It has been calculated that there is now between $902 billion and $1 trillion in total outstanding student loan debt in the United States today. It is also said that roughly two-thirds of students who are graduating from American colleges have some level of debt. In fact, the average borrower will graduate owing $26,600. And 10% of those borrowing money for their college educations will graduate owing more than $40,000.
If you graduated owing this much money – whether it’s $26,000 or $40,000 – your financial life can be crippled for years to come.
A variety of repayment options
There are a number of options for paying back student loans. You may already know the three basic ways to repay them, which are the Standard, Graduated and Extended plans. And you may be aware that there are four plans available related to your income: the Income-based Repayment Plan, Pay As You Earn Repayment Plan, Income Contingent Repayment Plan and the Income Sensitive Repayment plan. As an example of these plans, the Income-based Repayment Plan would cap your payments at 15% of your discretionary income. And with the Pay As You Earn Plan, your payments would be capped at 10% of your discretionary income. However with both these Plans, your payments will increase as your income increases.
These four plans vary somewhat but they all have one thing in common – you must pay back the money and your payments will increase as your income does.
Amazing but true – there are options that could help you pay back the money
An income-based repayment plan would definitely make it easier for you to pay back your student loans but notice that the key word here is “repayment.” Regardless of which of these plans you choose if you owe that $26,600 you will be required to pay it all back though you may have as many as 20 or even 30 years to do so. Fortunately, there are two ways to get help with those student loans that might totally surprise you.
The first of these options is called LRAPs or Loan Repayment Assistance Programs. These can be powerful tools to help you repay your educational debts. They are different from repayment plans such as Income-Based Repayment because instead of reducing the amount of your payments or providing you with forgiveness of your educational loans in the future, LRAPs give you funds now to help make the monthly payments on your loans. It’s possible that one of these programs could also provide money you could use to pay down any private educational loans, which are never eligible for federal loan relief programs. For that matter, it’s possible you might be able to use an LRAP in conjunction with another federal relief program.
Where could you find an LRAP?
Employers, schools, states and the federal government usually offer some type of LRAP. You would have to discuss this with your school or employer to learn what’s available. However, there are four LRAPs open to most everyone and two that are designed specifically for lawyers. The four that are available to almost everyone are:
US Office of Personnel Management Student Loan Repayment Program
This could earn you as much as $10,000 a year that would be applied towards loan repayment if you work for a federal agency. The total offered by this program is not to surpass $60,000 for any one employee.
National Health Service Corp. Loan Repayment Program
If you are a dental, primary care medical, behavioral or mental health clinician and care for the those who are underserved you might be able to get an award of $50,000 after just four years of service.
Armed Forces Student Loan Repayment Program
How much you could get in this program would depend on which part of the military service that you are in. But depending on this, you might get as much as $65,000 of your eligible student loans paid back.
Healthcare professions Faculty
If you are a student from a disadvantaged background and agree to be part of the faculty of an accredited health professions university or college for two years, you could get as much as $40,000 towards repaying your student loans.
For lawyers only
There are also two LRAPs available to law school graduates. The first of these is the Civil Legal Assistance Attorney Student Loan Repayment Program. This provides certain attorneys who do civil legal assistance with up to $6000 a year in student loan repayment for every year that they complete service. The max under this program is $40,000.
Second is the John R. Justice Student Loan Repayment Program. If you are an eligible state or federal prosecutor or public defender, you could get repayment of you eligible education loans up to a lifetime cap of $60,000.
An LRAP can certainly make it easier for you to pay back your student loans, but the second – and maybe even better way – to manage your loans — is to have them forgiven. The first way to achieve this is through the Public Service Loan Forgiveness Program. You would be eligible for this program if you have a William D. Ford Federal Direct Loan and if you work for a federal, state or local government or a non-profit organization that’s been termed tax exempt by the IRS. If you qualify for this program, you would have to first make 120 on time, scheduled, full payments on your loan and the rest of your loan would then be forgiven.
Teacher Loan Forgiveness
A second way to get your student loans forgiven is to teach full-time for five consecutive academic years in certain elementary and secondary schools and educational service agencies that serve low-income families. If you qualify, you could be eligible for a combined total of $17,500 on your Subsidized and Unsubsidized Federal Stafford Loans and your Direct Subsidized and Unsubsidized Loans. As you might guess, there are also other eligibility requirements for Teacher Loan Forgiveness such as you can’t be in default on a subsidized or unsubsidized loan and you must not have an outstanding balance on a Federal Family Education Loan (FFEL) or Direct Loan as of October 1,1998.
Did you know it’s also possible to get your loan canceled or discharged?
It’s basically just not possible to get student loan debts canceled by filing for bankruptcy. The only way you could do this is if you could persuade your bankruptcy judge that your situation in life is so awful there’s just no possible way you could pay back any of the money. In fact, this is what makes student loan debts different from almost any other type of unsecured debt – you basically cannot get it canceled through bankruptcy. However, you could get your loan canceled under certain circumstances, two of which are not very pleasant. For example if you were to die, your estate could get your student loans canceled. If you were to become totally and permanently disabled, you could get those loans canceled. You could also get them discharged if your school closed or if you had a refund that you were due that you never received. And finally, it’s possible to get student loans discharged if your school falsely certified your eligibility to get the loan or if it signed your name on an application or promissory note without your authorization or your loan was falsely certified because you were victimized by identity theft.
Do your homework
Whether you think you would qualify for some type of forgiveness or for an LRAP, the important thing is to do your homework to make sure you understand all the options available for paying back your student loans. Learning all the various alternatives can be time-consuming and sometimes perplexing. Each of the options mentioned in this article have numerous eligibility requirements and it pays to read all the fine print before you make a decision. But if you do your homework it’s possible that you could actually end up slaying that monster of student loan debt.
I am an associate at National Debt Relief, which is a Debt Consolidation Company that has helped thousands of Americans facing credit card debt problems. We help with debt settlement, debt management, and other debt related financial crisis' facing consum