5 Myths About Student Loan Relief You Should Ignore


The amount of student loan debt in the U.S. is a staggering problem that can’t be ignored – so prevalent, in fact, the average college student carries a debt load of more than $30,000 following graduation. Even worse, an estimated 10 percent of borrowers default within two years of earning their degrees.

Given those numbers, it’s no surprise that the amount of people enrolling in student loan relief programs that cap payments as a percent of income has increased more than 56 percent in the last year alone, according to a recent Wall Street Journal report.

Is debt relief or loan forgiveness right for you? Before signing up, it’s helpful to be aware of (and to beware) some common myths and misconceptions out there that could cost you money, or worse, send you further into debt.

Myth #1: All student loan debt relief programs cost money

That’s what the companies who charge a pretty penny would like you to believe: you’re in debt for thousands of dollars, and it’ll cost you almost as much to get them absolved.

The sad part is that many debt relief services walk a fine line between legitimate operation and outright scam; some may even inform you there’s nothing they can do for your debt, only after you’ve paid them.

Simply put, it’s money that you shouldn’t – and don’t – need to be shelling out when there are free alternatives available.

Applying for government aid through the U.S. Department of Education comes at zero cost. Start by visiting sites like studentloans.gov and studentaid.gov for information on debt relief, forgiveness, or repayment options. That’s not to say all debt relief programs costing money are bad, but it’s unwise to splurge when similar (or better) alternatives are available.

Myth #2: Declaring bankruptcy is the ultimate form of debt relief

It sounds too good to be true because it is. Unfortunately, you can’t declare bankruptcy and wipe your hands clean of student loan debt. Think about it: if the courts granted you a pass, your student loans still need to be paid off, and that would fall on the shoulders of taxpayers.

According to National Debt Relief, there are circumstances where you could claim a case of special financial hardship to a judge, but it’s unlikely they’ll approve it.

Fortunately, there’s a process called Public Service Loan Forgiveness, or PSLF, that will discharge your debt after 20 years if you work for a qualifying employer, providing you’ve been timely with your loan payments over the years.

Myth #3: Student loan debt relief stemming from fraud is only available to former Corinthian College students

Student loan fraud is not uncommon. In fact, the Department of Education recently set up a loan forgiveness program for former students of for-profit colleges such as Corinthian College, who were saddled with debt after the entire network of schools and campuses abruptly shut down. The big myth here is that only Corinthian students are eligible for debt dismissal.

The good news: any student who’s been a victim of federal loan fraud – from any school that’s broken state laws – can have their debt canceled outright, according to Gerri Detweiler of Credit.com.

“It’s called a ‘defense to repayment,’” she wrote, “and the Department of Education is working on a process to make it easier for borrowers who attended other schools to apply for this relief.”

If that’s you, don’t pass up on seeking out compensation for fraudulent debt.

Myth #4: President Obama will personally forgive your student loan debt

The Obama administration promised an era of change, but student loan debt is where it draws the line. One version of this myth states that the president will soon be signing a debt forgiveness program into legislation; another says that one already exists, called the “Obama Forgiveness Program.”

While this would be a godsend for anyone struggling with debt, the fact is that the U.S. government has enough of its own debt to contend with.

Myth #5: Student loan debt relief programs will get you out of debt faster

If you take advantage of one of the repayment plans outlined above, don’t assume that it’s the answer to getting rid of your loans quickly. While your monthly payments will be lower, your loan term will likely be much longer.

Plus, Natalie Bacon wrote for Money Under 30 that if you’re not making payments that cover at least your loan interest, you may find yourself spiraling into further debt as more interest builds on top of your principal balance.

Make sure that whatever your repayment situation is, you can afford to make your payments. Debt relief programs might not save you money in the long run, but will prevent you from defaulting if payments are too much to handle. Just be sure to do your research and choose a legitimate program that’s right for your situation.

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