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How to get rid of your student loans without paying

Are you weighed down by student debt?

Students hoping to become public defenders, work in the health field, or hopeful veterinarians in the state of Kentucky specializing in large food animals -- you're in luck.

You might be eligible for a number of programs that will help to repay your student loan debt. (Problem is, these programs aren't easy to find out about.)

"The information can be really buried within a website or can be fractured," said Betsy Mayotte, director of regulatory compliance at the nonprofit organization American Student Assistance. "You kind of have to dig for the details."

With the interest rate on new subsidized Stafford loans doubling from 3.4 percent to 6.8 percent on July 1, 2013, students taking on debt to pay for their graduate degrees might consider researching the different programs out there. To help guide students interested in forgiveness programs, ASA has put together an eBook called "60+ Ways To Get Rid Of Your Student Loans (Without Paying Them)." The organization divides the programs into two broad categories.

"Forgiveness programs are generally programs where you are rewarded for something that you do. Generally it's some sort or volunteer or a specific working profession where there's a need for people to work in that profession," said Mayotte. "Unfortunately, discharge is for when something bad happens to you."

The loan forgiveness and discharge programs were instituted by the federal government (as well as some state governments, organizations and private businesses) to eliminate all or part of a student’s loans if he or she qualifies. Borrowers who give back to their community, work in fields or areas of need, or face unpredicted, extenuating circumstances are eligible for these different programs.

To apply for forgiveness, you may need proof that you've worked for the required number of years at the location or profession that makes you eligible for the program.

The types of loan forgiveness programs available can be divided among these broad categories:

  • Community service
    One community service option is applying for an AmeriCorps. award. It repays part of a person's student loans based on their service in the AmeriCorps program. The U.S. federal government program is meant to engage adults in intensive community service work with the goal of "helping others and meeting critical needs in the community." Other volunteer organizations offering loan forgiveness include the Peace Corps. and Volunteers in Service to America (VISTA).
  • Military
    Perhaps one of the most well-known ways to forgive your student debt. Generally there are two types of programs -- ones that pay for school while you're in school and then programs relating to existing loan forgiveness. You should speak with a recruiter about the different plans out there. Find out more information at Military.com.
  • Profession
    The most common professions eligible for loan forgiveness tend to be in the health and teaching fields. Mayotte says some states are really thirsty for nurses, doctors, teachers, or public defenders -- and may have forgiveness programs to attract those types of workers. You can find more career-based forgiveness programs with an online search or by talking to your employer. Find out more information at FinAid.org.
  • State specific
    You may be eligible for a program in a particular state if you are a legal resident in that state, work in one of the selected jobs, have a license for one of the jobs in the state, or went to school there. Search online to see what programs are available to you. Go to the state's website and search around. State specific programs can change or be eliminated based on budget, so keep an eye out.

For more advice on dealing with your student loans check out these links:
- Student loan interest D-Day: What's it mean?
- How to survive severe student loan debt
- The trouble with refinancing a student loan


The types of loan discharge options include:

  • Closed schools/school errors
    Borrowers may be eligible if their school closed while they were attending or within 90 days of leaving it. They may also be eligible if they withdrew from school and were not refunded the correct amount. Borrowers are only eligible if they received their loans on or after January 1, 1986.
  • Disaster
    There's a discharge option for spouses of eligible public servants or other eligible victims who died or became permanently and totally disabled due to physical injuries suffered as a result of the September 11, 2001 attacks.
  • Financial hardship
    Borrowers who face financial hardship based on income or debt could be eligible for these options:
      • Bankruptcy
        Contrary to popular belief, you can get rid of your loans in bankruptcy. But it's difficult to do so. You must prove to a bankruptcy judge that repaying your loans would be an undue hardship. This standard generally requires you to show that there is no likelihood of any future ability to repay. Learn more.
      • Income-based repayment
        To qualify you must have a partial financial hardship, which means that payments to your eligible loans exceeds 15 percent of your discretionary income. After 25 years -- 10 working in public service -- any student loan debt left over is forgiven. Learn more.
      • Income-contingent repayment
        Similar to the income-based repayment program, but payments are capped at 20 percent of discretionary income. Learn more.
      • Pay as you earn forgiveness
        Only for newer borrowers. You must be a new Direct Loan borrower as of October 1, 2007, with a disbursement made after October 1, 2011. Any Direct Consolidation loan made on or after October 1, 2011, that does not include a Parent PLUS loan or a loan made prior to October 1, 2007 is eligible. Learn more.
  • Fraud
    If someone fraudulently obtained the loan in your name you may be eligible to have your loan discharged.
  • Medical
    For borrowers who suffer from physical or mental impairments or have died.

