How to Get Rid of Your Student Loans (Without Paying Them Off)
You’ve probably heard it said a million times before that your student loans cannot be discharged in bankruptcy. Everyone is basically stuck with them no matter what happens later in your life (which is ample motivation to pay them off as quickly as possible). In fact, I paid off my student loans just five years after graduating college instead of the 11 years my lenders had earmarked for me.
But what if that is not entirely the case? Are there circumstances where your federal student loans can be paid off without you?
Here are several ways that you can get rid of those federal student loans without paying them all off yourself:
After 20 Years of Consistent, On-Time Payments
Thanks to the Student Loan Forgiveness Act of 2012, students who borrow money starting July 1, 2014 will be able to cap their student loan repayments at 10% of their discretionary income instead of 15%, which is the current rate. And then if they make 20 years of consistent, on-time payments, the rest of their loans will be forgiven.
After 10 Years of Consistent Payments Plus Service Work
If you have federal student loans (specifically federal Stafford, Grad PLUS, or consolidation loans as long as they are in the DirectLoan program) and work in certain public service positions, then you may qualify for the Public Service Loan Forgiveness (PSLF) program. Through this program, your federal student loans will be forgiven after 10 years of on-time and consistent payments. Careers include any job in government, military service, emergency management, public safety, law enforcement, public health, and public education, to name just a few.
Note: Only payments made after October 1, 2007 count towards the 10 years, and also only payments made while you were working “full-time” (an annual average of 30 weekly hours or more) in an eligible service position.
Work in High Need Areas
If you work in areas such as rural communities, schools and medical clinics serving low-income families and underserved minority groups such as Native Americans, then you may qualify for state and federal initiatives to pay off your debt. This is because it’s difficult to recruit people into these positions, so programs have been created as an incentive. Some examples of these types of programs are the Indian Health Service Loan Repayment Program, and the Veterinary Medicine Loan Repayment Program.
Live in Certain Rural Communities
There are some areas in the United States that need residents so badly, they will help you out with your student loan debt for moving there. Two such places are over 73 counties within Kansas, and Niagara Falls, New York. In particular, Kansas’ rural opportunity zones will forgive up to $15,000 of student loan debt as well as exempt you from state income tax for five years, and Niagara Falls, NY will forgive $3,500 per year.
So if you work for yourself at some sort of web-based job, or you can find a job in one of these areas, then you might consider something drastic like relocating for a few years.
Become Part of Peace Corps or AmeriCorps
AmeriCorps members who complete a term of service (12 months, full-time) will receive an AmeriCorps Education Award. The amount of a full-time education award for national positions approved in the 2014 fiscal year is $5,645. You also may be eligible to put your federally-guaranteed loan in forbearance, which means you are not paying on them. It will continue to earn interest, and AmeriCorps may pay this interest for you.
With the Peace Corps, you receive an After Service transition fund of $7,425 after successful completion of 27 months of service. You could use this for your student loan debt, and of course for necessities such as rent deposits on an apartment. Volunteers with Perkins loans may be eligible for a partial cancellation benefit, and federal loans may be eligible for deferment or forbearance. Perkins Loans will partially be forgiven (15% loan cancellation for each of their first two years of service, and 20% percent loan cancellation for third and fourth years of service).
These programs may not be your first choice. However, if you are just coming out of college or have lost your job and are having difficulty reentering the workforce, then this is a great way to continue paying your student loans, cover living expenses, and gain experience (plus avoid resume gaps).
Are you still paying on student loan debt? Would you consider something drastic like the examples above in order to have part or of it forgiven?
Great article, thanks! Will these options also apply to parents with Federal PLUS loans?