Self-Help for Student Loan Borrowers: What to Do in Common Student Loan Scenarios
Are you a student loan borrower? Below are common situations you may find yourself in. For each, you will find general information and resources. This information is for your general use and is not specific legal advice. If you have specific legal needs, please contact Legal Aid.
PROVIDERS can find information and resources to assist borrowers here: Guidance for Providers working with Student Loan Borrowers.
BORROWERS are invited to call Legal Aid’s Economic Justice Information Line with questions about their student loans. They can call 216-861-5899 anytime, leave their question and contact info, and someone will call back within 2 business days.
Borrowers will need some basic information about their loans in order to understand the options. The most important: Do you have federal student loans? Borrowers could have federal student loans, federal loans and private loans, or just private loans. Almost all of the discussion below is focused on federal student loans.
Student Loans - FEDERAL or PRIVATE loan determination
- I don’t know what type of loans I have.
Your first step is to figure out if you have federal or private student loans. Federal student loans are those issued by the federal government or supported by the federal government. These can be loans that you took out yourself or that you borrowed for a child or grandchild. In contrast, private student loans are those issued directly by a private organization, like a bank or a school.
If you have your “Master Promissory Note” – that is, the contract you signed when you first took out the loan – you can use that document to figure out your loan type. If you don’t have the Master Promissory Note, you have two options.
First, you can log on to studentaid.gov to see if you have federal student loans. On the website, you can log in with your FSA ID (this is the same login information that you would have used to file their FAFSA application). Once logged in, you will see a dashboard with information on any federal student loans that you have. This website will only have information related to federal loans.
Second, you can obtain a free credit report from freecreditreport.com. Generally, the report will list all of your student loans, including both private and federal.
- I have private student loans but cannot afford repayment
Unlike federal loans, there are no standard repayment plans for all private student loan borrowers. Instead, your contract with the lender will determine whether you have other options. Some private lenders will provide various repayment plans and will work with you if you need assistance.
For more information on private student loans visit National Consumer Law Center's Student Loan Borrower Assistance website.
For Borrowers who HAVE FEDERAL STUDENT LOANS and need help with payment options:
- When do I need to start making payments again?
Since March 2020, the federal government has paused payments for most federal student loans. This means that such borrowers have not had to make any payments since that time.
Borrowers with federal student loans that have been in the payment pause will need to make payments again starting in October 2023 (loan interest accrual resumed on September 1, 2023 and payments will be due beginning in October 2023).
Given this, you can be planning for repayment right now. Learn more about possible repayment options in this article.
- I cannot afford the monthly payment amount on my federal student loans.
Most borrowers with federal student loans can sign up for an income-driven repayment plan that ties their monthly payments to their income. In fact, many borrowers are eligible for a plan with a $0 monthly payment. You must opt into such a plan and then confirm your income each year. After 20-25 years in such a repayment plan, the federal government will forgive the borrowers’ remaining debt.
With repayment on federal student loans resuming in October 2023, you should consider enrolling in such a plan as soon as possible. Legal Aid's website has more information on income-driven repayment plans, and a guide on how to enroll in such a plan:
- My federal loans were in default before the COVID-19 payment pause started in March 2020.
You are likely eligible to benefit from the Department of Education’s “Fresh Start” program. Under this program, your loans will be moved out of default, you will be eligible for an income-driven repayment plan, and there will be no involuntary collections (like wage garnishment) on the loan. In other words, you will get a “fresh start.”
To access the program, you should call the Default Resolution Group at the Department of Education (800-621-3115) or your Guarantee Agency. For more information on Fresh Start, see this Fresh Start Fact Sheet, or see this resource from the National Consumer Law Center.
- I went into default during the COVID-19 pandemic.
You likely have a federal loan held by a commercial entity (like a bank), called a “commercial-held FFEL loan.” The Department of Education has told these entities to move the loan into good standing by giving the loan to the Department of Education. Unfortunately, we have heard about many delays in this process, and it is not yet clear when the commercial entities will transfer the loans to the Department of Education.
If you are in this situation, you can reach out to Legal Aid or you can file a report with the Department of Education’s Ombudsman’s office.
For Borrowers with FEDERAL STUDENT LOANS facing special circumstances (such as fraud) that may require legal assistance:
- I am disabled and unable to work and so cannot pay my federal student loan bills.
You might be eligible for discharge of your federal student loans. Federal law provides borrowers who are “totally and permanently disabled” a discharge in some circumstances, including if you have been on social security disability insurance for at least five years, or if you will remain on social security disability insurance for at least five years in the future. The Department of Education is working to try to automatically discharge the debt. Borrowers can also apply with an application that includes information from their doctor.
If you are in this situation, please feel free to reach out to Legal Aid for additional assistance and to see if you are eligible for our services. You can also learn more here: Total and Permanent Disability (TPD) Discharge (disabilitydischarge.com)
- The school I was attending closed, but I still have loans from the program.
You might be eligible for discharge of your federal student loans. In most situations, federal law provides borrowers who were attending a school when it closed, or who withdrew from the program within 180 days of the closure, a “Closed School Discharge.” While the Department of Education is trying to automatically provide the discharges, some borrowers will still need to apply.
