How to Get Out of Student Loan Debt

Of the millions of Americans who struggle to pay student loans, many want to know: Can I reduce or eliminate my student loan debt?  In very limited circumstances, it is possible to get rid of student loan debt. However, most people will not be able to wipe out some or all of their loans. The good news, though, is that some people are eligible to reduce monthly payments, get a temporary break from payments, or take advantages of other ways to better manage their student loan payments.

Many of these programs depend on the kind of loan you have. To find out about the different types of loans and get details on the below programs, see the articles in our Student Loan Debt area.

Below is an overview of your options if you struggle to pay your student loans.

Payment Plans for Financial Hardship

If your income is low or unstable, or you have very high student loan debt compared to your income, you might be eligible for one of the below plans.

Income Contingent Repayment Plan (ICRP) 

If you have a federal Direct Loan (other than a PLUS loan), you can opt for this plan which calculates your payment amount based on your income. Your payments could be as low as $5 or even $0. If you haven't paid off your loan after 25 years, the government will cancel the remaining balance.

Income Sensitive Repayment Plan (ISRP) 

In this plan, which is only available for a certain type of loan (called a FFEL), your payments are based on your annual income, family size, and total loan amount. Your payments must at least cover accruing interest and you must pay the loan off in ten years.

Income Based Repayment Plan (IBRP)

You can get an IBRP for both Direct loans and FFELs, but you cannot be in default to qualify. IBRP offers more flexible options than under ICRPs or ISRPs. Your debt is eliminated after 25 years of payments, payments can be less than the accruing interest, and may be less than under ICRPs or ISRPs. 

Hardship Repayment Plans for Perkins Loans

If you have a Perkins loan, you must pay at least $40 per month, but the school can extend repayment for another ten years or allow additional extensions for prolonged illness or unemployment.

To learn more about these types of plans, see Student Loan Repayment Options.

Payment Plans Without Financial Hardship

If you don’t qualify for a payment plan based on financial hardship, there are still several options for restructuring your payment plan for federal loans. You can opt for a graduated payment plan where your payment starts low and slowly increases as time passes. Or, if your loan is over a certain amount, you can stretch out your payments over 25 years (versus the usual ten years). To learn more, see Student Loan Repayment Options.

Consolidating Your Student Loans

A consolidation loan allows you to combine one or more of your federal student loans into a single loan with one monthly payment. A consolidation loan can be helpful if you want to reduce your interest rate, you don’t qualify for another payment plan program, you qualify for another payment program but still can’t afford the payments, or you want to get out of default.

To learn more about how to consolidate your loans, eligibility criteria, restrictions, and the pros and cons, see Student Loan Consolidation.

Deferring Student Loans

A deferment excuses you from making student loan payments for a set period of time because of a specific condition in your life -- such as returning to school, economic hardship, or unemployment. Interest will not accrue on subsidized loans during the deferment period.  (Learn more about deferring student loans.)

Getting a Forbearance

With loan forbearance, your loan holder gives you permission to stop making payments for a set period of time or to temporarily reduce payments. Common reasons supporting a forbearance include poor health, unforeseen personal problems, your inability to pay the loan within ten years (or other loan term period), or monthly loan payments that are more than 20% of your income. (Learn more about student loan forbearances.)

Cancelling Student Loans

In some situations, you can get rid of your student loans altogether. This is referred to as cancelling  or discharging loans. In order to do this, you must meet very specific criteria. The programs only apply to certain types of loans and sometimes only if you received the proceeds after January 1, 1996.. Sometimes, you can cancel part of the loan, but not the entire loan.

The circumstances in which you might be able to cancel your student loan include:

• You attended or were enrolled in a school that closed while you were there, before you started classes, or within a certain time frame afterwards. This program only applies to certain types of loans. (Learn more about cancelling a student loan due to school closure.)
• Your school refused to refund you money that it owed to you because you did not attend the school or withdrew. (Get details on cancelling a student loan due to unpaid refunds.)
• Your school did not make sure that you were qualified to attend the program. This is called false certification. (Get specific information on cancelling student loans due to false certification.)
• You work in certain occupations after graduation (like teaching or some public service jobs).  (Learn more about cancelling part of your loans due to your occupation, volunteer, or public service work.)
• You are unable to work because of an illness or injury that is expected to continue for five or more years or result in your death.
•  If the person owing the loan dies, the loan obligation ends. (Learn more about cancelling student loans due to permanent disability or death.)

Discharging Student Loans in Bankruptcy

It’s very difficult to discharge student loans in bankruptcy. You must demonstrate that it would be an undue hardship for you to pay them, and courts are very reluctant to find that debtors have met this standard. If you file for Chapter 13 bankruptcy, however, you may be able to pay all or part of your student loans through your Chapter 13 plan. To learn more, see Student Loans and Bankruptcy.