Ask Stacy: Can I have my student loans forgiven?

A reader wants to know whether it's possible to get out from under student loans by having them forgiven. Here's the must-know if you have student loans.

By MSN Money Partner Jun 17, 2014 11:59AM

This post comes from Stacy Johnson at partner site Money Talks News


Money Talks News on MSN MoneyAs you've probably heard, student loan debt is a growing problem. Americans now owe more than $1.2 trillion on student loans, more than they collectively owe on credit cards or car loans. Only mortgage debt is higher.


Graduation cap © Stephen Wisbauer/Getty ImagesWhile it may seem that student loans are a problem isolated to students, they affect all of us. Student debt can prevent graduates from doing the typical things that stimulate our economy, from buying furniture, houses and cars to starting their own businesses.


Which leads us to today's reader question. It's about getting out from under student loan debt without having to actually pay it back.

How does someone get student loan forgiveness? -- TC

What is student loan debt forgiveness?

As you might imagine, once you borrow money for school, you generally have to pay it back, even if you never attended a class, don't finish your education, don't like the education you received, don't get a job or are unhappy with the loan terms.


But when you have a loan forgiven, canceled or discharged, it means you're off the hook.


Let's take a look at each of these methods to eliminate debt. You can learn more about each at this page of StudentAid.ed.gov.


Having student loans canceled, forgiven or discharged

The following is a list of all the ways you can escape student loans. You'll note that most apply only to loans issued or guaranteed by the government. If your loans are from private lenders, you'll have a lot fewer options.


Disability discharge. If you have a Direct, Federal Family (FFEL) or Federal Perkins loan, or a loan paid under the TEACH program, it's possible to have it discharged if you become permanently and totally disabled.


In order to have a debt discharged, you'll have to send proof of the disability (like certification from a doctor) to the Department of Education. Go here for more information. You can also have the above types of loans discharged by the death of the borrower.


Bankruptcy discharge. You may have heard that you can't eliminate student loan debt by filing bankruptcy. Not true. While it's certainly not as easy to eliminate student loan debt through bankruptcy as other types of debt, it does happen. The key is proving "undue hardship."


You need to meet three conditions to get an undue hardship discharge in bankruptcy, and you'll need to meet all three. From the StudentAid.ed.gov website:

If you are forced to repay the loan, you would not be able to maintain a minimal standard of living.
There is evidence that this hardship will continue for a significant portion of the loan repayment period.
You made good-faith efforts to repay the loan before filing bankruptcy (usually this means you have been in repayment for a minimum of five years).

As you can see, the bar is set high for those trying to discharge their debt in bankruptcy. But if you think you can meet the requirements, a talk with a bankruptcy lawyer might prove valuable. Read more about this option here.


Closed school discharge. You can get out of Direct and FFEL loans if your school closes and you don't complete your course of study, or one similar, at another school. There are requirements, like the closure must happen within 90 days of your withdrawal.

If you think you might qualify, call a DOE School Participation Team to get more details.


School rip-off discharge. While it's unlikely you'll encounter fraud or bad information from a community college or university, the odds increase when dealing with for-profit centers of learning.


If your school forges your signature on an application or loan request, your loan was improperly certified, or you were certified as eligible for a profession for which you really weren't eligible because you weren't mentally, physically or legally able to do it, you might get your Direct or FFEL loan discharged.


Teacher loan forgiveness. If you've taught full time at a low-income elementary school, secondary school or educational service agency for a minimum of five consecutive years, you might get as much as $17,500 of Direct or Stafford loans forgiven.


Here's a list of qualifying schools, here's the application (.pdf file), and here's a .pdf brochure that explains the details.


You might also get teacher loan forgiveness for Perkins loans. Find out about that program here.


Public service forgiveness. Jobs other than teaching might also earn forgiveness on Perkins and other types of loans.


Some members of the military, the Peace Corps and Head Start might qualify, as well as some nurses, law enforcement, and child or family service workers. The amount of forgiveness depends on the type and length of service, type of loan and when it was taken out. Learn more here.


The fastest way to find out if you qualify for forgiveness

As you can see, loan discharge and forgiveness are complicated. The links in this article will take you to information that can help, but if you find your eyes glazing over, try calling your loan servicer. They might be able to tell you in seconds what you'll find out on your own in hours.


Another good source of free information, as well as assistance if you're having trouble paying your student loans, is the Student Loan Alliance. You can find them at StudentLoanHelp.org


More from Money Talks News

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178Comments
Jun 17, 2014 1:41PM
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This makes me FURIOUS!!!!!!!

We have saved over the past 20 plus years in order to pay our three children's tuition with them covering expenses from part time jobs......
why should we have done this if you can just borrow money and walk away??!!

This is a perfect example of the terrible financial and work ethic values being passed on to the next generation.  

We also guide our kids in selecting a major that will be employable after graduation...so far a nurse and an engineer.   There are so many majors that will send you to the unemployment line.....ex. women's studies, anthropology, russian art history, just to name a few (these are actual majors of kids I know...living in their parents basement working odd jobs with lots of student debt!) Insanity!