If you are in this situation, please feel free to reach out to Legal Aid for additional assistance and to see if you are eligible for our services. For more information on Closed School Discharges, please visit: Student Loan Cancellation: Closed School (studentloanborrowerassistance.org).
- I have federal student loans, but my school lied to me about the program.
You might be eligible for discharge of your federal student loans. Federal law provides borrowers with a “Borrower Defense to Repayment” if your school engaged in certain bad acts (such as lying about job placement rates, falsely guaranteeing employment, and misrepresenting the transferability of credits).
The Department of Education has announced discharges for borrowers who attended the following schools and programs:
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- Students of Westwood College, any location, between 1/1/2002-11/17/2015
- Students of ITT Technical Institute at any location and at any time.
- Students of Corinthian Colleges at any location and at any time.
- Students enrolled in the Medical Assistant or Medical Billing & Coding Program at the Kenmore Square campus between 7/1/2011-2/16/2012.
- Students who attended Marinello Schools of Beauty between January 2009 and February 2016.
Borrowers eligible for these discharges should routinely check their student loan account to see if the discharge has gone through. If they do not see any changes by the end of Summer 2023, they should contact us at Legal Aid or file a report with the Department of Education’s Ombudsman’s office.
In addition to these schools, borrowers can apply to the Department to have their loans discharged under the Borrower Defense to Repayment regime. The applications are technical, and borrowers are encouraged to speak with a lawyer before doing so.
If you are in this situation, please feel free to reach out to Legal Aid for additional assistance and to see if you are eligible for our services. For more information on borrower defense to repayment, please see Borrower Defense FAQs — Project on Predatory Student Lending (ppsl.org).
- I never took out the federal loans in my name.
You might be eligible for discharge of your federal student loans. Federal law provides borrowers with a “False Certification” discharge in various situations, including when they are the victim of identity theft or forgery. The requirements for such a discharge can be tricky and such a borrower is encouraged to speak with an attorney.
If you are in this situation, please feel free to reach out to Legal Aid for additional assistance and to see if you are eligible for our services. For more information on false certification discharges, please visit False Certification - Student Loan Borrowers Assistance (studentloanborrowerassistance.org).
For Borrowers with FEDERAL STUDENT LOANS who are eligible for specific programs, concerned about taxes, or who owe other debt:
- I have FFEL federal loans and have been in repayment for many years.
You might benefit from the Department of Education’s recently announced Income Driven Repayment Account Adjustment. Under income-driven repayment plans, borrowers are eligible to have their loans discharged after being in repayment for 20-25 years. The Department has recognized that many borrowers have been in repayment for a longtime, and many should be eligible (or close to eligible) for a loan discharge. However, problems with the student loan system have curtailed the Department’s ability to provide such discharges.
So, in 2024, the Department will be going back and providing borrowers with credit towards their IDR for any period of repayment and certain periods of deferments and forbearances. If you have Direct Federal loans, you do not need to take any steps to benefit from the adjustment. However, if you have a FFEL – rather than Direct – federal loan, the borrower will need to “consolidate” their loans into a direct one before the end of 2023 (consolidation is the process of combining multiple existing loans into a new “consolidated” loan).
For more information on loan consolidation: Consolidation to get out of default (studentloanborrowerassistance.org).
For more information on the IDR account adjustment: Payment Count Adjustments Toward Income-Driven Repayment and Public Service Loan Forgiveness Programs | Federal Student Aid.
- I applied for the one-time COVID-related cancellation program and do not know the status of the application.
On June 30, 2023, the U.S. Supreme Court struck down the proposed cancellation program. As a result, borrowers will not see cancellation under the program. If you were “approved” for the relief and took steps based on that representation, please reach out to Legal Aid for further discussion.
Because the Supreme Court decision was narrow and focused on the President’s authority to cancel debt in response to a national emergency, President Biden announced that he was going to try to pursue other ways to create a different cancellation program. We do not have any details on what a new cancellation plan will look like or when it will be available. We will provide updates as they are available.
For more information, visit our Federal Student Loan Cancellation Update, September 2023.
- I received a discharge of my federal student loans; do I need to pay taxes on the amount discharged?
Under federal law, borrowers who receive a cancellation or discharge of their loans through 2025 will not have that amount considered taxable income for purposes of federal taxes. However, some states or local governments may treat the cancellation or discharge differently. If you are in that situation, you should consult with a tax expert in your area.
- I have various outstanding delinquent, defaulted, or unaffordable debts, including student loans.
Depending on the specifics of your situation, bankruptcy may be an option for you. Although bankruptcy has typically been a difficult path for student loan borrowers, the Department of Justice and Department of Education recently announced some changes that could ease the discharge of these loans through the bankruptcy process.
For additional information on the new guidance: New Process to Discharge Student Loans in Bankruptcy | NCLC Digital Library.
Given the complexity of the issue, we encourage you to reach out to Legal Aid if you find yourself in this situation.
Updated September 12, 2023