Anyone with a student loan debt that has ever considered filing for bankruptcy, or met with a bankruptcy attorney, has probably been told the same thing — Student Loans Never Go Away. And while it is true that student loans are generally non-dischargeable, do they really stick around forever? Well, I say no, they don’t. You have options, not all great options, but options. So let’s go over them briefly. I promise starting next week I’ll go over all the options individually and more in depth, but for now, let’s just hit the highlights.
1. Bankruptcy: It is true that in most cases student loans are non-dischargeable, but I personally believe that far too many bankruptcy lawyers just accept the fact that student loans will not go away instead of really delving into the facts. In order to have your student loans discharged, you must show that: (1) Based on your current income and expenses, you cannot maintain a minimal standard of living if you are forced to repay your loans; (2) Your financial situation is unlikely to improve; and (3) you have made a good faith effort to repay your student loans. This test has historically been very hard to satisfy, but with recent cases coming down, the standards are getting relaxed and improve the prospects of getting your student loans discharged. Check out this case in Oregon where a bankruptcy filer discharged almost all of his loans. Yes, it is an uphill climb, but student loans CAN be discharged in bankruptcy, just make sure you have an experienced bankruptcy attorney to help you.
2. Income Based Repayment Plans: These plans allow you to make monthly payments based on your income if they meet a debt-to-income test. Under that plan, your payment would be lower than payments under the Standard (10-year) repayment plan. Some people even have $0 per month repayment plans. The upside to these is that it allows you to maintain your credit score, and after 25 years, if there is still a balance, the loan is forgiven.
These are the two main options for people staring down student loan debt, and we will go over them in depth next week, as well as several others that might help people struggling to pay their bills. Student loans are a problem, but they can be solved, you just need the right lawyer to help you out.
Make sure to visit our student loan help services page for additional information.