In the last decade, the average student loan debt of the college attendee has creeped its way to amounts upwards of $35,000, with total outstanding federal student loan debt doubling from $516 billion to $1.2 trillion between 2010 and 2015.
Are there ways to eliminate student debt obligations?
The answer can vary greatly. The most effective student loan relief options, and the protections of a borrower’s rights, are available in a relatively straightforward, navigable spectrum. Understanding the accompanying laws, regulations, and scope of possibilities toward financial relief can help one achieve the stability that will support a happy, sustainable life.
- While the strain of student loans seem unforgiving at best, the loan forgiveness options available to students are surprisingly ample.
Forgiveness with Income-Based Repayment (IBR). This repayment system caters to students who’ve recently acquired any of the following loan types:
- Direct Subsidized and Unsubsidized Loans
- Direct Grad PLUS loans
- Subsidized and Unsubsidized FFEL Stafford Loans
- FFEL PLUS Loans made to grad students
- Federal Perkins Loans, if consolidated
Forgiveness with Pay As You Earn (PAYE) PAYE program caps your monthly payment at 10% of your discretionary income and, after borrowers have made consistent payments for 20 years, any remaining balance becomes eligible for forgiveness.
Forgiveness with Revised Pay as You Earn (REPAYE) REPAYE caps your monthly payment at 10% of your discretionary income. After undergraduate fee borrowers have made consistent payments for 20 years--graduate fee borrows for 25 years--any remaining balance becomes eligible for forgiveness. Anyone with qualifying federal student loans is eligible for REPAYE.
Forgiveness with Income-Contingent Repayment (ICR) Through this method, you’ll either pay 20% of your discretionary income monthly, or alternatively, the amount that you’d pay on a fixed 12-year plan, whichever is less.
Student Loan Bankruptcy
Borrowers have to hire a bankruptcy lawyer, decide what type of bankruptcy proceeding to pursue, and prove that they face “undue hardship.” Without a standardized definition, the courts test the circumstances of each filer’s case against a spectrum of financial incapacitation, or threat due to their immense debt, using a series of questions known as the Brunner Test.
In the Brunner Test, courts look at three main factors to determine undue hardship:
- You cannot maintain, based on current income and expenses, a minimal standard of living if forced to pay off student loans.
- You have made good-faith efforts to repay the loans.
- Additional circumstances (such as financially supporting a dependant) suggest that this state of affairs is likely to persist for a significant portion of the repayment period.
Hiring an Attorney
The loan and bankruptcy process can rack up extra time, incorrect or misdirected filings, even a lost case if attempted without the aid of someone versed in the vast field of financial relief. Having a qualified bankruptcy attorney at your side can assure that the remedies being applied, whether a bankruptcy claim, or initiation on the path toward loan restructuring, are done so in the most beneficial manner to your particular situation.