Can Student Loans Ever Be Forgiven?

October 27, 2016

Wondering if there is a way of getting your student loans forgiven? Let me walk you through who qualifies and which loans can be reduced or eliminated.

If you attended college in the last 5-10 years, you’re more than likely walking around with one or more student loans hanging over your head. Unfortunately, gone are the days where a middle-class American could pay their way through school with a part-time job.

The typical class of 2016 college student graduating with a 4-year degree has around $37,000 in student loan debt, and if you studied at a private institution or received a post-graduate degree, you could have loans in the hundreds of thousands. Yikes!

It’s no wonder then, my friend, that you are interested in loan forgiveness. This is especially true if you were taken advantage of by a financial institution or school, or if you weren’t educated on what you were signing up for when taking out your loan(s). Frankly, I’d think you were off your rocker if you weren’t curious. Unfortunately, though, it is not an easy thing to do, so let me walk you through who qualifies.

Totally & Permanently Disabled

If you have been shown to be “totally and permanently disabled,” your Direct Loans, FFEL Loans, Perkins Loans, and TEACH Grant may be forgiven. You are required to prove your disability with proof from the VA (if you’re a veteran), Social Security, or your doctor.

School Closing

If your school closes while you are enrolled or within 120 days of your withdrawal, you may be eligible for a 100% discharge of your Direct Loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans. Just a few days ago, Regency Beauty Institute closed all 79 of their locations. You may qualify for loan forgiveness if you attended, but did not finish, your education at Regency

Death

If you have the unfortunate luck of passing away, all loans will be forgiven. Regardless of any strong-arming your family may receive, they are not responsible for your student loans after your death.

False Certification

A Direct Loan or FFEL Loan may be forgiven if you were falsely certified or if your identity was stolen. To qualify, you must have one of the following:

Bankruptcy

Despite what you may think, bankruptcy is not an automatic reason for student loan forgiveness. Instead, you must prove to the court that paying your student loans would cause undue hardship. They use these three points to determine this:

  1. You would not be able to maintain a minimal standard of living.
  2. This hardship will continue for a large portion of the loan repayment period.
  3. You made an effort to repay the loan before filing bankruptcy.

Other Ways to Get Your Loans Forgiven

In addition to the above options, you may also be able to get some of your loans reduced or forgiven if you have the following qualifications:

So, What Are My Options?

As you can see, there is no easy way of getting your student loans forgiven or reduced. This is why I strongly suggest weighing all the long-term pros and cons before taking out a student loan.

Realize that not all loans are created equal and many lenders don’t care about the financial hardship they may be putting you under. And why would they? You pretty much have to die or be permanently maimed to get out of paying them.

Yikes.  Luckily though, you can refinance.  

If you’re feeling worried about your debt, refinancing your student loans is an option.  Credible is an option for refinancing your loans that’s been recommended around the blogosphere, and allows you to consolidate your student loans, which might help you get a better rate. This can save you thousands over the course of your loan.

Refinancing is an option if you already know that you don’t qualify for some of benefits that come with federal loans, or simply only have private loans.  Be sure to double check the type of loans you have and see if you can qualify for loan forgiveness  (usually limited to public service jobs) or if you could benefit from an income-based repayment plan.

Weigh your options to see if you qualify, otherwise, refinancing could help you lower your interest rates and make your debt more manageable in the long term.

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