Is Student Loan Debt Relief Possible When I Am in Debt to My Student?

Are you buried under a mountain of student loan debt? If so, don’t worry; there are ways to get out from under it. Some options will require some cooperation from you, but others are completely automatic. In any event, it’s important that you take action to reduce your debt now while you still have the time.

What Are You Paid For? Some loan programs offer the graduated payment plan, which allows borrowers to switch to a payment plan with lower payments as they reach different income milestones. Some borrowers with adjustable rate loans (ARM) find this option attractive because of the potential for early payoff and forgiveness of principal. The ARM plan has annual adjustments, such as price increases and discounts for a variety of reasons.

What Is Your Voluntary Income? Borrowers must prove their current or future income in order to qualify for either the graduated payment or the flexible payment option. In most cases, this means documenting every paycheck of the borrower for at least a few months. However, borrowers who do not have the best paying jobs or the highest paying positions may also qualify for the standard income-based forgiveness program.

What Are You Working With? Certain loan programs reward borrowers with lower payments or lower interest rates for working for them in a specific company for at least a specific number of years. Student loan programs with a tax-free loan principal are generally less generous in terms of interest rates. Those with tax-free debts are generally considered “income-driven repayment plan” or IPRs. IPRs provide a lower monthly payment or interest rate while working for the same employer for 25 years or more.

If you are planning to take advantage of any of these income-driven repayment plans, you will want to do your research first. In particular, the tax consequence of any plan you select should be contemplated. While the positive tax implications of having one of these loans is well worth the lower monthly payments, the negative tax consequence of delayed payments or missed payments can be far worse, resulting in higher interest rates and fees.

How Do You Access Them? To get started, borrow only the funds you need. Paying off your loans in full and on time will save you thousands of dollars in interest. The other sources of discretionary income that you can tap include government grants for higher education, child care benefits, veterans’ benefits, child support, and even part-time work. Any additional cash you have access to will help you pay down the principal on your loan as quickly as possible.

Can I File For Bankruptcy? A bankruptcy may seem like an easy option, but it is not recommended. Not only is filing for bankruptcy a lengthy process, it can have severe negative consequences on future credit reports. Furthermore, although discharged debts may not be reflected on your current financial statements, a discharged loan may trigger an automatic stay of your loans from being re-applied. This means you will not be able to apply for any new loans for at least five years.

Will My Student Loan Debt Get Settle When I Declare Bankruptcy? Unfortunately, the answer is no. If you obtain a bankruptcy declaration before you begin repayment on your federal loans, the remaining balances will usually be wiped out. However, most people who file for bankruptcy protection do so because they have exhausted all other federal relief options and need immediate money to cover living expenses while they are in bankruptcy court.

Can I Get Student Loan Forgiveness If I Have Been Laid Off From My Job? Yes, you certainly can. In fact, many types of student loans can be discharged by filing a request with the Department of Education. However, you should also keep in mind that you will not be able to receive student loans or federal income tax benefits until six months after you complete your bankruptcy.

What if I Don’t Qualify For Federal Student Loans? Do I still have choices left? Absolutely. Many graduates find that they qualify for private loans to help cover living expenses while they complete their post-secondary education. If you do qualify for a consolidation loan, make sure that you make the monthly payment on time and not cancel it during the grace period.

Is There a Way to Get Rid of My Student Loan Debt Once And for All? Of course there is! The best way to pay off your debt is through a repayment plan. For example, you could consolidate your federal student loans into one monthly payment with a lower interest rate and an extended grace period to pay off your debt.