Options for Getting Rid of Student Loans
Posted by Richard on August 9, 2018
Income-based student loan repayment programs can help graduates with low-income and high loan balances.
Young people entering college are the least experienced with money but the most likely to get a student loan. They can quickly find themselves over their heads in debt.
The problem of student loan debt has become a $1.52 trillion burden for college graduates, second only to mortgage debt as the highest category of consumer debt in the United States, according to Forbes.
According to the Student Loan Hero blog, however, repayment and loan forgiveness programs could allow some borrowers to get a big break.
Nearly everyone that has a typical loan, such as a direct subsidized, unsubsidized, or consolidation loan, will be able to qualify for some Income-Based Repayment program (IBR). The IBR plan will cap the monthly payment at 10-15 percent of discretionary income and require 20 or 25 years of payments.
The Pay as You Earn (PAYE) program caps payments at 10 percent and the number of years to pay at 20.
In the case of both the IBR and PAYE programs, some debt can be forgiven but it will be treated as taxable income for the last year of the program.
Another strategy is public service.
Federal, state, and local governments often offer jobs that pay less than private sector employment. Governments sweeten the deal with student loan repayment options.
The most common variant, Public Service Loan Forgiveness, is available to any worker in government, 501(c)3 nonprofits, AmeriCorps, or Peace Corps if that worker makes 120 payments on their loan in one of the income-based loan programs. The number of payments will be half or less than half than the usual requirement.
Other forgiveness programs apply to nurses, doctors, lawyers, and teachers, usually requiring a work commitment in a high-need area.