Millennials and other former students are looking for ways to ease the burden of student loan payments. There are an estimated 44.2 million borrowers owing money for college expenses with around 11% struggling to the point of default. Current debt levels surpassed 1.4 trillion dollars in 2017with average student owing $37,172 at graduation. Borrowers under 30 years old have an average monthly payment of $351, which can impact the ability to achieve other life goals such as home ownership or starting a family.
With over 11 million borrowers currently enrolled, most students remain in the 10-year level repayment plan.However, based on the plan you qualify for, several loan forgiveness options require enrollment in an income based plan, which extends repayment for 20 or 25 years.One down side of extended repayment is the longer time frame which can lead to higher levels of interest paid, which could thennegate the benefit of loan forgiveness.Evaluate your loan forgiveness options early and choose the one that best fits your circumstances.
Here are ten different routes you can take to achieve some level relief in student loan balances.
- Public Service Loan Forgiveness (PSLF) is one of the most generous programs available and eliminates student loan debt after ten years (120 payments), while employed by a qualified employer. Government and non-profit jobs typically meet the requirements, but there are exceptions which could affect qualification.
- Teacher Loan Forgiveness allows qualified teachers to receive a reprieve for up to 100 percent of Stafford or Direct Loans. To qualify, you must teach for five consecutive years in a Title I or other approved low-income primary or secondary school. The program offers higher discharge amounts if you teachers in the high need subjects such as math, science, and special education. The school must serve low-income students at least one of the five years to qualify. For additional information visit Studentaid.ed.gov.
- Health Professionals Loan Repayment Program and other similar programs entice qualified doctors and nurses to work in underserved areas or with military personnel with the promise of loan discharges up to $50,000. Some states offer similar programs, such as the Maine Dental Loan Repayment Program, which extends loan forgiveness to dentists working in high need areas.
- Volunteer Work. Companies like Sponsor Change have built online networks that allow former students to exchange volunteer work for paying down student loan debt. Borrowers choose a charity connected with Sponsor Change and complete volunteer service. In exchange for their skills, donors make payments towards their debt. The company offers opportunities both in person and remotely to assist various non-profit organizations.
- Workplace Benefits. Forbes listed student loan repayment as the “hottest employee benefit of 2017.” A survey taken in 2015 indicated that 76% consider assistance with student loans as a deciding factor in an employment decision. Currently, companies do not receive tax incentives forpaying down student loan debt, and students receiving the benefit must pay taxes on contributions. Congress is considering a new bill which would treat debt reduction payments made by employers under the same taxation rules as 401K matching contributions. Currently, only 4% of companies offer any assistance. Companies such as Staples, Aetna, and Pricewater house are leading the call by providing student loan payment assistance as an employee benefit.
- Military Service. Serving in the military does qualify under the PSLF program, but service also offers other options.Members of the military who borrowed through the National Defense Student Loan or Perkins loan programs can receive partial discharges for serving in a hostile fire area. Other benefits include annual payments towards existing student loans and access to tuition assistance programs in place of loan discharges.
- Bankruptcy.You may receive a discharge of student loans if you file for bankruptcy, which requires a separate process. To qualify, you must prove repayment would create anundue hardship, and your financial circumstances are likely to persist. It is difficult to prove the hardship standard, and the courts do not have consistent precedent.
- Income Driven Repayment. The most recent form of loan forgiveness involves signing up for an income driven plan and making payments for 20 or 25 years, depending on the program. One key advantage with income driven options is the lower monthly payment. The disadvantage is you could pay nearly three times the interest in hopes of discharging remaining balances at the end of the 20 or 25-year term. If income rises significantly, you could be responsible for 100% of the loan balances, plus the additional interest resulting from the longer repayment term.
- Perkins Loans Forgiveness Options include a multitude of occupations, making it more generous than many other programs. In most cases you may receive up to 100% loan forgiveness, paying a percentage of outstanding loans for each year of service. A few occupations include firefighters, law enforcement, attorneys working as a public defender, qualified professionals in education and child care, to name a few.
- Death or Disability. All federal loans grant a full discharge in the event of death or total and permanent disability of the student. In the case of PLUS loans, the discharge applies to the death of the student and the death or permanent and total disability of the parent borrowing the funds.
Other less common circumstances which grant a loan discharge include:
- The closing of the school before you graduate, a school falsely certifying eligibility, or the school failing to refund the loan when you drop out of school.
- Seeking assistance with loan repayment can speed up the process or reduce the amount owed, freeing up funds for other financial goals such as buying a home or saving for retirement. 2017 could bring significant changes to some forgiveness options, as Congress grapples with ways to help ease the burden of student loan debt.