how can one get rid of a student loan other than consolidation? Is there any way to negotiate a low payoff?

Question

I hear that usually the lenders do not allow any renegotiation for a lower amount (other than the interest). And you cannot file bankruptcy due to the laws regarding student loans. Is there any other way out? Thanks to all who has any suggestions.

Answer 1

In general, you can't simply "get rid of" your student loans. Repaying your student loans will continue to be your responsibility and there are no easy answers for anyone looking to shake off this burden.

It isn't exactly possible to "negotiate" a lower payoff, but it is possible to arrange an alternative payment plan -- some of these plans require very minimal payments for your first few years of repayment. Among the plans to ask your lender about: interest-only repayment; graduated repayment; income sensitive/contingent repayment, extended repayment, etc.

Federal Loan Consolidation is often the fastest way to lower your monthly payment and, sometimes, even your overall costs. It's a good option for borrowers looking to extend their repayment term which, in turn, lowers the monthly payments, often significantly.

OK, about bankruptcy...

For the most part, you heard correctly: Federal Stafford Loans cannot be forgiven, even if the borrower files for bankruptcy. Perkins Loans can sometimes be forgiven/cancelled/discharged when the borrower has filed for bankruptcy. However, I DO NOT recommend filing for bankruptcy on the off-chance that your Perkins might be discharged. It generally does more harm than good.

One other option you might have is Loan Forgiveness. If you work for 5 years as a teacher in a low-income or subject-shortage area, all of your Perkins Loans and *some* of your Stafford Loans can be forgiven. Teaching is pretty much the only way to have your Stafford loans forgiven, but if you have Perkins Loans, there may be others: law enforcement/corrections officers, those in the HeadStart program, early intervention service providers, PeaceCorps and ACTION volunteers, nurses, military personnel, etc. can all have their Perkins Loans forgiven in part or in full. For more information, see here: http://www.finaid.org/loans/forgiveness.phtml