How to Get Out of Student Loans Without Paying
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The cost of education continues its upward momentum. According to U.S. News, the average college tuition in the 2021-2022 academic year rose to 2%. And to meet this growing cost, students must take on more debt. Indeed, student loan debt in the U.S. totals $1.762 trillion, according to EducationData.org, with federal loans comprising 91.2% of all student loan debt. The average balance is $37,014.
Paying student loan debt- or any form of debt- can be daunting. It requires sticking to a budget, cutting discretionary spending, and hacking money management in general. Still, you may sometimes feel like your balance isn't shrinking by much. This is especially true if you're making the minimum payment, which barely moves the needle. I get it: repaying debt and remaining current on your bills is a tricky balancing act.
But the federal government has a few programs, including some that let you off the hook before you've paid the amount in full. While that may seem too good to be true, the programs offered by Uncle Sam are legit and do not involve robbing a bank.
Jump To
Eligibility
Each plan has its own criteria that determine whether you can avail it or not. Generally, if you took out a student loan from private lenders or other loan companies, you do not qualify. Only direct loans made by the government and Stafford loans are eligible.
The programs offered fit into these three categories:
- Forgiveness: This is what it sounds like: you don't have to repay the full amount. If you’re no longer required to make monthly payments due to your job, it is called student loan forgiveness or cancellation of your loan.
- Discharge: If circumstances, such as a disability or the closure of the school where you received your loans, force you to no longer make payments, it's defined as a discharge of your loan. In order words, removing your obligation to repay under certain circumstances is called a loan discharge.
Related: Best Private Student Loans of 2022
5.62% - 16.85% VARIABLE rate APRs 4.39% - 16.49% FIXED rate APRs
- Check your eligibility in just 2 minutes
- Fast application and decision-making process
- Flexible repayment options
- No fees for origination, disbursement, prepayment, or late payment
- Skip a payment once per year (once repayment period restarted)
- Covers up to 100% of the school's certified cost of attendance
- 9-month grace period (3 months more than most lenders)
How to get out of student loans without paying
Forgiveness
Public service loan forgiveness program
If you work for the government or are an employee of a qualifying nonprofit organization, you may be able to avail of this service. You can have the remainder of your debt balance forgiven tax-free if you've made 120 qualifying student loan payments. The best part? These payments don't have to be consecutive. To qualify, however, you'll need to have direct loans.
important: Most of the qualifying payment rules have been suspended through October 31, 2022. This means that even if you weren't able to pay the full amount or on-time, you may get credit for these payments.
Once you're ready, you can download this form, fill it out and mail it to the U.S. Department of Education. You can also fax the form to 717-720-1628. The government recommends you submit the PSLF form yearly or when you jump ship to another employer. This makes it easy to get your affairs in order once you've made the requisite payments (which takes 10 years) and are ready to apply for forgiveness.
Teacher loan forgiveness program
Finally, something is going right for teachers! If you've taught at a low-income school or an educational service agency for five consecutive years, you can have between $5,000 and $17,500 of your federal direct or Stafford loans forgiven. Why two different numbers? If you taught mathematics, science, or special education, the $17,500 figure would apply to you. However, you'll only be eligible if you're classified as a highly qualified teacher, which means you have at least a bachelor's degree and are state certified. One caveat is that you only qualify if you took out a loan after October 1, 1998.
important: Under a waiver that's good until October 31, 2022, if you got teacher loan forgiveness, the period of service that led to your eligibility can count toward public service loan forgiveness if you certify PSLF employment for that period. This previously wasn't the case.
Once you're confident you meet all eligibility requirements, you can submit the application to your loan servicer.
Income-driven repayment plan forgiveness
If you don't earn much and have high student loan debt, this one's for you. Federal student loans are typically paid over the course of 10 years. However, if you cannot make payments, you can enter one of four income-driven repayment plans, which stretch your payments anywhere from 20 to 25 years. These plans are called: Income-Based Repayment Plan, Income-Contingent Repayment Plan, Pay As You Earn Repayment Plan, and Revised Pay As You Earn Repayment Plan.
In these plans, a percentage of your discretionary income becomes your payment amount. Once that term has ended, the balance on the loan is forgiven as long as you made all qualifying payments. These plans are ideal for people who have large loan balances relative to income.
5.62% - 16.85% VARIABLE rate APRs 4.39% - 16.49% FIXED rate APRs
- Check your eligibility in just 2 minutes
- Fast application and decision-making process
- Flexible repayment options
- No fees for origination, disbursement, prepayment, or late payment
- Skip a payment once per year (once repayment period restarted)
- Covers up to 100% of the school's certified cost of attendance
- 9-month grace period (3 months more than most lenders)
Discharge
Closed school discharge
If your school closes while you're enrolled, or it's been 120 days since you left it and haven't yet received your degree, you may be eligible for this loan discharge. You can contact your loan servicer to get the process going. However, while your application is being processed, you'll have to continue to make payments. But once your application has been green-lit, you cannot only stop making payments but you may also be refunded a portion or all of your past payments. In addition, any adverse history associated with the loan will be removed from your credit report.
