Janice Lozano
Student loans can be a burden, but there are several ways to get help paying them off. Firstly, it's important to understand the terms of your loans, including the type, interest rates, and repayment plan. Then, you can explore strategies such as creating a budget, consolidating your loans, or applying for a different due date. Additionally, loan forgiveness programs and income-driven repayment plans can provide relief. For those serving in the military or with disabilities, there are special benefits and discharge options available. Furthermore, grants, scholarships, and employer-provided repayment programs can assist in reducing student loan debt. If you're struggling, reach out to your loan servicer to discuss your options and explore resources like Bold.org and Studentaid.gov for more information.
| Characteristics | Values |
|---|---|
| Private lenders' charge-off rules | Vary by lender; typically charged-off after 120 days past due |
| Defaulting on a federal student loan | Lose eligibility for federal student aid; face garnishment of federal tax returns, wages, and Social Security payments |
| Reliable lenders | Want to help borrowers get out of default |
| Knowledge | Know what you owe; make a list of loans, their type, monthly payment, due date, balance, interest rates, and servicer |
| Budgeting | Make a budget and explore strategies for reducing debt |
| Due date | Request a different due date to make payments on time |
| SAVE plan | Helps reduce the cost of repaying federal student loans |
| IDR plan | Bases monthly payment on income and family size |
| Loan forgiveness | Possible through several loan forgiveness programs for teachers, public servants, members of the armed forces, etc. |
| TPD discharge | For those with a disability that severely limits their ability to work |
| Grants | Offered by organizations like Bold.org, National Institutes of Health, and some companies like Aetna, Google, SoFi, and PwC |
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What You'll Learn
Student loan forgiveness programs
Public Service Loan Forgiveness (PSLF)
Public Service Loan Forgiveness (PSLF) is a program that offers loan forgiveness 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 engaging in 10 years of full-time public service work. Teachers employed full-time in low-income public schools may also be eligible for PSLF after working for five consecutive years.
Teacher Loan Forgiveness
The Teacher Loan Forgiveness program provides up to $17,500 in loan forgiveness for teachers who teach full-time for five consecutive academic years in certain elementary or secondary schools serving low-income families. To qualify, teachers must meet specific requirements and have taken out loans after October 1, 1998.
Total and Permanent Disability (TPD) Discharge
The TPD Discharge program is designed for individuals with a disability that severely limits their ability to work, whether it be physical or mental. If approved, borrowers are not required to repay their federal student loans or complete any grant service obligations. Applicants typically need to provide proof of their disability and may be subject to a post-discharge monitoring period.
Income-Driven Repayment (IDR) Plans
IDR plans are offered by the federal government and are based on the borrower's income and family size. These plans allow you to cap your loan payments at a percentage of your monthly discretionary income, with payments potentially being as low as $0 per month. After making payments for 20 or 25 years, depending on the plan, your remaining loan balance may be eligible for forgiveness.
AmeriCorps Education Award
The AmeriCorps Education Award is a benefit provided to participants who complete a term of national service in an approved AmeriCorps program. After successful completion of the service, individuals are eligible to receive an award that can be used to repay qualified student loans. Additionally, AmeriCorps service can contribute to the Public Service Loan Forgiveness (PSLF) program.
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Loan repayment assistance from employers
Many American workers are burdened by student loan debt, and the resulting financial stress can negatively impact productivity and cause retention issues. Employers can help alleviate these problems by offering student loan repayment benefits, which can also be used to attract and retain talent.
Student loan repayment by employers is a benefit that helps employees reduce their student loan debt. Employers can create programs that fit their budget and employees' needs, with specific ground rules in place. For example, there may be a maximum amount that employers are willing to contribute, and employees may have to work for the company for a certain period to be eligible.
There are several common variations of employer student loan repayment programs:
- Recurring payments: Employers repay the employee's loan in regular installments.
- Signing bonuses: New employees receive a lump sum payment toward their student loan balance.
- Paid time off (PTO) exchange: Employees can swap their unused PTO for cash, which is then applied to their student loans.
Employers can also offer financial coaching alongside these programs. Payments may be sent directly to the employee or to the financial institution that holds the loan. If an employee has multiple loans, payments may first be applied to the loan with the largest balance or the one closest to being fulfilled.
Recent federal stimulus legislation has extended a tax-free provision for employer-provided student loan repayment benefits until January 1, 2026. Under this provision, an employer may contribute up to $5,250 annually toward an employee's student loans and/or education expenses. To remain IRS-compliant, employers must include a detailed policy in their employee handbook.
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Federal grants and scholarships
There are various organizations that offer grants and student loan forgiveness options, including the U.S. Department of Education's Federal Student Aid portal, scholarship search engines like Bold.org, and Scholarships360. Many state-based grants are tied to certain jobs and industries, so it's worth researching your state and industry to see what grants may be available to you. For example, if you work in the public sector, you may be able to qualify for Public Service Loan Forgiveness (PSLF). PSLF is a program that will pay off your student loan balance, saving you tens of thousands of dollars. To take advantage of the PSLF program, you must make 120 monthly payments on your federal student loans, pay back your student loans on an income-driven repayment plan, and be employed by a qualifying employer for 120 months. Qualifying employers include the government or any 501c3 non-profits.
