If you are watching your student loans pile up, unpaid, you probably feel like there is no way out. You are not alone, especially here in Pennsylvania. We collectively owe over $1 trillion in student loans, which makes education the largest cause of debt in the country. People above 40 make up the bulk of delinquencies. This is partly because student loan debt is very difficult to discharge, but there are a number of ways to relieve some of the debt burden. I can help you get the relief you need.
Income-Based Repayment (IBR) can help your loan payments become affordable with payment caps based on your income and family size. IBR will also forgive remaining debt, if any, after 25 years of qualifying payments. For public servants, if you meet certain requirements, the Public Service Loan Forgiveness (PSLF) Program discharges any remaining debt after 10 years of full-time employment in public service.
For those who don’t qualify for PSLF, there are other options. You can fix student loans by using government programs, like Pay As You Earn, to erase student loans after twenty to twenty five years. You can only do this if your current, not in default. If you are in default you have to go through a loan consolidation or rehabilitation program to make them current.
Will Bankruptcy Reduce or Eliminate Student Loans?
No, student loans are not dischargeable through bankruptcy. They will survive a Chapter 7 bankruptcy. Or, you can put the debt into a Chapter 13 case for 3 to 5 years. The good news is that you won’t be hounded by creditors. You get piece of mind. After the 3 to 5 years, the unsecured debt is erased, but the student loans stay. Worse, the interest on the student loan has capitalized.
There are cases where discharging student loan debt is possible. Even if you received the loan from a private lender, the courts are unlikely to change your fiscal obligation. Yet, there are exceptions.
If you cannot work because of a disability, or if there are other severe, extenuating circumstances, there is a possibility a judge will rule in your favor. If you decide to file for bankruptcy, you might still have to pay back the debt in its entirety, but there are other ways to receive relief.
Bankruptcy will put your debts on hold. Collection attempts can no longer be made, and debts are placed into a deferment. As long as your loans are in deferment, payments do not need to be made. Unsubsidized loans continue to gain interest during the deferment period, but penalties will stop.
Chapter 7 bankruptcies last 3 or 4 months and provide a brief pause. The deferment period in a Chapter 13 bankruptcy continues as long as the installment agreement lasts, between 3 and 5 years. The lengthy time period can give you the break you need to retake control of your finances, find more lucrative employment and then address the student loans. Negotiating other debt settlements is another potential source of relief.
Negotiating a Debt Settlement for Your Student Loans
Settlements are a strong option for reducing what you owe, especially if you have defaulted on your loan for years. In a debt settlement, the lender will agree to provide a discount on the loan. In many cases, collection charges and some of the interest can be taken off. Because collection charges can balloon to 25% of your monthly payments, the discount from this, alone, can save a lot of money and help cut your debt down to size.
Although there is no foolproof, one-stop plan for handling student loan debt, you have a number of options to help bring your finances under control. I understand personal finance, as well as the legal system here in Pennsylvania. I can help you put an effective debt-relief plan into place. Call (215) 854-6342 for a free consultation.