Should You Stop Paying Your Student Loans? - Forbes

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Should you stop paying your student loans?

Here’s what you need to know.

Student Loans

In the wake of $8.7 billion of student loan cancellation, many student loan borrowers are wondering whether they qualify for student loan forgiveness. Since becoming president in January, President Joe Biden has cancelled student loans for approximately 500,000 student loan borrowers. With 45 million total student loan borrowers collectively owing $1.7 trillion of student loan debt, most student loan borrowers haven’t received any student loan forgiveness. For a cross-section of these student loan borrowers, many are fed up with the high-cost of student loan debt and simply don’t want to pay their student loans. Some can’t afford their student loan debt, while others think non-payment is an effective form of protest. This begs the question: Should you stop paying your student loans?

Student loans: why some student loan borrowers don’t want to pay student loans

For the first 100 days of the Biden presidency, the Debt Collective — a membership-based union of debtors and their allies — sponsored the Biden Jubilee 100 in which 100 student loan borrowers became “strikers” presumably to stop paying their student loans. Their goal was for Biden to cancel all student loan debt — including both private and federal student loans — within the first 100 days of Biden’s presidency. While that goal wasn’t met, the strikers gave several reasons for striking against student loans: financial struggles in the midst of the Covid-19 pandemic; threat of eviction; food insecurity; medical costs; rising tuition; mental health; fear of illness; and other unpayable bills. The student loan debt strikers shared their stories of how student loan cancellation will provide necessary financial relief:

“My credit score would be higher, stress reduced, more money to live.” — Dave Amato ($80,000 of student loan debt)

“I would be able to help my family get access to better housing, I would be able to start saving for my future.” — Armen Henderson ($600,000 of student loan debt)

"I can buy a house and build generational wealth for my family.” — Shamell Bell ($300,00 of student loan debt)

Student loans: is it a good idea to stop paying student loans?

Should you stop paying your student loans? Before answering that question, let’s highlight at the outset that student loan debt can be expensive. In some cases, student loan debt is prohibitively expensive. The rising cost of tuition has caused millions of student loan borrowers to begin their adult lives with the shackles of student loan debt. This is in addition to other living expenses, including housing, food and other necessities. That doesn’t mean that you should simply ignore your student loans or refuse to pay them. Also, while student loan cancellation may help student loam borrowers, that doesn’t mean Biden will cancel everyone’s student loans. Whether you think student loans are unfair or too expensive or college didn’t lead to the job you expected, it’s important to remember that student loans are a financial obligation. Whether you have private or financial student loans, ultimately you signed a promissory note with either the federal government or a private lender, or both. If you simply stop paying your student loans, your credit score could suffer, your wages could be garnished, and your financial situation could be damaged further. Here are some potential options instead:

1. Contact your student loan servicer to discuss options

Your first point of contact should be your student loan servicer. You may not be a fan of your student loan servicer, but the first step is to discuss your financial situation and explore options. You don’t have to commit to any options immediately, but it’s important to convey you need help paying your student loans. Ignoring your financial situation or hoping your student loan debt will disappear are not viable options.

2. Check if you qualify for existing student loan forgiveness

Biden student loan forgiveness has been extended to student loan borrowers primarily in two categories: student loan borrowers with a total and permanent disability and student loan borrowers who attended a college or university that misled or defrauded them. For example, Biden has cancelled $1.5 billion of student loans through the borrower defense to repayment rule. These options for student loan cancellation are available for federal student loan borrowers and can result in total student loan cancellation or partial student loan cancellation, depending on the facts and circumstances. (Here’s what Biden’s student loan relief means for your student loans).

3. Enroll in an income-driven repayment plan

If you’re struggling financially, your best bet is to enroll in an income-driven repayment plan such as PAYE, REPAYE, IBR or ICR. These income-driven repayment plans set your federal student loan payment based on your income, family size and state of residence. For some borrowers, their student loan payment may be as low as $0 per month. This is a better option than simply not paying your student loans out of protest. If you pay your student loan payment in full each month and on-time, your student federal student loans can be cancelled after 20 years (undergraduate student loans) or 25 years (graduate student loans). If you are already enrolled in an income-driven repayment plan, make sure you update your financial information with your student loan servicer. This could result in a lower student loan payment if you suffered a decrease in income or lost your job, for example.

4. Consider public service loan forgiveness

If you don’t want to wait 20 or 25 years to get student loan forgiveness, then consider another type of student loan forgiveness that can get you federal student loan cancellation in 10 years. The Public Service Loan Forgiveness program is available to federal student loan borrowers who work for a qualified public service or non-profit employer, make 120 qualified monthly student loan payments and meet other requirements. To get public service loan forgiveness, it’s at least a 10-year, full-time commitment (at least 30 hours a week), but it’s one of the fastest ways to get student loan forgiveness.

5. Consider bankruptcy for your student loans

If you’re struggling financially and other options aren’t available to you, then you may want to consult an attorney to evaluate your options. Traditionally, unlike mortgages or credit card debt, for example, student loans are not dischargeable in bankruptcy. However, there are exceptions if you can demonstrate an undue financial hardship. That said, there is a high standard to prove undue financial hardship so student loan cancellation through bankruptcy is the exception, not the rule. Student loan cancellation has become a hot topic on Capitol Hill. There’s currently a bipartisan proposal to make student loan cancellation through bankruptcy an easier path for student loan borrowers. With enough bipartisan support, Congress could pass this student loans bill, which could help student loan borrowers who are struggling financially.

Here are options to consider for student loan repayment if you want to pay off student loans faster: