Student Loan Debts: Finding Some Relief

Today, a majority of individuals attend college, and a large proportion of them will wind up owing money after college. In fact, the average amount of debt college students carry upon graduation is $25,250.  Although for most, going through bankruptcy doesn’t change student loan debts, there are a few ways to reduce or eliminate them.

First, individuals going through bankruptcy may file a special request to get their student loan debt forgiven.  This can be accomplished by filing a written complaint and serving it together with a summons on the applicable lender(s).  The individual going through bankruptcy may file it, or their lawyer may file it.  This document must be in a special format and must include the reasons why the student loan debt is causing undue hardship (see Court Form B-16; http://www.uscourts.gov/uscourts/RulesAndPolicies/rules/BK_Forms_09_Official/Form_16D_Caption_Adversary_Proc_INSTRUCTIONS_0509.pdf for the instructions).  In response to this filing, the judge will decide whether or not to forgive the student loan or some part of the loan.  Usually, the individual’s income and financial/medical circumstances, and whether or not the individual tried in good faith to make the loan payments, are all considered.  In up to 40% of all cases, the filing of this suit results in at least partial student loan forgiveness, so it can be very worthwhile to do this.

Second, there is a special program called the Public Service Loan Forgiveness Program (PSLFP), which was developed in 2007 as an incentive to attract quality workers to public service jobs.  This program provides forgiveness on federal student loan debts for individuals who work in public sector jobs after they have made a minimum number of payments on the loans.  See http://www.studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service for more information.

If you have a large amount of student loan debt, it may be very helpful to consider these options.