Student loan debt relief has never been more important than in 2014, especially since the collective student loan debt recently passed the $1 trillion dollar mark, eclipsing all other forms of outstanding debt.
Fortunately, whether you have a federal student loan or a privately-funded one, you do have access to a variety of incredibly effective debt relief.
To get help paying off your student loan debt, first find out whether you have a public or private student loan, then check out the debt relief programs available to loans of each type below.
Debt Relief for Federal Student Loans
Those with federal student loans have access to all sorts of opportunities for reducing their debt, from forgiveness programs to income-based repayment programs.
Because the student loan debt crisis has escalated so quickly, posing a real threat to our economy and even our national security, the current administration has made providing help with student loan debt one of their top priorities.
Here’s a list of available debt relief programs for those with one or more federal student loans:
- Loan Forgiveness Programs
- Loan Deferment Programs
- Loan Forbearance Programs
- Income-based Repayment Programs
- Income-contingent Repayment Programs
- Other Programs (Graduated Repayment, Extended Repayment, Income-sensitive Repayment, etc.)
Federal Student Loan Forgiveness Programs
In 2014, Federal Student Loan Forgiveness comes in a variety of ways.
Virtually everyone with a federally-funded student loan has access to at least of these programs, though becoming eligible for some of them does require making significant sacrifices.
These forgiveness programs are your absolute best bets at getting effective student loan debt relief, since loan forgiveness literally wipes out your debt, rather than just reducing it or extending the time you have to pay it back.
If you’ve got a federal student loan, here are the forgiveness programs that you should look into using:
- Public Service Forgiveness Programs
- President Obama’s Forgiveness Program
- Teacher Forgiveness Programs
- Military Forgiveness Programs
Public Service Loan Forgiveness Programs
The Federal Government provides Public Service Loan Forgiveness to people who volunteer in Government-funded community service organizations like the Peace Corps, AmeriCorps or Vista, providing a great debt relief option for those interested in serving the community.
These programs provide debt forgiveness benefits to participants with high debt to income ratios (people who don’t make much compared to what they owe), and they won’t necessarily offer debt relief to everyone.
However, if you do qualify for PSLF benefits, then they can be incredibly valuable, so make sure to take advantage of them!
President Obama’s Loan Forgiveness Program
One of the most recent federal debt relief opportunities made available is the Obama Student Loan Forgiveness Program, which provides some protections to college graduates who leave school with enormous amounts of debt.
The most important tenet of the program includes setting the maximum monthly loan payment to 10% of a recent graduates’ discretionary income, allowing those who qualify for the benefit to find their financial footing by deferring student loan debt payments to a later date.
The Obama student loan forgiveness program also offers total deft forgiveness for all federally funded student loans at the 20 year mark, which reduced the previous forgiveness date by 5 years, and is a welcome relief to those individuals who are being crushed by overwhelming levels of student loan debt.
This program, however, has created a great deal of controversy, with some conservatives vowing to pass legislation to overturn the law, revoking access to these valuable benefits.
UPDATE: In August, 2013, the Administration announced President Obama’s Higher Education “Shake Up” Plan to offer additional student loan debt relief to a wider audience, so be sure to check out the details of his new plan to find out if you’re eligible to take advantage of some of the new offerings.
Teacher Loan Forgiveness Programs
Recent years have seen an explosion in the availability of Loan Forgiveness Programs for Teachers, which are extremely popular, as they’ve helped tens of thousands of Americans dig their way out of student loan debt and achieve a sense of financial security.
It’s well known that teachers’ salaries tend to lag behind private sector workers, and even though some districts may offer great benefits, teachers generally have to spend at least as much (if not more) on their higher education credentials than do workers in other sectors who end up making far more money!
Accordingly, the Federal Government offers a variety of programs to help reduce your out-of-pocket costs for getting a degree in teaching, as well as helping you recover the costs of money you previously spent on earning your teaching credentials.
Here are a few of the most popular debt relief programs available to teachers:
a. TEACH Grants
Federally-funded TEACH Grants are relatively difficult to qualify for, as they’re only made available to teachers who serve in high-need areas at low-income schools.