Some kids just need to go to a trade school...4 years aren't meant for everyone.  I don't want my taxes to go to forgiven student loans....I paid my loans and my husband did to.

This is why Washington needs to just shut down...they can't make financial decisions that make sense.  Give all the the tax money back to the states and let them be in charge...get rid of every "Federal Department of_______"

Like I said before INSANITY!!!!
Jun 17, 2014 1:22PM
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Yeah the same way you should be able to get your car loan, home loan, credit card bill forgiven.

 

You willingly accepted the oligation and the money, now live up to your part of the contract and repay the loan based on the terms of the contract. 

 

I hope you picked a major that is in demand from a reputable school.

Jun 17, 2014 1:39PM
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What ever happened to a thing called responsibility? If you agreed to the terms of the loan, you should be required to pay it back.
Jun 17, 2014 1:53PM
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Ah yes, Another Stacy Johnson article on how to get free money and saddle the tax payers with it....How wonderful....More advice on how to lie,cheat and steal....
Jun 17, 2014 2:57PM
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Of course this not surprise me one bit. 
Give a man a fish and eats for a day. Give a man welfare, free cell phones, section 8 housing, food stamps and forgivable loans for education and he will vote democratic the rest of his life!
Jun 17, 2014 2:20PM
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It is in the best interests of the United States that as many of our citizens as possible get some kind of advanced training, college or otherwise. If people can't afford to pay up front, it makes sense for the government to help them with a loan. This loan should be repaid in full after the training is done, including enough interest to pay for the operation of the plan, but to charge a ridiculous interest, up to 7 % is just plain stupid. Banks pay their depositors no more than 1% and loan money at 4 and 5 percent, why in hell the government should use student loans as a way to make a windfall profit is not good for anyone, especially the citizens that we used to think our representatives were in government to serve.
Jun 17, 2014 2:35PM
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WTF!!??  I had to pay back MY student loan!  No one bailed ME out!  I say YOU PAY IT!  *___*
Jun 17, 2014 2:00PM
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Yeah, too many kids going to these small private schools that run $25 to $40k a year getting a degree that earns them $25k.  Public schools are just as good at a third of the cost.  Yeah, also time to get a real degree, not an art degree that you can do nothing with.


Jun 17, 2014 12:53PM
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The answer to that question should always be NO, unless you are trading your debt for work.

And we already have too many teachers.
Jun 17, 2014 4:03PM
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The sad thing is that the college system just perpetuates this mess.  It used to be a high school degree could get you a decent job, then a college degree, then a masters, and in some fields you need a PhD to get a job.  We really don't need anymore college graduates with major that are worthless.  What the USA needs is a trade school systems like the colleges where you can learn how to operate heavy equipment, plumbing, electrician, carpenter, etc...  If I had to go to college today, I don't think I would bother, as learning a good trade will make you self sufficient for life, as most tradesmen can do their trade on the side to earn extra money.  A skilled tradesman is 100 times more valuable than a liberal arts major.
Jun 17, 2014 4:02PM
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You don't need to repay your loan and why should you. Just bill the middle class. We got the bill for fannie mae and their lending. we get the bill for all the illegals. we get the bills for our elected officials living like kings and queens, we get the bill for medical, that was a good one. The GAO says 800 bil per year is the cost. Just send the middle class the bill. Higher prices, higher taxes. Free stuff for everyone else. Now middle class, shut up and get to work.
Jun 17, 2014 3:40PM
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Just more liberal left welfare to get votes.  Screw the middle class , and hard working American who pays taxes...let's just give it all to the illegals, the slackers, the poor, the 16 and pregnant moms, the illiterate .....because after all, they had some hard breaks in life. It just keep getting worse.  Who would have ever thought we would long for the days of Jimmy Carter.  This one man in the White House has done more damage to this country than all the muslim terrorists combined.We all worry about the terrorists in the mid east, we need to worry about the terrorist in the Mid-atlantic.
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Oooooor...............You could just pay the damn thing off like a responsible adult.
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This is the new mentality that has finally come to fruition after decades of Liberal indoctrination. 
Jun 17, 2014 2:07PM
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Coming soon, to a minority near you, Obamacollege !
Jun 17, 2014 5:00PM
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This is just another example of the irresponsibility of our nation. Why no mention of the president and his magic pen capping loan payments and forgiveness after 10 years of paying. Wake up America! We have a terrorist president hell bent on destroying this nation and doing a good job of it! 
Jun 17, 2014 2:42PM
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If you get your Student Loan forgiven, then it appears on your Tax Form as income. Then guess what

you get taxed on it. No escape.

 

Jun 17, 2014 3:51PM
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Another large voting block to be bought with your taxes.
Jun 17, 2014 5:49PM
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Once again the loons in the left are rewarding irresponsible behavior  of some and expecting the responsible hard working tax payers to foot the bill. 
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