Student debt has now topped $1.3 trillion. Millions of Americans have had no choice but to default on their student loans, and managing this debt is a burden on our entire country. Student loan debt is a hot-button topic right now. Recently, a bill has been introduced by congressman John Delaney that would reform the bankruptcy code to allow for excessive student loan debt to be discharged in bankruptcy. This would be very helpful, as the process for eliminating student debt currently is more difficult.
Recent efforts by Betsy Devos and the Trump administration seek to cut subsidized federal student loan programs, making repayment more difficult for low-income students who rely on them. What happens to the student loan bankruptcy process could be changing, here’s where it currently stands.
Ways to Help Get Rid of Excessive Student Debt
- Chapter 7 Bankruptcy: Designed for people with little income to repay debts, this process will eliminate unsecured debts, and your student loans may be discharged in some extreme cases.
- Chapter 13 Bankruptcy: For people with more income available for repayment, your student debt will not be eliminated, but a new, more affordable repayment plan will be created to help free up funds with which to make payments on your student loans.
- Prove undue hardship: This process can be difficult, but it is one of the only ways to discharge student debt through bankruptcy. It only applies to people deeply affected by their student loan debt. You need to demonstrate that:
- You have attempted to pay off the debt and cannot
- Repaying your debt will not allow to maintain an acceptable standard of living
- The hardship you are experiencing will last a substantial amount of your repayment period
- Loan repayment and forgiveness: Federal student loans have income-based repayment plans which allow you to set aside a percentage of your income to repay your debts over a long period of time. There are also deferment programs for federal loans for people who need a break to regain financial stability. Private lenders may have hardship programs as well. Contact your lender to find out.
Having excessive student debt is not the end of the road, and you are certainly not alone. Contacting a Lewisville bankruptcy attorney can help you figure out the best option to start eliminating your student debt.