Mayotte said it's important to note that for many of these loan programs, the amount that's forgiven can be taxed as income.

She says the best way to find out what programs are available to you is searching online and asking.

"Ask a potential employer if student loan repayment is part of a benefit. Ask a school that you're attending if the school is aware," says Mayotte. "I wouldn't be surprised if there were some super secret programs out there that weren't online."

Learn more about student loan forgiveness programs -- click play on the audio player above to hear the Marketplace Money  interview with Mayotte.

About the author

Daryl Paranada is the associate web producer for Marketplace overseeing all daily website content and production, as well as producing multimedia features -- including the popular economic explainer series Whiteboard -- and special projects. Follow him on Twitter @darylparanada.
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How can I transfer my parent plus loan into my son's name so that he can reap the tax benefits of the interest being paid on this loan? He is paying this loan even though it is in my name.

I enjoyed your interview with the two guys who had borrowed a lot of money to go to school but could you put these types of reports in context? For example:

- Did these two guys go to private schools or state schools?
- How much was the tuition for each year?
- How much do states subsidize public higher education now versus the 1960's, 70's and 80's?
- The retired guy going back to school was going to the University of Phoenix. What type of school is that? How much is tuition for private universities vs community or state schools?
- What percentage of college students have student debt?
- What percentage went to private colleges vs state or community schools?
- What percentage of student debt is owed by parents vs the students?
- Are there differences between financial aid advisors at state schools vs private schools?

The two interviews were compelling, but I would like to know more about the student debt problem and causes of it other than just personal interviews.

Thanks.

There is a significant amount of fine print with all of these programs that students need to know. First of all, those who don't have a direct-from-the-government student loan will not qualify for the public service option. Even those who have such loans may not get what's being advertised. The amount that is forgiven is "up to" $7,500, and that's only if the student loan industry determines that you qualify. For many of us, that won't even scratch the surface off the interest.

It's also important to note that the "forgiven" amount will be considered taxable income for that year. Under this scenario, a student loan borrower remains beholden to a government agency; it's just a different one.

In addition, the "public service" option assumes a student loan borrower can afford to make the minimum monthly payments for 10 years. Frequently, they cannot afford those payments. And all that's assuming a borrower is fortunate enough to find a job.

If a person has a steady job with no problems (like car breakdowns, rent increases, etc.), s/he might have a shot at making student loan payments for 10 years. But if that person loses his or her job, the interest will keep getting added on. If that person gets sick and can't work for a while, the interest will keep getting added on. Therefore, this person, through no fault of his or her own, could end up paying double - or more - what s/he borrowed in the first place. Student loans are really nothing but legal loan-sharking.

The income-based repayment plans and other band-aids being touted by our so-called elected representatives do nothing to help the 10 million+ people who still cannot afford the payments, and the "forgiveness" is minimal at best.

Until standard consumer protections are returned to student loan borrowers, we're just going to see more and more of this grandstanding by politicians. Meanwhile, nothing that will actually help us will get done. For example, Senator Warren's proposal to give current student loan borrowers a 0.75% rate would only last for a year - and then, the rate would go up to 6.8%. So her advocating for students is really nothing more than a well-designed marketing campaign, and the sad part is that many students who support her efforts believe they'll get the 0.75% rate for the life of their loans.

John "Speaker-for-the-1%" Boehner was a student loan corporate executive before inflicting his hideous orange self onto the 99%. He also saw to it that his daughter got a nice, cushy job as a student loan collector. It's quite obvious where his loyalties lie.

There is really no good reason why student loans can't be subject to the Fair Debt Collection Practices Act and other consumer protections that apply to medical bills, credit cards, mortgages, car loans, etc. The only reason student loans are exempt is because the predatory student loan industry and its lobbyists are making a fortune. Until we get our basic rights back, the student loan industry and their lobbyists will continue to have a stranglehold on our so-called elected representatives.

There is a movement to give us our basic rights back. I hope others will join it and realize that we, the people, can do something to help ourselves, because our so-called government definitely won't: http://tinyurl.com/ov4fmgw

http://tinyurl.com/o7w8kz3

http://tinyurl.com/ovy3ehm

Thank you for finally mentioning the military as an option. Too often discussion of student loan ignores this HIGHLY effective way to eliminate loan balances in only 4 - 6 yrs. Plus for the rest of your life you can puff up your chest and say "I am a Veteran".

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