Can You Get Rid Of Student Loans Without Paying? | Student Loan Planner

Can you get rid of student loans without paying anything? That might sound kind of like a pipe dream, but it's actually possible. And here's what I mean by that. There are various forgiveness programs that exist that allow you to pay a percentage of your income. Generally, this percentage is 10% of what's called your discretionary income. What this means is basically your income minus 1.5 times the poverty line for your family size. For a single person, this is about $20,000 when you take that 1.5 and multiply that by the poverty line. For a family of four, that might be closer to $30,000 or $40,000. That is a deduction that allows you to subtract that from your income before the government takes 10% of that to figure out what your student loan payment is. So for example, a family of four with a $50,000 income might get to have a deduction of $30,000 or $40,000 first, and anybody that has student loan debt would then have a 10% payment that they would have to make on that remaining money. So for example, a family with $50,000 combined income, let's say that this is a teacher married to a stay-at-home spouse that has $70,000 of student loan debt. So then that monthly payment, if it's a family of four with a couple kids, that monthly payment might be as low as $100 a month. In some cases, if someone's income is below 1.5 times the poverty line, plus maybe their retirement contributions might be reducing their income even further, that is possible to have a $0 per month monthly payment on your student loan debt. What does that mean? It means that you could pay a percentage of your income, which is almost nothing, and then at the end of those 20 years, if you're in the private sector, your loan is forgiven. And what is the catch? You have to pay income taxes on that forgiven balance. But here's another loophole. You can do something called the insolvency rule. What that means is if your assets are smaller than what you owe in liabilities, then the government forgives this debt tax-free, and you don't end up owing any income taxes even after those 20 years of payments in the private sector. So it's very possible to pay almost nothing on your student loans where it's a percentage of your income for 20 years, and then at the end, you use the insolvency rule to get the loans wiped away completely. The other option is to do public service loan forgiveness. This allows you, after 10 years of working full-time at a not-for-profit or government employer, under an income-driven plan like Pay As You Earn, to have the remaining balance forgiven tax-free at the end of the 10 years. So imagine a scenario where you have a large family and you have a lot of debt and you have a relatively modest income. You could be paying almost nothing on your student loan debt and still have your student loans forgiven at the end of the 10 years. Now, what about private student loans? Unfortunately, private student loans are not dischargeable in bankruptcy. That means under almost any scenario, you should be expected to pay back your private student loans in full. The only exception is if you happen to live in a very consumer-friendly state, then you might consider talking to an attorney to see if a particularly bad situation can be salvaged through a settlement, which basically what that involves is waiting until the statute of limitations has passed and not making a payment during those entire, often times it's like a seven-year statute of limitations, and then seeing after not making any payments for those seven years if it can be wiped away. This is not a strategy I recommend at all. I would suggest strongly that you plan to pay back your private student loan debt in full. So for private student loan debt, it is not possible to pay almost nothing. For federal student loans, in some limited cases, for people at certain income levels, it is possible to get your loans forgiven without paying anything. And what we do try to do is find the best scenario for you, so hit us up, studentloanplanner.com slash help if you wanna learn more about how we help people save.