How to Get Out of Student Loan Debt

Most people can't eliminate student loan debt—but many can get better payment plans.

By , Attorney · Northwestern University School of Law

Legal Update: After the U.S. Supreme Court struck down President Biden's debt cancellation plan, the administration introduced a 12-month "on-ramp" repayment program. Beginning October 1, 2023, and for a year after that, the Education Department won't report borrowers who miss payments to the credit bureaus, consider them delinquent, place them in default, or refer them to debt collection agencies. But interest will accrue.

In addition, the Biden Administration announced that, in February 2024, it would start canceling federal student loan debts for anyone who initially borrowed $12,000 or less and has been in repayment for at least 10 years if they first enroll in the SAVE income-based repayment plan (see below). To get forgiveness, it doesn't matter what repayment plan or plans you previously had, so long as you were actively repaying your loans and are enrolled in the SAVE plan. However, on March 28, 2024, eleven states filed a federal lawsuit arguing that President Biden overstepped his authority in creating the SAVE Plan.

The Department of Education is pausing student loan payments for SAVE borrowers for July 2024 to recalculate payments according to the new formula that will lower them from 10% of a borrower's income to 5%. If you're a SAVE borrower and the Department of Education notified you about this adjustment, then you can skip your July payment.

Many of the millions of Americans who struggle to pay their federal student loans want to know: Can I reduce or eliminate my student loan debt? In very limited circumstances, getting rid of student loan debt is possible. But most people won't be able to wipe out some or all of their loans.

The good news is that some people are eligible to reduce monthly payments, get a temporary break from payments, or take advantage of other ways to manage their student loan payments better.

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

Income-Based Repayment Plans to Help Get out of Student Loan Debt

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.

Saving on a Valuable Education (SAVE) Plan

In 2023, the Biden Administration introduced a new income-driven repayment plan—the Saving on a Valuable Education (SAVE) plan. This plan lowers undergraduate borrowers' monthly payments to 5% of their discretionary income. Those with undergraduate and graduate loans will pay a weighted average between 5% and 10% of their income, depending on the original principal balances of their loans. In some cases, payments will be $0. And under this plan, your unpaid interest won't accrue if you make your full monthly payments.

In addition, the remaining loan balance is forgiven after 10 years of payments for borrowers with original loan balances of $12,000 or less, with the maximum repayment period before forgiveness rising by one year for every additional $1,000 borrowed up to a maximum of 20 or 25 years. For example, if you originally borrowed $14,000, you receive loan forgiveness after 12 years. Payments you made before 2024 and those made thereafter count toward these forgiveness timeframes.

All student borrowers in repayment are eligible for the SAVE plan, and borrowers already in a Revised Pay as You Earn (REPAYE) plan are automatically enrolled in SAVE. To learn more about the SAVE plan, visit the Education Department's website.

Income Contingent Repayment Plan (ICR)

If you have a federal Direct Loan, you can opt for this plan which calculates your payment amount based on your income. Under this plan, your monthly payment is the lesser of

  • 20% of your discretionary income, or
  • the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income.

The government will forgive the remaining balance if you haven't paid off your loan after 25 years.

Income Sensitive Repayment Plan (ISR)

In this plan, which is only available for certain types of loans (subsidized and unsubsidized Federal Stafford Loans, FFEL PLUS Loans, and FFEL Consolidation Loans), your payments are based on your annual income, family size, and total loan amount.

Income-Based Repayment Plan (IBR)

You can get an IBR plan for:

  • Direct Subsidized and Unsubsidized Loans
  • Subsidized and Unsubsidized Federal Stafford Loans
  • all PLUS loans made to students, and
  • Consolidation Loans (Direct or FFEL) that don't include Direct or FFEL PLUS loans made to parents.

This plan requires payments equal to 10% of your discretionary income if you're a new borrower on or after July 1, 2014 (but never more than the ten-year standard repayment plan amount) or 15% of your discretionary income if you're not a new borrower on or after July 1, 2014 (again, never more than the ten-year standard repayment plan amount).

