Federal Student Loans: Three Ways for Relief

Many people worry about paying off their student loans. In fact, it has been estimated that more than 40 million people have unpaid student loans in the United States. About 5.6 million of them owe more than $50,000.

It is unfortunately that borrowers don't know that there are government programs they can enroll in to give them relief, and they are all legal.

Federal student loans can be forgiven, canceled or discharged. That means borrowers will not have to repay some or none of their loan. Even though forgiveness, cancellation and discharge programs do basically the same thing, they are available to borrowers depending on their financial situation.

Repayments Might Not Be Required

Borrowers may not be required to make payments on their loans if they do not make enough money from their job or if they have no job at all. The disability of a borrower may be a good reason that federal student loan payments might not be required. Another reason for non-payment is if the school has closed where the loan was originated. A federal government program might be available that fits the borrower's circumstances.

Forgiveness of Federal Student Loan

The Consumer Financial Protection Bureau estimates that one-fourth of borrowers may be eligible for an income-based repayment or a loan-forgiveness program, and you might be one of them. You can apply for the Income-Based Repayment (IBR), also known as the Income-Driven Repayment (IDR). This program is for borrowers who aren't able to make the full or monthly payment at all on their federal student loan.

The borrower's monthly loan payment is adjusted to his income. The adjusted loan payments can be as low as $0. Then after 25 years, the borrower's balance is completely forgiven. Use the online calculator to find out how much your income-based repayment will be if you enroll in the income-based repayment program.

Cancellation of a Federal Student Loan

Federal student loans can be canceled if the borrower works for a certain period of time in a public service job such as being a member of the military. A federal student loan may also be canceled if the borrower has a disability that prevents him from working.

Discharge of a Federal Student Loan

Every federal student loan will be discharged after a borrower dies. The debt is not considered part of the estate of the deceased. There are other ways for federal student loans to be discharged without anyone having to die. A borrower's student loan can be discharged if the school where he enrolls closes.

Things to Know

The above information is only for federal student loans. There might be other options for private loans that are not covered in this article.

A borrower does not have to make payments every month, but the interest continues to go up. Even though the interest on federal student loans is minimum, the large amount on your credit report will probably shock you after a long time. What you see will be a whole lot more than your original loan. That means you might have difficulty if you ever try to buy a house, car or another major item. Even so, the Income-Based Repayment Plan is the only option for people who just don't have money to pay.

Personal Disclosure

There are a lot of scams that claim to help people manage their student loans. However, all the information contained in this article is true to the best of this writer's knowledge.

I know about the Income-Based Repayment Plan first hand. I have been enrolled in the program for seven years, and I have had a $0 balance every month. The entire balance will be forgiven after it has been in effect for 25 years.

My relatives are not responsible for the repayment if I die before the expiration date. The bank requires me to be certified every year to prove if my income is still the same as it was the previous year. It takes just a few minutes to complete the simple form online.

This information might be helpful if you are struggling with paying off your student loan.