Student Loan Debt is a Huge Problem in the U.S.
A few stats to show how bad this problem is getting in the U.S.:
- 2 million Americans have student loan debt.
- Total owed was 7.8 BILLION in 2015 and of course it is increasing each year.
- There is more owed in student loans than there is to car notes or credit cards in the US. In 2003, the opposite was true.
- Those over 30 with student loan debt are 75% less likely to buy a house than their contemporaries without student loan debt.
- In a survey, 72% said that student loans are making it impossible or difficult to save for retirement.
- 28-34% say the debt has caused them to delay getting married and having a family.
To make matters worse, when you call about getting on a payment plan with the student loan company, they WILL DIRECT YOU TO THE PLAN THAT IS EASIEST FOR THEM, not what is best for you. You MUST know your rights, or you WILL be steered in the wrong direction by your lender.
Which Loans Are Dischargeable in Bankruptcy?
Almost all other debt in the U.S. is dischargeable in bankruptcy with a few exceptions like child support and damages caused by drunk driving. Even some taxes owed to the IRS are dischargeable. Yet, student loans are not generally dischargeable. However, there are some exceptions.
What is a student loan: SOME private lenders and all federal loans used to pay for school at a qualified institution.
What is NOT a student loan?
- Loans made for living expenses above and beyond the cost of school.
- Loans made to the truck driving school to get your CDL and like trade schools.
- Often loans made by the school itself do not meet the criteria.
- Loans made to non-U.S. citizens or the student who are enrolled less than half time.
These are all dischargeable in a bankruptcy.
So What Are Your Options?
Here are some options available to debtors:
- Forbearance: While the student is enrolled in school, the loans are put on hold and do not usually accrue interest.
- Deferment: Debtor has some type of hardship so the lender allows them to take a break from re-payment. Loan DOES accrue interest. This is where the lender will direct you if you call and claim a hardship.
- Income Driven Repayment: If you are able to work, this is the plan you need to ask for when calling your loan servicer. They will not tell you about this plan. It is based on your income and family size. It requires you to apply, make your monthly payment each month for a year, and then reapply each year. Your payment may range from $0 to a few hundred dollars/ month. Each year you reapply and make the payment and then at the end of 20 years, the loan is forgiven.
- Administrative discharge: This is not a bankruptcy action. It is simply a process of proving that the debtor is unable to pay back the debt and getting the govt to forgive the entire balance. Usually the debtor must be disabled. Gahanian Law, PA can help debtors navigate this process.
- Military or public service programs: If you work in these fields for a number of years, currently 10, then your loans are forgiven. Most people who qualify for these programs know about them through their employer.
- Bankruptcy: In some cases, you can discharge all or part of your student loans in a bankruptcy.
What Must You Show to Get a Hardship Discharge?
In addition, bankruptcy can help get a debtor a hardship discharge. In Florida, the debtor show:
- The debtor cannot maintain, based on current income and expenses, a minimal standard of living for his/herself and his/her dependents if forced to repay the student loans;
- Additional circumstances exist indicating that the hardship is likely to persist for a significant portion of the repayment period of the student loans; and
- The debtor has made a good-faith effort to repay the loans.
Talk to a Student Loan Lawyer
If the debtor can meet these requirements, a student loan lawyer can help them discharge their student loans in a bankruptcy. Even if the loans cannot be discharged, a bankruptcy will stop a student loan lender from garnishing the debtor’s pay and give the debtor time to get themselves on an income driven repayment plan. To learn more about how we can help, contact Gahanian Law, PA today.