That qualification alone makes them relatively unpopular, especially with teachers who are able to find great jobs outside of impoverished areas.
However, it also means that if you are one of those rare individuals willing to sacrifice the perks of working in a nicer neighborhood, you’ll be able to receive up to $4,000 per year in debt relief while you work on earning your undergraduate degree, teaching credentials, or subject-related masters degree.
b. Perkins Loan Forgiveness
If you’ve ever heard of Teacher loan cancellation (rather than forgiveness), then you were being told about the Federal Perkins Loan Forgiveness Program.
Perkins loan forgiveness benefits can qualify you for up to 100% forgiveness on any Federal Perkins loans that you’ve taken out on your way toward becoming a teacher, but they’ll also offer you another incredible perk (pardon our pun) in the way of loan deferment benefits.
Loan deferments and teacher loan cancellation benefits are made available to teachers who serve in low-income schools, and to teachers who special needs students, math, science, foreign language or any other subject that has a shortage of qualified teachers in their area.
c. Stafford Loan Forgiveness
If you’re interested in receiving up to $17,500 in student loan forgiveness benefits, then you should look into qualifying for the Stafford Loan Forgiveness Program.
These loan forgiveness benefits are quite valuable, but they’re also relatively tough to qualify for, since earning them requires teaching at a qualifying low-income school for five complete and consecutive years.
While that may not sound all that difficult (and for some teachers it really isn’t), this is one of those debt relief programs that does require a great deal of dedication, sacrifice and tenacity.
If you think you’ve got what it takes though, then make sure you check the program’s eligibility requirements because you could stand to save yourself a lot of money in the process.
Military Loan Forgiveness Programs
Some of the most important federally-funded student loan forgiveness programs available are those offered to members of the United States Armed Forces.
Most of these are only available to enlisted personnel (though there are some programs for Officers as well), and the majority of them are also only made available to those who are either joining the service for the first time, or while they’re joining the Reserves.
Military Student Loan Forgiveness benefits were created to incentivize more highly qualified individuals to enlist in the Armed Forces, and they may not be available for much longer since our need for Active Duty and Reserves personnel is dropping due to our withdrawals from both Iraq and Afghanistan.
However, the available debt relief is extremely valuable, with qualifying participants able to receive up to $65,000 in student loan debt forgiveness.
a. Military College Loan Repayment Programs
The Military College Loan Repayment Program is available to pretty much everyone joining one of the major service branches (yes, even Coast Guard enlistees have access to these benefits!), though each branch provides a different level of loan forgiveness relief, basically depending on how badly they need fresh recruits. Here’s a quick breakdown of the CLRP benefits for each branch of the United States Armed Forces:
The Army College Loan Repayment Program
The Army Student Loan Forgiveness Program is one of the most powerful offered by any branch of the military, with up to $65,000 of total debt relief available to those eligible to participate in the program.
The Navy College Loan Repayment Program
The Navy Student Loan Forgiveness Program offers benefits on par with the Army’s program, providing up to $65,000 in student loan debt relief for those enlistees who qualify for the program.
The Air Force College Loan Repayment Program
The Air Force Student Loan Forgiveness Program is nowhere near as valuable as the Army’s or Navy’s programs are, and offers just $10,000 in total loan debt relief for qualified enlistees.
The National Guard College Loan Repayment Program
The National Guard Student Loan Forgiveness Program provides up to $50,000 in total debt relief assistance, but it also requires an extremely long service commitment (compared to other branches), with benefits only offered to those enlistees who agree to serve for at least six years.
The Marines College Loan Repayment Program
The Marines are certainly the outlier here, and although it seems like a Marine Student Loan Forgiveness Program would be a no-brainer, they do not currently offer any college loan repayment benefits to enlistees (as of the time of this writing).
The Coast Guard College Loan Repayment Program
The Coast Guard student loan forgiveness program is actually one of the best bang for your buck options out there, with up to $30,000 of loan relief requiring just 3 years of service. That’s $10,000 in college loan repayment benefits per year, and it makes this a pretty dang attractive offer.
b. National Defense Student Loan Discharges
The National Defense Student Loan Discharge Program provides student loan forgiveness benefits to anyone who completed a full year of service in the Armed Forces that included at least one year of deployment to a hostile fire or imminent danger area.
