Student loans are very difficult to discharge in bankruptcy. In general, you will have to prove that the payment of the student loan will cause an undue hardship on you or your dependents for the life of the loan. Unfortunately, new legislation has not passed yet to make it easier to discharge all or part of your student loans in bankruptcy. For those who are not able to afford making payments and do not meet the stringent guidelines under the “undue hardship” test, it can be a struggle to make the minimum payments on your loans.
Recent studies have shown that almost half of all student loan debt is in a “deferred” status. This means that student loan borrowers have suspended their loan payments because they are unable to afford to make them. If you find yourself in a situation where you have student loans and are not working or underemployed, deferment may be a necessary evil. Deferment extends your loan and buys you some time until you can start making your payments.
If you don’t qualify for deferment and can’t make your student loan payments, your lender may allow forbearance. Under forbearance, your interest will still accrue but you do not need to make monthly payments. Collection efforts will also stop.
Another option for handling student loans is to apply for income based repayment (“IBR”). This option, if available, is a decent option in trying to deal with your mounting student loan debt. IBR is designed to reduce your monthly payments to assist you with making your student loan payments manageable. Your monthly payment amount may increase or decrease each year based on your income and your family size. However, the lower payment may be manageable and by making those payments, you are tackling your overall debt.
All options are worth looking into with your lender. It is always prudent to contact your lender and have an open conversation about the situation you are in and the hardships you are facing. Also, you can contact an attorney at Goldberg Law to discuss your options.