Janice Lozano
Student loan debt can be a heavy burden, but there are ways to get free money to help pay it off. This can include grants, scholarships, and loan forgiveness programs, as well as employer-provided student loan repayment assistance. Federal student loan forgiveness programs can help those who work in public service or have a qualifying disability, while grants and scholarships are often awarded based on financial need or career choice. Additionally, some employers offer student loan repayment assistance as a benefit to attract and retain employees. By exploring these options and creating a budget, individuals can develop a strategy to reduce their student loan debt.
| Characteristics | Values |
|---|---|
| Student loan forgiveness programs | PSLF, IDR, TPD discharge, Perkins Loans, Teacher Loan Forgiveness Program (TLF), etc. |
| Loan repayment assistance from employers | Recurring payments to lenders or contributions towards retirement savings |
| Grants | Pell Grants, career-based grants, etc. |
| Federal loan benefits | Interest rate caps, loan discharge for closed schools, etc. |
| Strategies for reducing debt | Creating a budget, comparing repayment plans, setting up direct debit, extra payments, etc. |
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What You'll Learn
Grants and scholarships
While there is no such thing as free money, there are grants and scholarships that can help you pay off your student loans. These are typically awarded based on merit or financial need.
Pell Grants
Pell Grants are only available for students who are currently enrolled in an accredited undergraduate program. You can get a Pell Grant to reduce your future student debt, but not to pay off existing student loans.
Charles Cheesman's Student Debt Reduction Scholarship
This scholarship is aimed at helping individuals with private student loans.
John R. Justice Repayment Program
This program is a grant aimed at lawyers to help pay off student loans.
PSLF Help Tool
The PSLF Help Tool is a resource for those interested in Public Service Loan Forgiveness (PSLF). After making 120 qualifying monthly payments, you can apply to have your remaining loan balance forgiven, tax-free.
IDR Plan
An IDR plan bases your monthly payment on your income and family size. If you repay your loans under an IDR plan, your student loan balance may be forgiven after you make a certain number of payments over 20 or 25 years.
Loan Simulator
The Education Department's Loan Simulator can help you compare federal repayment plans by monthly payment, total interest, and more.
Direct Debit
Setting up direct debit for your federal student loans can reduce your interest rate by 0.25%.
Student Loan Forgiveness for Teachers
There are several loan forgiveness programs for teachers. For example, teaching full time for five consecutive academic years in certain elementary or secondary schools or educational service agencies that serve low-income students may qualify you for student loan forgiveness of up to $17,500.
Student Loan Forgiveness for Individuals with Disabilities
If you have a disability that severely limits your ability to work, you may qualify for a TPD discharge, which means you won't have to repay your federal student loans.
Student Loan Forgiveness for Military Service Members
The Servicemembers Civil Relief Act (SCRA) entitles active-duty service members to have their interest rate reduced to 6% on all debts, including federal and private student loans. Federal student loans can be reduced to 0% when serving in a hostile area.
Remember to always be cautious of scams and never share your loan or bank information unless you are certain of the legitimacy of the organization or company.
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Loan forgiveness programs
Public Service Loan Forgiveness (PSLF) is one such program. It is available to government and qualifying nonprofit employees with federal student loans. Eligible borrowers can have their remaining loan balance forgiven tax-free after making 120 qualifying loan payments on an IDR plan and 10 years of full-time public service work. Teachers employed full-time in low-income public schools may be eligible for Teacher Loan Forgiveness after working for five consecutive years, with up to $17,500 in federal direct or Stafford loans forgiven.
Another option is the Income-Contingent Repayment (ICR) plan, which is the only income-driven repayment plan available to Parent PLUS borrowers. On ICR, your loan balance will be forgiven after 25 years.
It's important to beware of scams when considering loan forgiveness programs. So-called debt relief companies may charge high upfront fees without delivering on their promises. Forgiveness is also not an option for defaulted loans, which must first be rehabilitated or consolidated before becoming eligible for forgiveness.
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Employer repayment assistance
Employer-sponsored student loan assistance is an increasingly popular benefit offered by companies to attract and retain talent. This type of educational assistance program can be used to help pay off student loans for employees.