This is a little-known, but extremely useful program, and one that you will definitely want to research further if you meet those initial qualifications.
Debt Relief for Private Student Loans
Many people have private student loans – in fact, they’ve recently been estimated to comprise about 15% of total outstanding student loan debt.
Unfortunately, the past few years hasn’t seen much growth in the opportunities for student loan forgiveness of privately-funded loans.
And because private loans tend to offer far more money than federal loans, they’re often relied upon by those who need to borrow larger amounts of money to pay for college (i.e. poorer students, students attending expensive private universities, etc.), making those borrowers even more likely to need financial assistance.
Private loans also tend to come with higher interest rates, making it even more important to get debt relief from them if you’re having trouble making your monthly payments.
Unfortunately, at the time of this writing in 2014, there aren’t any loan forgiveness programs for private student loans, but there are other options to help you get some debt relief in other ways.
If you’ve got a private student loan and need some help reducing monthly payments, you won’t have access to loan forgiveness programs, but you do have some great opportunities for getting effective debt relief:
- Loan Consolidation Programs
- Loan Modification Programs
- Loan Discharge Via Bankruptcy
- Defaulting On Your Loan
Loan Consolidation Programs
The easiest way to get relief for excessive debt is to apply for a private student loan consolidation program. Loan consolidation combines multiple existing loans into a single new loan, reducing the complexity of your debt, allowing you to make only a single monthly payment, and often providing other significant financial benefits as well.
Loan consolidation programs typically include interest rate reductions, loan repayment schedule extensions and other adjustments that make your debt more affordable, especially in the short-run, by decreasing your monthly payments, allowing you to more easily make them on time.
The downside to loan consolidation is that it often ends up costing you more money in the long run, due to increasing the amount of money you’ll end up paying in interest charges and other fees.
Loan Modification Programs
Another great way to get relief for private student loans is to qualify for a loan modification program. These have the same outcomes as loan consolidation programs, except they relate to a single loan, meaning that you’ll have to get a loan modification on each of your student loans.
Benefits include reduced interest rates, longer repayment schedules and sometimes even a bit of loan forgiveness, but the downside to loan modification is that it’s almost entirely up to the lender. Your chances of getting a loan modification depend entirely on your ability to convince your lender to ease up on your debt, which costs them money.
For that reason, loan modification programs aren’t all that easy to get, and you’ll likely have to do quite a bit of work to get something put into place. However, the benefits can be tremendous, so these are certainly worth looking into.
Loan Discharge Via Bankruptcy
If you’re really in a bad way and simply can’t afford to make your private student loan payments, then you might need to consider pursuing a student loan discharge by filing for bankruptcy.
This is a difficult, long, and potentially costly process (you have to pay for court fees, legal fees, attorney fees, etc.), but it can end up saving your financial skin by having your entire student loan debt wiped out through the process called “discharge”.
The hard part to receiving a student loan discharge is that it requires you convincing a court of law that your student loan debt is placing an “undue financial burden” on your life, forcing you into crushing poverty and impeding upon your ability to provide essential needs for yourself and your family.
Defaulting On Your Loan
The worst option of the bunch, but guaranteed to work, is voluntarily defaulting on your private student loan debt.
While this will completely erase it, allowing you to move on and avoid making continued repayments on those loans, it’ll also crush you credit score, make it virtually impossible for you to get any other loan for a period of many years, and potentially open you up to all sorts of legal consequences.
If you’re not interested in being sued for breach of contract, battling your lenders in court, facing bank levies or wage garnishing actions and just generally dealing with a financial and legal nightmare for the next few years of your life, then this probably isn’t your best course of action.
There might be other options for finding effective relief from your student loans, but these are the most popular, most publicized opportunities around.
If you’ve come across any other student loan relief programs or if you just have ideas on other things that could be tried, then please sound off in our comments section below to share them with us and the rest of the community.
Let’s face it – we’re all in this thing together, and any help that we can offer each other is certain to be most appreciated.