Additionally, there are career-based grants that provide funds to qualified people in specific careers, such as teachers and medical personnel. The Teacher Loan Forgiveness Program (TLF), for example, can offer student loan forgiveness of up to $17,500 off of Direct Subsidized and Unsubsidized loans and Subsidized and Unsubsidized Federal Stafford Loans. In exchange, you must teach full time for five complete and consecutive academic years in a low-income school or within an educational service agency, among other qualifications.
It's important to note that grants and scholarships for student loan repayment may have specific eligibility requirements, so be sure to carefully review the details of each opportunity before applying.
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Strategies for reducing debt
Strategies for reducing student loan debt vary depending on an individual's financial circumstances and the type of student loans they have. Here are some strategies to consider:
Income-Driven Repayment Plans
Enrolling in an income-driven repayment plan can help make your monthly payments more affordable. These plans base your monthly payment on your income and family size, typically limiting the payment to between 10% and 20% of your discretionary income. Examples of income-driven repayment plans include Income-Contingent Repayment (ICR) and IDR plans.
Student Loan Forgiveness Programs
Student loan forgiveness programs can help you get your loans forgiven after a certain number of payments or by meeting certain requirements. For example, the Public Service Loan Forgiveness (PSLF) program forgives the remaining loan balance after 120 qualifying monthly payments. Other forgiveness programs include those for teachers and individuals with disabilities. Additionally, consider exploring loan discharge options, such as through bankruptcy or, for servicemembers, the Servicemembers Civil Relief Act (SCRA), which can reduce interest rates.
Student Loan Consolidation
Consolidating multiple student loans into a single payment can simplify your repayment process and potentially lower your monthly payments. However, be cautious when consolidating federal loans, as you may lose flexible repayment options and borrower protections.
Refinancing
Refinancing your student loans at a lower interest rate can help reduce your monthly payments and the overall cost of your loan. However, be mindful of the risks associated with using home equity to refinance, as it could result in losing your home if you encounter repayment difficulties.
Budgeting and Payment Strategies
Understanding your loans and creating a budget can help you explore strategies for reducing debt. Consider the type of loans you have (federal or private), their interest rates, repayment plans, and how they fit into your finances. You may also request a different due date to make it easier to make timely and full payments. Additionally, contributing to a tax-deferred retirement account can decrease your adjusted gross income (AGI) and, consequently, your IDR payment.
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Loan forgiveness for people with disabilities
If you have a disability, you may be able to get your federal student loan debt discharged through the Total and Permanent Disability (TPD) program. To qualify for TPD discharge, you must have a physical and/or mental disability that severely limits your ability to work now and in the future. This means that you are unable to engage in any substantial gainful activity due to your disability.
To receive a TPD discharge, you will need to provide specific kinds of proof of your disability. There are three ways to qualify for TPD discharge through documentation or certification:
- The U.S. Department of Veterans Affairs (VA)
- The Social Security Administration
- A physician's certification that you are totally and permanently disabled
If you are identified as eligible by the Social Security Administration or Veterans Affairs, you may automatically qualify for TPD discharge. In most cases, however, you will be subject to a post-discharge monitoring period, which could reinstate your discharged loans.
It is important to note that TPD discharge only applies to federal student loans. If you are struggling to pay off private student loans, you should contact your loan servicer immediately to discuss your options. Private lenders may have different rules regarding loan forgiveness or repayment plans. Additionally, you should be cautious about using credit cards or home equity to pay off student loans, as this can have negative financial consequences.
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Frequently asked questions
Here are some strategies for paying off your student loans:
- Know what you owe. Make a list of your student loans, including whether they are private or federal, the monthly payment and due date, the current and principal balance, the interest rate, and the servicer.
- Make a budget and explore strategies for reducing debt to understand how your student loans fit into your finances.
- Look into loan forgiveness programs. There are loan forgiveness and repayment programs for teachers, public servants, members of the military, and more.
- If you are employed, research whether your employer offers repayment assistance for employees with student loans.
There are several loan forgiveness programs, including:
- The Public Service Loan Forgiveness (PSLF) program, where you can apply to have your remaining loan balance forgiven after 120 qualifying monthly payments.
- Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligation, where teachers can have their federal student loans forgiven.
- Income-Driven Repayment (IDR) plans, where your monthly payment is based on your income and family size, and your loan balance may be forgiven after a certain number of payments over 20 or 25 years.
You can lower your payments by saving for retirement. Contributing to a tax-deferred retirement account, like a 401(k) or 403(b), decreases your Adjusted Gross Income (AGI) and your IDR payment. You can also look into the SAVE plan by calling your servicer.
Yes, there are grants and scholarships available to help pay off student loans. Bold.org, for example, offers financial relief to students and graduates struggling to repay their student loans. The National Institutes of Health (NIH) offers Loan Repayment Programs (LRPs) that provide up to $50,000 per year to doctoral-level researchers in various fields. Additionally, some companies, such as Aetna, Google, SoFi, and PwC, offer student loan repayment programs as part of their employee benefits.
