As the costs of higher education continue to increase, more and more people find that taking out student loans covers tuition most effectively. Although statistics may show that students generally make enough money after they get a higher degree and higher-paying job, you can’t always count on the job market in your area to provide you with your ideal job and ideal salary.
Although a higher education helps almost everyone financially in the long run, sometimes it takes a while to put your education to use. That extended time period means that many people have a difficult time paying back student loans, at least on the original payment plan. However, your lender would much rather have you pay back the loan somehow than have you cancel or default on your loan; so you have several other options for repaying your student loans.
Although bankruptcy comprises the last option you want to take, you should know that even bankruptcy won’t eliminate your student loans. Even though bankruptcy does allow you to cancel other types of loans, you will still maintain responsibility for your student loans. If you have student loans and bankruptcy, you may try to get a short measure of peace during a Chapter 13 case, but this route still won’t eliminate your loans. You may also try to challenge the enforceability of your student loans and bankruptcy, though most people find this very difficult to do.
With student loans and bankruptcy, you may also try to discharge student loans by showing that repaying the loan will create extreme financial hardship on you and your family. If you go this route, you also need to show that your conditions are unlikely to improve over several years’ time. You need to go to court to prove this financial hardship, and often the judge still doesn’t discharge the loan, or only discharges part of the loan, and you still have to pay the rest.
If you don’t think you can prove financial hardship to get out of a student loan, you still have other options besides defaulting. You want to avoid defaulting at all costs because not making payments will only hurt you by lowering your credit rating and increasing the loan balance. Plus, if you don’t pay up, your lender has many ways of getting your money and making your life miserable. For example, lenders can charge high collection fees, the IRS can intercept your tax refund, lenders can garnish up to 10 percent of your wages, and they can even sue you, as well.
You have probably run into some unforeseen problem that has caused you to have a difficult time paying back your student loans. Even though student loans and bankruptcy don’t mix well, you can still find other ways to get a deferment or even cancel part or all of the loan. If your school closes before you finish your education or if you only finish less than 60 percent of the class, you often won’t have responsibility for loan payments. You can also sometimes get a loan deferment if you are temporarily unemployed but looking for work, if you return to school part-time, if you teach or serve needy populations or perform community service, if you serve in the country’s uniform service, or sometimes even if you have small children. You should talk with your lender about your student loans and try to work out a better payment option you can agree upon and one in which you have confidence in paying.
By Lisa Zyga