Recovering from Financial Ruin

Student Loans: Are There Legal Ways To Get Out Of Debt?

24 September 2015 by Veeti Lepisto

Drowning in student debt and don't know what to do? Well, first of all, you aren't alone. In fact, there are 40 million Americans who have some level of student loan debt, with the average borrower having four loans. These loans aren't always easy to pay back, especially with everything else that you need to pay on a regular basis. Luckily, there are options available to you that can have your loans partially or fully forgiven, discharged or cancelled:

Income-Based Repayment Forgiveness

With an Income-Based Repayment Plan, you are essentially ensuring that your payments will never exceed the amount that you can afford each month based on your income. In other words, your monthly payment amount is going to be based on your income using a sliding scale rather than the actual amount of the loan. In addition, after 25 years of making qualified payments on your student loans, the remaining debt will be forgiven under this program. This program is eligible to be used with FFEL and Direct loans, as well as most federal loans.

Loan Forgiveness for Teachers

If you adequately meet certain conditions, you may be eligible for the Teacher Loan Forgiveness Program. Under this program, you can receive student loan forgiveness for up to $17,500 on your Subsidized and Unsubsidized Federal Stafford and Direct Loans. PLUS loans are not eligible at this time for this program. Now, one criteria that you'll need to meet is having been a full-time teacher for five straight years in an elementary or secondary school that meets certain conditions, such as being a low-income facility. Other criteria and information regarding this program can be found at the Federal Student Aid website.

Loan Forgiveness for Public Service Workers

If you work in the public service sector, such as for the local, state or federal government, you may be able to receive loan forgiveness under the Public Service Loan Forgiveness Program. In order to qualify for this program, you do have to be in a qualifying public service job for at least 10 years, although these years are not required to be consecutive. It is also must be full-time, which is 30 hours or more per week. You also must make 120 monthly payments on time. This program only refers to Direct Loans, but you can consolidate other loans into your Direct Loan so that they can be eligible as well.

What About Other Programs or Even Bankruptcy?

There are other ways to have your student loans forgiven, cancelled or discharged, depending on your exact circumstances. As a general rule, bankruptcy is not an option for eliminating your student loans. There is one exception, of course, but it is often hard to prove as you must prove that paying your loans would create an undue hardship to you, according to Nolo.com. Even if you can't prove this, you may be able to find help with Chapter 13 bankruptcy (not chapter 7 bankruptcy) by having your payments reduced throughout the duration of your reorganization plan. Currently, President Obama is trying to expand bankruptcy options for those who have student loans.

Ultimately, your best bet is to speak with a qualified bankruptcy attorney. He or she will be able to examine your exact circumstances and prove you with a guideline of what can and can't be done and what you can expect moving forward.

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