How to Get Rid of Government Loans

Seek financial relief if your government loan payments are too high.

If you're struggling to pay back your government loan, whether it be a home loan insured by the Federal Housing Administration or a federal Stafford or Perkins student loan, you can find financial relief. To do so, you'll need to convince your lender or loan servicer that you have suffered a financial setback that has made it impossible to pay back your government loan. In extremely rare cases, you might be able to convince your lender or servicer to eliminate the government loan that you can no longer afford to pay.

Things You'll Need

• Copy of your most recent government loan statement
• Copies of your other loan statements, including auto or personal loans
• Copies of your two most recent paychecks
• Copy of your most recent federal income tax return
• Copies of your savings and checking account statements
• Copies of your credit card bills

Instructions

1. Make copies of your most important financial papers. These papers include your two most recent paychecks, most recent federal income tax return, other loan statements, savings and checking account statements and credit card bills. These papers can help verify that your debts are rising while your monthly income is either stagnating or falling.

2. Contact your lender or loan servicer at the customer-service number listed on your most recent government loan statement. Ask to speak to an account executive or loan officer, and tell this official that you have suffered a financial setback that has made your once-affordable loan payments a financial burden. Explain that you'd like your servicer or lender to eliminate the remaining balance on this loan.

3. Draft a hardship letter that puts into writing the reason why you can no longer afford to make your monthly payments. You might cite a job loss, drop in annual income, serious illness or other reason. Include your request that the remaining balance of your government loan be eliminated.

4. Send by email, fax or mail the hardship letter and the copies you made in Step 1 to your loan servicer or lender. Your lender can then review this paperwork to determine how severe your financial situation is. If it is severe enough, your lender or servicer might agree to eliminate your remaining balance.

5. Reach an agreement on a solution that either eliminates your loan debt or makes it more manageable. In the vast majority of cases, your servicer or lender will not be willing to eliminate the rest of your government loan debt. But it might be willing to reduce the amount of money you owe, lower the loan's interest rate or restructure the terms of the loan so your monthly payment is one that you can afford.

References

• CNNMoney: Modifying Student Loans
• Bankrate.com: Mortgage Modification