Two Solutions to Student Loans That Far Too Few People Know About and Take Advantage Of

In science, pursuing revolutionary advancements can be like searching for diamonds hidden in sewage. It's a shame that the realms of questionable ideas contain "diamonds" of great value. This makes the judging of crazy theories far more difficult. If crazy discoveries were always bogus, then we'd have good reason to reject them without investigation. However, since the diamonds exist, we must distrust our first impressions. Sometimes the "obvious" craziness turns out to be a genuine cutting-edge discovery. As with the little child questioning the emperor's clothing, sometimes (but rarely, of course) the entire scientific community is misguided and incompetent. Sometimes only the lone voice of the maverick scientist is telling the truth. – William Beaty

If the student loan crisis is as massive in scope as I’ve made it out to be—and you’re welcome to confirm all the data we’ve covered for yourself—then why do so few people seem to care?

Well, it could be because we live in an attention deficit society. Many other problems are competing for our focus. For instance, global warming, the increasingly factional nature of domestic politics, North Korea, the opioid epidemic, the obesity epidemic, the list goes on. But I promise you if you or someone you know is drowning in this debt, it is on top of their mind and stress meter.

The student loan debt situation might be getting lost in the shuffle of the general public, possibly because there are so few whistle blowers who are knowledgeable enough to put the pieces together. I often feel like a lone voice in the wilderness. While there are people talking about it - authors, journalists, economists, and politicians - they seem to be doing it with the wrong intent. Maybe to sell papers and get ratings, however they are bringing awareness to the issue without addressing the entire problem or the consequences. All this while not offering solutions that can be used today. It’s crazy to me that so few people speak out about this issue, and maybe it’s that they don’t see what I see. It just seems odd to be one of the only people talking about the real-world solutions that can be applied immediately.

But here’s the good news. Assuming you’ve followed the story so far, you now have a nice, 20,000-foot view of the situation, too. So welcome to the club! And once you understand the big picture, the real- world solutions pop out surprisingly easily.

The two big solutions that we’re going to discuss here are income-driven repayment and forgiveness.

I introduced income-driven repayment and went in depth about it in my article titled How Income-Driven Repayment Plans Can Save Your Budget (and your sanity!). Please read it if you haven’t already; it is rather essential to this discussion.

What I want you to understand is how income-driven repayment and forgiveness work together. Independent of one another, they are amazing; but put them together, and they are as magical as when chocolate and peanut butter came together.

Let’s dive into the topic of forgiveness first and then I’ll put them together.

Before I go any further, I want you to understand that student loan forgiveness is real; and it is available to every human being with a federal student loan. Don’t let anybody tell you any differently! (Sorry, no forgiveness for private student loans: that’s a whole other subject.) Forgiveness is literally in the law and was first created by the College Cost Reduction and Access Act of 2007. Since then it has been added onto and enhanced by the Obama administration.

Forgiveness or cancellation or discharge all mean pretty much the same thing—your loan is wiped out. But it’s not like winning the lottery, like some people think. It’s not like you can just apply with a little paperwork, and all your debt is cleared. No, forgiveness works like this. Imagine that you lent a good friend some money. And they paid you back diligently, month after month. Then, towards the end, you just say: “You know what? Don’t worry about the rest. You’ve done such a good job paying me back—we’re even; we’re square; it’s forgiven.”

That is how forgiveness works, it’s a timeline or a clock. No matter how much debt is left over after the clock runs out, the federal government forgives the remainder completely. If you are like me, then you are probably thinking, “If that’s the case, then how do I leave the most left over to be forgiven?” Hold tight. We will get there, I promise. That is the goal, to leave as much debt left over to be forgiven as possible.

Anyway, back to forgiveness. There are six different forgiveness programs available, but the only real differences between them is how long the clock runs until forgiveness kicks in. So let’s dive in:

If you were defrauded by your school, or if you are permanently disabled, loans are forgiven right away, no waiting (0 years).
If you’re a teacher, you get partial forgiveness after 5 years;
If you work for a non-profit organization or government entity, you get your loans forgiven after 10 years;
Then finally, President Obama came in and opened up forgiveness for everybody else after 20 or 25 years, depending on the ages of the loans. This is commonly known as “Obama Forgiveness.”

I will go in depth on each of the programs I outlined above in future articles. For now, I just want you to understand the basics of how it works and to dispel any misconceptions out there. So anyone out there, any scam artist who promises that they can get your loans completely forgiven, is full of it. Unless, like in the first scenario, you are permanently disabled or got screwed by your school. Even in these situations, the process is not easy.

It’s important to remember that with all types of forgiveness, the government is essentially giving away free money. That being said, they are going to make borrowers jump through a ton of hoops in order to get it. The worst part is that they do not tell you what you need to do, you are apparently just supposed to know through your own research. Luckily that is what I am here for.

Remember what I said at the beginning? The goal is to leave as much debt left over as possible so that the absolute maximum is forgiven. In simplest terms, would you rather pay $500 a month for 10 years or $100 a month for 10 years? Pretty easy to answer, right? The way to pay as little as possible is by using an Income-Driven Repayment Plan. This plan will lower the monthly payment until the forgiveness clock runs out. I know I make it sound simple, but these are the basic concepts we’re going to build on.

When we couple income driven repayment with forgiveness, it creates a very, very powerful tool. I call this tool Plan A, or The Foundation, because it is what I use to help anyone who reaches out to me for a better way to tackle this debt. Keep in mind that these programs are in place right now. Most people can take advantage of them immediately, but 90% of people don’t.