Under current law, this option will be available until December 31, 2025. Traditionally, educational assistance programs have been used to pay for books, equipment, supplies, fees, tuition, and other education expenses for the employee. However, these programs can now also be used to pay the principal and interest on an employee's qualified education loans. Payments can be made directly to the lender or to the employee, and they qualify as tax-free benefits up to $5,250 per employee per year.
There are a few different ways employers can structure their student loan repayment assistance programs. One way is to set up recurring payments toward the employee's debt, either by sending payments directly to the lender or through the employee's monthly paycheck. Another option is to match the employee's contributions each month, similar to a 401(k) plan. A third approach is to allow employees to trade in their unused PTO or vacation time and apply the cash value to their student loans.
Some companies, like Google and New York Life, offer a simple maximum contribution amount toward student loans, while others, like Aetna, Chegg, and Fidelity, take a tiered approach based on factors such as whether the employee is still in school and their job level. On average, businesses that offer student loan assistance start with contributions of around $50 to $100 per employee per month, which can save employees a significant amount in interest over time.
Employers should decide whether they will offer student loan repayment benefits to all employees or only full-time workers and at what point in their tenure they will become eligible. They may also want to set a maximum contribution rate to ensure they have the funds to cover the program.
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Federal student loan programs
Public Service Loan Forgiveness (PSLF): This program offers loan forgiveness for those who work full-time in government or not-for-profit organizations. After 120 qualifying monthly payments under an IDR plan or a standard 10-year plan, you can apply to have your remaining loan balance forgiven, tax-free. The PSLF Help Tool guides you through the application process.
Income-Driven Repayment (IDR) Plans: IDR plans base your monthly payments on your income and family size. Depending on the specific IDR plan, your loan balance may be forgiven after 20 or 25 years of payments. You can use the Loan Simulator to compare IDR plans and estimate monthly payment amounts.
Teacher Loan Forgiveness (TLF): If you teach full-time for five consecutive academic years in certain low-income schools or educational service agencies, you may be eligible for up to $17,500 in loan forgiveness. However, you cannot receive benefits under both the TLF and PSLF programs for the same teaching service period.
Closed School Discharge: If your school closes while you are enrolled or soon after you withdraw, you may qualify for a discharge of your federal student loan.
Total and Permanent Disability (TPD) Discharge: If you have a physical or mental disability that severely limits your ability to work now and in the future, you may be eligible for a TPD discharge. This means you won't have to repay your federal student loans or complete any TEACH Grant service obligations.
Additionally, the US Department of Education and Department of Defense offer special benefits for military service members with federal student loans, including interest rate caps and potential loan forgiveness during active-duty service in hostile areas.
It's important to be cautious of scams when exploring these options. Always use official government websites and resources, and never share your loan or bank information with unsolicited requests.
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Non-profit credit counselling
These organizations also provide support with other financial matters, such as housing and bankruptcy counselling, as well as debt management plans. They can offer confidential and empathetic solutions, helping you to navigate challenges and work towards financial stability and wellness.
To find a non-profit credit counselling service, you can search for "credit counselling nonprofit" along with your city or town. You can also look for "free student loan advice" to find organizations that specialize in student loan debt.
Remember, you should never pay for help with your student loans. Free, qualified help is available, and you can also contact your servicer to understand how certain plans can help reduce the cost of repaying your loans.
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Frequently asked questions
There are a few options for getting financial aid to pay off student loans. Firstly, some employers offer student loan repayment assistance, which can take the form of recurring payments to lenders or contributions towards retirement savings. Secondly, grants and scholarships are forms of financial aid that can be used to fund your education or pay off student loans. Grants and scholarships are usually need-based and merit-based, respectively. Lastly, federal student loan forgiveness programs exist, such as the Public Service Loan Forgiveness (PSLF) program, which forgives the remaining loan balance after 120 qualifying monthly payments.
The Teacher Loan Forgiveness Program (TLF) offers student loan forgiveness of up to $17,500 for teachers working in low-income schools or educational service agencies. The Nurse Corps Loan Repayment Program provides funds to cover up to 60% of student loan debt for nurses working in critical shortage areas for at least two years. The IHS Loan Repayment Program offers grants of up to $50,000 for those serving American Indian and Alaska Native communities for at least two years.
You can directly inquire about financial wellness benefits with your employer or potential employer. According to a report by the Employee Benefit Research Institute, about 36% of employers offered student loan repayment assistance in 2024, so it is worth exploring this option.
