How to Get Out of Student Loan Debt

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

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.

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

Income-Based Repayment Plans

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 (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.

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

Income Sensitive Repayment Plan (ISRP)

In this plan, which is only available for a 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. You must pay the loan off in ten years.

Income Based Repayment Plan (IBR)

You can get an IBRP 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 do not include Direct or FFEL PLUS loans made to parents.

Your debt is eliminated after 20 or 25 years of payments, depending on when you took out the loan.

Pay As You Earn Repayment Plan (PAYE)

Under this plan, your monthly payments are 10% of your discretionary income, but never more than the 10-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.

If you haven't repaid your loan in full after 20 years, the rest is forgiven.

Revised Pay As You Earn Repayment Plan (REPAYE)

Much like PAYE, under this plan, your monthly payments are 10% of your discretionary income. 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

Other types of repayment plans also exist: a standard repayment plan, a graduated repayment plan, and an extended repayment plan.

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 federal Direct Consolidation Loans, eligibility criteria, restrictions, and the pros and cons.

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.)

Canceling Student Loans

In some situations, you can get rid of your student loans altogether. This is referred to as canceling or discharging loans. In order to do this, 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:

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 Loan Debt in Bankruptcy.

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