Total and permanent disability discharge
If you can provide documentation proving that proves your disability — physical or mental — is preventing you from working, you may be eligible to get the remainder of your loan discharged. After the discharge, your finances and disability will be monitored for three years, and depending on the outcome of this monitoring period, there's a likelihood that your loans may be reinstated.
important: Typically, you're required to certify your annual earnings each year under during the three-year monitoring period. However, this requirement was waived in March 2021 due to COVID-19 and currently remains so.
To apply, you'll need to complete an application, attach any required documentation, and send it to Nelnet, the servicer for this discharge. Once your application has been approved, you'll be reimbursed for loan payments made after the effective date of your disability determination.
Discharge due to death
The remainder will be discharged if the borrower dies before repaying their federal student loan. All that's required is a submission of proof of death by a family member to the loan servicer.
Discharge in bankruptcy
On rare occasions, your loan may be discharged if you declare bankruptcy, but the onus will be on your to prove that the payment imposes an undue hardship on you and any dependents. However, to trigger this, you'll have to separately file an "adversary proceeding." Not only that, but your creditors will also be in attendance to challenge your request. There are three possible outcomes from the court's proceedings:
- Your loan may be fully discharged, which means you're off the hook with regard to the remaining loan amount.
- Your loan may be partially discharged, in which case, you may be required to repay a portion of the remainder.
- You may have to repay the loan in full, albeit with different terms such as lower interest rates.
Borrower defense to repayment discharge
A portion or all of your federal student loan debt may be discharged if your college defrauded you or if you can provide proof that the educational institution violated state law. The application, which takes about 30 minutes to complete, should include:
- Your Federal Student Aid username and password.
- The school's name, the programs you studied, and your enrollment dates.
- Any documentation that proves the college's misconduct financially harmed you.
If you've won a partial discharge, you must repay any remaining amounts, including interest accrued. In some instances, you may even be eligible to receive a refund of prior payments.
Perkins loan cancellation and discharge
Borrowers who have worked for five years in a public service job can have up to 100% of their Perkins loan canceled or discharged. If you're a teacher who served low-income families or taught subjects including mathematics and science, loans are canceled incrementally for each year of work. As a teacher, a cumulative 30% of the loan will be canceled for the first two years of service, a total of 40% will be canceled for the third and fourth years, and the remaining 30% will be canceled for the fifth year.
In addition to teachers, firefighters, law enforcement officers, anyone in military service, nurses, and public defenders, among others, are also eligible for up to 100% cancelation. A Perkins loan may be discharged if the borrower dies or they declare bankruptcy, the school closes, or if the borrower can provide proof of total and permanent disability.
Applications must be made to the school’s Perkins loan servicer.
Ask your employer
If you do not qualify for any of these programs, you could turn to your employer for student loan assistance. Many good employers recognize that an employee's student loan debt can affect their mental health affecting productivity. The employer could either make the payment to the lender on your behalf or directly to you. According to Paycor.com, employers can tax-free offer up to $5,250 in student loan repayment assistance. While that's considerably lower than the average student debt, it might be enough to put you on solid financial footing.
Refinance your loan
If you cannot make your payments, you may want to consider other repayment options like refinancing your student loan. If you decide to refinance, you could see a lower interest rate or your repayment period may be stretched. Both options should lower your payment and free up more money for other expenses. Federal and private student loans can be refinanced through a private lender. However, you'll then be unable to participate in any student loan forgiveness programs.
Overview of how to get out of student loans without paying
Government program | Available for |
Public service loan forgiveness program | Direct loans |
Teacher loan forgiveness | Direct loans and FFEL program loans |
Closed school discharge | Direct loans, FFEL program loans, Perkins loans |
Total and permanent disability discharge | Direct loans, FFEL program loans, Perkins loans |
Discharge due to death | Direct loans, FFEL program loans, Perkins loans |
Discharge in bankruptcy | Direct loans, FFEL program loans, Perkins loans |
Borrower defense to repayment discharge | Direct loans |
Perkins loan cancellation and discharge | Federal Perkins loans |
5.62% - 16.85% VARIABLE rate APRs 4.39% - 16.49% FIXED rate APRs
- Check your eligibility in just 2 minutes
- Fast application and decision-making process
- Flexible repayment options
- No fees for origination, disbursement, prepayment, or late payment
- Skip a payment once per year (once repayment period restarted)
- Covers up to 100% of the school's certified cost of attendance
- 9-month grace period (3 months more than most lenders)
The bottom line
Debt can't be eliminated quickly, and student loans aren't an exception. As with other forms of debt, you can work out strategies that reduce your payments. But a few government programs forgive loans or target student loan borrowers who don't earn much relative to the loan amount. The loan type and income will determine which of these programs are suitable for you. But if you don't qualify for these programs, you could explore other repayment options like asking an employer if they'd be willing to assist your, or refinance your loan to get competitive interest rates.
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Writer
Jasir Jawaid is Joy Wallet's Assistant Editor. He has more than 13 years of experience as a journalist covering Wall Street, equities, financial policy and regulation, and cryptocurrency and blockchain.
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