I am starting to get this question more frequently than any other. There appears to be no student loan bailout in the near future, but there are some avenues available. These options include:
- Delaying payments on your loans through forbearance or deferment programs,
- Getting your loan canceled and eliminating all payments,
- Discharging your loan through bankruptcy proceedings,
1. Student Loan Deferments/FOREBEARANCES
In some situations, you may be able to obtain a deferment on your student loan payments. These deferments allow you to stop making payments for a certain period of time if you can show that you qualify. For instance, you may be able to get a deferment if you can show economic hardship, are returning to school, are unemployed, or looking for a job.
Depending on your type of loan, the deferment will not only allow you to stop making payments on the principal, but it will also stop interest from accruing on the unpaid balance. For other types of loans, you are only allowed to defer the principal of the loan, meaning that interest on your loan will continue to increase during the time you are not making payments. You will need to figure out what types of loans you have, as well as where you got them from, in order to see what kinds of deferments you are eligible for.
In most situations, you will be able to defer payments on your student loans if you meet one of the conditions that are described below (see the last section of this article titled “Conditions for Deferments on or Cancellations of Student Loans”) and you are not currently in default on your loan. In some situations, you may even be able to qualify for a deferment even when you are in default – this is called a retroactive deferment.
Like many things in life, deferments are never automatically put in place. In general, you must apply for a deferment. To do this, you should contact your loan holder and get the necessary paperwork. It can be a lot of work to get everything done correctly, but you should take the time and do it properly if a deferment will help you.
To get the necessary paperwork, you should contact your loan holder and talk to them about the various types of deferment that you think you may qualify for. Then, you should ask them to send you the right forms that you need to fill out. Doing this may help keep the loan holder from calling you about past due payments.
If you are unable to qualify for a deferment, you may be able to postpone payments on your student loans by setting up a loan forbearance. A loan forbearance can generally be thought of as your loan holder allowing you to stop making payments for a set period of time. However, you should keep in mind that interest will continue to accrue during a forbearance so your loan balance will be higher when you come out of the forbearance. Generally, forbearances are easier to obtain than deferments because they are not linked to the type of student loans you have and they are not covered by the laws and rules that apply to deferments and cancellations of student loans.
Generally, you may be able to obtain a forbearance for a variety of reasons. For example, if you have suffered from poor health or unforeseen personal problems, you may be able to get a forbearance. Also, if you foresee that you will not be able to pay back your student loans within the period for repayment (generally 10 years), or your monthly payments are more than 20% of your income each month, you may be able to get a forbearance. Loan forbearances are generally granted for up to one year at a time and you may be able to get a forbearance even if you have defaulted on your student loans.
In order to apply for a forbearance, you should contact you loan holder and tell them about your inability to pay. You will probably have to fill out some forms, either online or via mail, to apply for a forbearance.
In the event of the borrower’s death, or on or after July 23, 1992, the death of the student for whom a parent received a PLUS loan, the obligation of the borrower and any endorser to make any further payments on the loan is discharged.
To verify a borrower’s death, the servicing agency must have the original, certified copy, or clear, accurate, and complete photocopy of the original or certified death certificate. The U.S. Department of Education cannot accept a faxed copy.
|Total and Permanent Disability|
For total and permanent disability discharge applicants, if a physician (doctor of medicine or osteopathy) certified that you are totally and permanently disabled and you meet certain other requirements during a three-year conditional discharge period your loan(s) may be discharged. You may request a “Discharge Application: Total and Permanent Disability” from our the Department of Education’s forms request page.
If you are a veteran, you will be considered totally and permanently disabled for purposes of this discharge if you provide documentation from the U.S. Department of Veterans Affairs showing that you have been determined to be unemployable due to a service-connected condition. If you provide this documentation, you are not required to have a doctor complete Section 4 of the discharge application or provide any additional documentation related to your disabling condition. Veterans who qualify under this standard are eligible for immediate discharge and are not subject to the standard discharge process that entails a three-year conditional discharge period.
For more information, please visit: http://disabilitydischarge.ed.gov.
Bankruptcy and Student Loan Discharge
Another option that you have when you cannot pay back your student loans is to try to have your loans discharged through bankruptcy. However, this is very hard to accomplish under current law. Generally speaking, your student loans can only be discharged through bankruptcy if you can show that the burden of repaying your student loan would impose a severe hardship on you. This is quite a tough standard to meet. Courts generally consider a number of factors when you try to make this argument such as your age, health condition, income, expenses, and the length that your income problems are likely to persist.
Information Courtesy of