, National Guard Student Loan Repayment, and Navy Loan Repayment Program. We’ll briefly summarize two of them.
The Navy Loan Repayment Program is for active-duty borrowers who are willing to enlist for at least three years and have no military experience. As long as you meet requirements, you can receive 33 1/3 percent of the remaining principle balance of loans per year, and the loans that qualify include Stafford loans, Grad PLUS laons, Consolidation loans, and Perkins loans.
On the other hand, if you are a fully qualified health professional in an area that has a shortage of skill and if you’re serving as a commissioned officer on active duty, you are eligible to have up to $40,000 forgiven for loans that include Stafford loans, Grad PLUS loans, Consolidation loans, Perkins loans, Health professions student loans, and Private student loans.
The next options also follow along those same lines. You can qualify for certain forgiveness programs based on your career, but many careers are not eligible. Those careers that do qualify include, but are not limited to, health professionals, lawyers, public service employees, and teachers. We’ll highlight a couple of examples.
If you’re a degree-trained health professional from a disadvantaged background serving on the faculty at a health profession college or university, you could be eligible for the Faculty Loan Repayment Program that forgives up to $40,000 for two years of service. Loans that qualify include Stafford loans, Grad PLUS loans, Consolidation loans, Perkins loans, and Private student loans.
If you’re a teacher and taught full time for five consecutive years in a designated elementary or secondary school serving low-income families, you could be eligible for the Teacher Loan Forgiveness Program. This allows borrowers to receive from $5,000-17,500 a year based on when the service began and what they taught. Loans that qualify include Stafford loans and Consolidation loans.
4. Discharged Schools
The next batch of options falls under a different category than the student forgiveness programs. These are categorized as loan discharge options and are available for students who cannot possibly pay a loan (due to death or disability) or can’t apply the education for which the loan was granted. Don’t worry, you’ll see what we mean.
First up is when the circumstance arises that a school is closed while a borrower was attending it, or within 90 days of he or she leaving it. You could also be eligible for this discharge if you withdrew from a school that failed to refund you the correct amount. For the Discharge Closed School program, borrowers eligible are those who couldn’t complete their education due to the school closing while they were enrolled or 90 days after they dropped out. The forgiving party will forgive 100 percent of the loans you took out for that program, and loans that qualify include Stafford loans, Consolidation loans, Parent PLUS loans, Grad PLUS loans, and Perkins loans.
Also, if you withdrew from school and were not adequately refunded for the portion of the loan you deserved, you could be eligible for the Discharge Unpaid Refund program that compensates you for the amount that was originally supposed to be refunded to you. Loans that qualify include Stafford loans, Consolidation loans, Parent PLUS loans, and Grad PLUS loans.
The next option is limited to victims of September 11, 2001, and is called the Spouses and Parents of Victims of September 11, 2001, Forgiveness program. Students are eligible for this discharge if they’re a spouse of an eligible public servant (police officer, firefighter, Armed Forces, or other safety and rescue personnel), if they died, or if they became totally and permanently disabled due to physical injuries sustained during the September 11 attacks. Loans that qualify include Stafford loans, Parent PLUS loans, Grad PLUS loans, Perkins loans, and consolidation loans made to pay off loan amounts that were owed on September 11, 2001. If you meet the requirements, you are eligible to earn back 100 percent of the loan amount you owed on September, 11, 2001.
6. Bankruptcy/Income-Based Repayment
The next alternatives are for those borrowers who qualify for programs based on their inability to pay off debt due to financial hardship. Programs include Bankruptcy, Income-Based Repayment, Income-Contingent Repayment, and Pay As You Earn Forgiveness.
To be eligible for the Bankruptcy program, you must be able to prove to a judge that there is no likelihood of any future ability to repay loans. Good luck, because you have to convince said judge that repaying your loans would be an undue hardship. Should you qualify, you can have up to 100 percent of your loan’s amount forgiven, and you can also reattain federal student aid eligibility if you lost it. Loans that qualify include Stafford loans, Parent PLUS laons, Grad PLUS loans, Consolidation loans, and Perkins loans.
Another kind of program under this categorization is the Income-Contingent Repayment Loan. For this, borrowers must make 25 years of eligible payments, which are calculated each year based on annual income, family size, and the total amount of federal student loans. They’ll be capped at 20 percent of your discretionary income. Loans that qualify include Direct Stafford loans, Direct Grad PLUS loans, and Direct Consolidation loans — and if you are eligible, you can have up to 100 percent of your outstanding balance forgiven after 25 years, or 10 years if you work in public service.
Next up: fraud. The good news here is that if someone fraudulently used your name to obtain a loan, you could have 100 percent of it discharged, just as long as you can prove it. The two available programs include False Certification Due to Identity Theft and False Loan Certification.
The first is if the person who stole your identity has been convicted of the crime. You must be able to present a police report as well as other evidence that validates the identity theft. Also, you’ll have to assist in any proceedings related to the prosecution of the crime, and the identity thief had to have obtained the loans after July 1, 2006. You can then receive up to 100 percent of your student loan discharged, as long as the loan was a Stafford loan, a Grad PLUS loan, a Parent PLUS loan, a Consolidation loan, or a Perkins loan.
The second is for those borrowers who didn’t necessarily have their identity stolen, but who falsely certified their eligibility for a loan, which can occur when a school official falsely signs off on a loan application, appropriately named a false certification due to unauthorized signature. A borrower can also be eligible for this program if a school admits that he or she didn’t meet the necessary requirements to attend the school and therefore wasn’t able to benefit from the education received. This is called a false certification due to ability to benefit.
Lastly, you can fall under disqualifying status, meaning that you weren’t able to meet the legal requirements for employment in your state of residence due to age, physical or mental condition, criminal record, or other reason. You must have been eligible for this disqualifying status at the time the loan was issued. Should you meet these requirements, you can receive up to 100 percent of your federal student loans discharged. Loans that qualify include Stafford loans, Grad PLUS loans, Parent PLUS loans, and Consolidation loans.
The last batch of programs offer discharge for borrows who suffer from physical or mental injuries, or have died.
If the borrower dies before repaying loans, the borrower’s family can have the loans discharged. In addition, in the case of Parent PLUS loans, the loan can be discharged if the parent dies, or if the student dies.
To be able to apply for a Total and Permanent Disability discharge, a physician must certify that the borrower is unable to participate in “substantial gainful activity” due to physical or mental impairment, expected to result in death or at least last 60 months. Also, effective July 1, 2o13, borrowers may be eligible for discharge if they have been classified as disabled by the Social Security Administration.