If you haven't paid off your loan after 20 years (new borrowers on or after July 1, 2014) or 25 years (if you're not a new borrower on or after July 1, 2014), the government will forgive the remaining balance.

Pay As You Earn Repayment Plan (PAYE)

Under this plan, your monthly payments are 10% of your discretionary income, but never more than the ten-year standard repayment plan amount. (Under a standard repayment plan, the payments are a fixed amount.)

The following types of loans are eligible for this repayment plan:

  • Direct Subsidized and Unsubsidized Loans
  • Direct PLUS loans made to students, and
  • Direct Consolidation Loans that do not include PLUS loans (Direct or FFEL) made to parents.

The rest is forgiven if you haven't repaid your loan in full after 20 years.

Revised Pay As You Earn Repayment Plan (REPAYE)

Much like PAYE, your monthly payments are 10% of your discretionary income under this plan. Your outstanding balance is forgiven if you haven't repaid the loan in full after 20 or 25 years. The following types of loans are eligible for REPAYE:

  • Direct Subsidized and Unsubsidized Loans
  • Direct PLUS loans made to students, and
  • Direct Consolidation Loans that do not include PLUS loans (Direct or FFEL) made to parents.

Other Repayment Plans for Student Loan Debt

Other types of repayment plans include a standard repayment plan, a graduated repayment plan, and an extended repayment plan.

Consolidating Your Student Loans to Reduce Student Loan Payments and Interest

A Direct Consolidation Loan allows you to combine one or more of your federal student loans into a single loan with one monthly payment. This kind of 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.

Deferring Student Loans to Delay Paying Student Loan Debt

A deferment excuses you from making student loan payments for a set amount of time because of a specific condition in your life—such as returning to school, economic hardship, or unemployment. Interest won't accrue on subsidized loans during the deferment period.

Getting a Forbearance to Stop Paying off Student Loan Debt Temporarily

With loan forbearance, your loan holder permits you to stop making payments for a set amount of time or to make reduced payments temporarily. Common reasons supporting a forbearance include poor health, unforeseen personal problems, inability to pay the loan within ten years (or other loan term period), or monthly loan payments over 20% of your income.

Canceling Student Loans to Get Rid of Student Loans

In some situations, you can get rid of your student loans altogether, which is referred to as student loan "forgiveness," "cancellation," or "discharge." You must meet very specific criteria. 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 afterward.
  • Your school refused to refund you money that it owed to you because you didn't attend the school or withdrew.
  • Your school didn't make sure that you were qualified to attend the program, called "false certification."
  • You work in certain occupations after graduation, like teaching or some public service jobs.
  • You're unable to work because of an illness or injury—a total and permanent disability—that's expected to continue for five or more years or result in your death.
  • If the person owing the loan dies, the loan obligation ends.

Discharging Student Loans in Bankruptcy To Get Out of Student Loans

Generally, it's been 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 have historically been reluctant to find that debtors meet this standard.

In 2022, the Biden administration introduced a new student loan bankruptcy policy to make it easier for borrowers to discharge their student loan debts in bankruptcy. Student loan borrowers have to fill out a lengthy form, explaining their financial struggles and making their case for a discharge.

The Justice Department, along with the Department of Education, reviews the information provided, applies the factors that courts consider relevant to the undue-hardship inquiry, and then determine whether to recommend that the bankruptcy judge discharge the borrower's student loan debt.

Getting Help With Your Federal Student Loans

To learn more about options for federal student loans, visit the U.S. Department of Education's Federal Student Aid website. You can also call your loan servicer. If you have a Federal Perkins Loan, contact your school.

To get assistance in dealing with your servicer or to get help understanding the different repayment, deferment, forbearance, and forgiveness options for federal student loans, consider consulting with a student loan attorney or debt negotiation attorney who deals with student loans.

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