Loan Repayment and Forgiveness
Student loans are debt you have to pay back, even if you don’t finish your degree. But depending on your situation and what kind of loans you have, you might be eligible for a different repayment plan or to get your loans forgiven. And when it comes to qualifying for these programs, there’s nothing a private company can do for you that you can’t do yourself.
If you have federal loans (government loans), the Department of Education has different free programs that could help, including:
- income-driven repayment plans — your monthly payment is based on how much money you make
- deferment and forbearance — you get to postpone making payments, though interest might cause what you owe to increase
- loan consolidation — you combine all your federal student loans into one federal student loan and make one monthly payment. It might give you lower monthly payments over a longer repayment term. But then you could pay more in interest in the long run.
- loan forgiveness or loan discharge — in some very limited circumstances, you don’t have to pay back some or all of your loans. You might qualify if you have certain jobs, a disability, or if your school closed or committed fraud. Also, under certain income-driven repayment plans, any balance that remains after 20 or 25 years of payments is forgiven. In some cases, you may owe income taxes on the forgiven or discharged amount.
- Applying for these programs is free. You can find out more about your options at the Department of Education’s StudentAid.gov or by contacting your federal student loan servicer. You also can find out more about how to get out of default.
Consolidating your student loans means combining multiple loans into one loan. Typically, people consolidate their loans to simplify monthly payments or get new repayment terms.
Loan consolidation isn’t a good idea for everyone. Whether consolidating helps you depends on factors like what type of loans you have, their interest rates, when you took them out, and whether they came with benefits you wouldn’t want to lose. When you consolidate your loans, you get a brand new loan with new terms.
Consolidating federal loans with the federal government is free. Private loans have to be consolidated with a private lender. There might be a cost, but avoid companies that tell you to pay up-front fees. Some debt relief companies and lenders offer to consolidate federal and private loans together into one new loan to lower your monthly payments or interest rate. Understand that, if they do, you’ll lose any benefits and protections offered by your federal loans.
Before you consolidate your loans, find out what it could mean for your specific situation. If you have private loans, talk to your loan servicer. For federal loans, call the Department of Education’s Loan Consolidation Information Call Center at (800) 557-7392.