How to Find Student Loan Debt Relief

Emergency measures due to the COVID pandemic temporarily suspended student loan payments and interest charges for millions of borrowers. With that temporary student loan debt relief due to expire in August of 2022, those borrowers must once again come to terms with their student loan balances.

Even apart from emergency COVID student loan debt relief programs, there are a variety of things people with student loans can do to make this financial burden easier to manage.

This article covers options ranging from student loan forgiveness to income-driven payment plans and debt forbearance.

How Do I Get Relief From My Student Loan Debt?

Today’s high post-COVID student debt levels make it easy to see why many borrowers are looking for student loan debt relief. So what options do they have?

The answer depends greatly on whether you have federally-sponsored student loan debt or debt issued solely by a private lender.

Government loans

Most student loan debt balances are in government-backed programs. 

That probably made a difference when you first got your loan. These federal programs help make education credit available to people who otherwise would not qualify and keep interest rates on that debt lower than they would normally be.

The benefit of federal student loan programs extends beyond the initial loan. As will be described later in this article, those programs offer a variety of debt relief options to struggling debtors. 

Private lenders

Despite the advantages of federally-backed student loans, some borrowers have taken out private loans. This may have been because they did not qualify for federally-backed loans, or because they exceeded the available limits on those loans. 

People with non-government student loan debt have fewer debt relief options, but there are still things they can do.

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Types of Student Loan Debt Relief Programs

Here are some different types of student loan debt relief:

Income-driven repayment

Each student loan has a repayment schedule with a specified monthly payment. But what if you don’t make enough money to afford those payments?

To help in those situations, federally-backed student loans have an option called income-driven repayment, or IDR.

There are four different types of IDR programs available. Your eligibility depends on the type and timing of your loan. These programs have two defining characteristics:

First. they limit your monthly payments to a certain percentage of your income. This may be anywhere from 10% to 20% of discretionary income, depending on the IDR program. 

Discretionary income means the amount of your income over and above a certain minimum amount needed to support yourself. So, if you sign up for an IDR program you’ll pay the lesser of your originally-scheduled payment or this percentage of income.

If those reduced payments mean you don’t fully pay off your loan within a certain number of years, any remaining loan balance is forgiven. That time period is between 20 and 25 years, depending on the IDR program.

Income-based repayments don’t happen automatically – you have to sign up for them. And if your monthly payment doesn’t cover at least the interest due, your student loan balances will continue to grow. However, this plan can help keep your monthly payments affordable.

Student loan forbearance

Forbearance means a temporary pause on required payments. It doesn’t mean those payments are forgiven. It simply pushes your repayment schedule back to give you more time before you have to resume making payments. Lenders add missed payments to the loan balance. 

The COVID-19 emergency relief program that suspended federal student loan payments was an example of forbearance.

A key issue with forbearance is whether or not interest will continue to accrue during the forbearance period. If interest does continue to accrue, it means the balance you owe will grow during the forbearance period. That’s because you’re still being charged interest from month to month but not paying anything.

The forbearance on federal student loan payments included a suspension of interest charges. However, forbearance does not always suspend interest, so make sure you know that before you agree to a forbearance program.

Forbearance may be available on federal student loans under some circumstances. While private lenders may not have a formal forbearance program, it may be something you can negotiate with them if you can demonstrate that you need time to get your payments back on track. 

With any lender, it’s always preferable to try to make a formal forbearance agreement rather than simply stopping your payments.

Student loan forgiveness

Student loan forgiveness means part of your loan balance is simply wiped off the books. 

Federal student loans have a variety of programs that will forgive all or part of the balance you owe under certain circumstances. This usually involves serving for a specified number of years in certain occupations. Examples include teaching, government or not-for-profit work, the military, or an approved Americorps program. 

Under extreme circumstances, it may be possible to have a private lender forgive some of your loan balance. However, this is most likely to happen as part of a negotiation in which the lender settles for partial payment if it’s clear you can’t pay all of what you owe. 

Depending on the circumstances, student loan forgiveness may have a negative impact on your taxes and/or your credit history.

Student loan refinancing

Refinancing involves replacing one loan with another. There are two ways this can make your loan payments more affordable.

If you can get a new loan at a lower rate than your existing loan, it could reduce your monthly payments and the total amount of interest you pay over the life of the loan. Just be sure to factor in any fees involved in refinancing when you figure out whether or not it would truly save you money.

If your refinance loan extends the time it takes to pay off your balance, it can reduce your monthly payments by spreading what you owe over a longer time. However, you are likely to pay interest over the life of the loan. 

Take special care when refinancing from a federal student loan to a private one. If you do so, you forfeit eligibility for any federal student loan debt relief programs. 

What Is Certified Student Loan Debt Relief?

It’s important to make a distinction between certified student loan debt relief programs and unofficial ones. 

As mentioned previously, federal student loans have a variety of official student loan debt relief programs available. Private lenders are less likely to have formal programs, but there are still actions you can take individually. 

These actions include refinancing or negotiation with your lender. There are debt relief services that may be able to help you with those negotiations. 

Whether it’s a federal student loan or a private one though, be wary of student loan debt forgiveness scams. 

Avoiding Student Loan Debt Forgiveness Scams

The Department of Education warns that borrowers may receive a variety of phone calls, text messages, and emails offering debt relief programs that are scams. 

These scams may involve trying to get sensitive data out of you, such as your social security number or bank account information. Or, they may pressure you to pay money upfront for debt relief that never materializes. 

Two warning signs of scams are people who put urgent deadline pressure on you to make a decision and those who offer something that seems too good to be true. 

Your best defense is that when exploring debt relief options, make sure you’re dealing with an authorized representative of your debt servicer. 

Is Bankruptcy an Option for Student Loan Debt Relief?

Bankruptcy is a legal process in which a court decides which debts you can repay and which need to be discharged. 

Historically, it has been very difficult to get student loans wiped off the books through bankruptcy. That’s because you have to prove that paying back those loans would cause “undue hardship” for an extended period of time. 

That may be changing, as the student loan crisis prompts courts to take a softer stance toward this debt. Even so, a big reason to think twice before pursuing bankruptcy for student loan debt relief is that bankruptcy is a public filing that stays on your credit history for seven to 10 years. It will probably limit your ability to get credit for several years, and it may even prevent you from working in certain careers and industries. 

Alternatives to Bankruptcy for Student Loan Debt Relief

Less drastic measures than bankruptcy might provide student loan debt relief. These measures include seeking forbearance, signing up for an income-driven repayment program, or refinancing your loan.

If you are unable to find a solution on your own, you might benefit from the services of a debt counselor or debt relief specialist. 

In short, there are solutions if you take action. Don’t sit back and let your student loan debt get the best of you.