Student loans are a massive burden on the American economy. In the United States alone, there is over $1.2 trillion of outstanding student loan debt. In fact, the average college graduate with debt has over $30,000 in student loans. This can be a crushing burden, and even if you do everything right, you might have trouble paying back the loans.

But what should you do if you can’t pay back your student loans? Let’s look at your options. First, we’ll review federal loans, which are generally more flexible and offer borrowers more options for loan forgiveness. Then, we’ll look at private student loans which are generally a bit tougher to get rid of. Let’s dive in.

Can your federal debt be canceled?

Let’s get to the big question first—is there a way to make all this debt just disappear? The answer, surprisingly enough, is yes—but don’t expect it to be easy. Getting your federal student loan debt reduced or eliminated is difficult but not impossible. Here are some of the ways your student loan debt can be forgiven.  

Direct and FFEL loans may be canceled if something bad happens:

• If your school closes before you graduate, you may be eligible for a closed school discharge
• If you become severely disabled, you may be eligible for a total and permanent disability discharge
• If you attended a school that misled you, you may be able to qualify for a borrower defense discharge
• Bankruptcy (in extremely rare cases—more on that later)
• Death (although in this case, loans are the least of your worries)

Direct and FFEL loans may also be canceled if you commit to public service. The Public Service Loan Forgiveness Program allows forgiveness if:

• You are employed in certain types Governmental organizations and make 120 monthly payments
• You work for a tax-exempt non-profit and make 120 monthly payments
• You work in certain other areas of qualifying public services and make 120 monthly payments

Perkins loans may be canceled if something bad happens:

• Bankruptcy (in very rare cases—more on that later)
• Death
• Severe disability

Perkins loans may be canceled if you commit to public service, like:

• Volunteer in the Peace Corps
• Become a teacher
• Are active duty military in a hostile area
• A Head Start worker
• A nurse or medical technician
• Are a child or family services worker
• Serve in law enforcement or corrections
• Serve in other qualifying professions

 There are also a few other less common qualifying events that can lead to the forgiveness of your federal loans. Check this site for more information.

Can your private student loans be erased?

Getting private student loans forgiven is extremely difficult. Often lenders will not forgive the debt unless you become disabled or die. What you should do varies by company, but generally, the best advice is to negotiate with the private loan company directly and see if they can help you out.

But what about bankruptcy?

If you are suffering true financial distress and can’t meet your financial obligations, bankruptcy is a difficult but often necessary choice. While it is certainly not a perfect solution, it can help you start with a clean slate. In the past, going bankrupt could eliminate private student loan debt. However, thanks to a 2005 law, both private and federal student loan debt are now nearly impossible to discharge in bankruptcy.

In certain rare cases, your debt can be forgiven in bankruptcy, but only if a court rules that the debt is so crippling that paying it back will now allow you to maintain a minimal standard of living. This is extremely rare and you should not assume that bankruptcy is a solution to student loan debt.

But if forgiveness isn’t an option and bankruptcy doesn’t work, are there any other ways to reduce the burden of student loans? The answer is yes.

Can a deferment help me with my federal student loan debt?

A deferment is a temporary delay of your repayments of principal and interest on a loan. During the deferment period, you do not need to make payments. In some cases, the federal government may even pay your loan’s interest during the deferment period.

Direct loans, FFEL loans, and Perkins loans may be eligible for deferment:

• During a period of enrollment in college or graduate school
• During a period of economic hardship (including Peace Corps service)
• During a period of unemployment
• During a period of active duty military service
• During other qualifying life events

Forbearance and federal student loans

If you’re having trouble paying your federal student loans, but don’t qualify for a deferment, forbearance is probably your next best option. Forbearance is the temporary suspension or reduction of your monthly interest payments. However, this is not a silver bullet. Even if you are granted forbearance, interest will still accrue on your loans

Speaking of being granted forbearance, there are two types: mandatory and discretionary.

They mean what they sound like. If you meet the criteria for a mandatory forbearance, the lender has to allow it. On the other hand, if you don’t meet these criteria, but want to apply anyway, you can ask for a discretionary forbearance. But, as you can guess, it’s up to the lender whether to grant it or not.

Life events that may qualify for mandatory forbearance:

• Serving in a dental or medical internship or residency program
• If your monthly payment is greater than 20% of your income
• If you are performing some types of teaching services
• If you are an activated member of the National Guard
• If you have received a national service award while in a national service position

Although financial hardship and sickness can significantly impact your ability to pay back your student loans, unfortunately, these conditions generally do not qualify you for mandatory forbearance. You can, however, ask for discretionary forbearance.

Deferment and forbearance for private student loans

 Private student loans have far less flexibility than federal loans. While there are a multitude of ways to get your federal debt forgiven, deferred, or put in forbearance, private lenders generally have no such programs. That said, it may be possible to work out a deferment, forbearance, or a payment plan that will help you repay your student loans.

Student loans are easy to take on but difficult to pay. Luckily, federal loans have certain programs that help alleviate the burden. Nurses, active duty military, teachers in low-income areas and other public servants have various relief options. And even if you don’t qualify for cancellation or forgiveness, you still may be able to manage a rough spot using deferment or forbearance.

If you’ve got a lot of loans left and feel overwhelmed by all the information I just threw out, don’t be so hard on yourself. It takes time to get your finances in order. Understanding what your student loan options are is the first step towards getting them paid off.

Got any questions? Let us know in the comments!