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Student Loan Debt, A Tremendous Problem

As of this writing (Dec. 2021) the latest estimates show that roughly 45 million Americans are carrying about $1.6 trillion of student loan debt. That averages out to more than $30,000 per borrower. Both of those numbers are steadily growing. There is more outstanding student loan debt in America than credit cards or car loans. That’s a lot of debt. Not only that, but the rates of delinquency and default are higher with student loans than with any other category of debt. It doesn’t need to be that way.

About 95% of student loans are federal (either federally-guaranteed or direct loans from the Dept. of Education). The remaining 5% are private loans, with no connection to the federal government. Other than the fact that they all fall under the general heading of student loans, federal and private loans have very little in common. Absent total disability or other overwhelming hardship, both are very difficult to discharge in bankruptcy. There are some rare situations in which private loans can be discharged more easily. For instance, if you cosigned a private loan for a student who was not your true dependent at the time, then you should be able to discharge the debt (as to the cosigner only; not the student). Also a student who was given far more private loans than should have been necessary for that school and that course of study should be able to discharge at least part of their debt. And as a practical matter it can be much easier to negotiate a settlement with private lender than with the Dept of Education (although that may be changing soon).

There are also times when people with unmanageable student loan debt (whether federal, private, or both) can take advantage of the automatic stay by filing chapter 13 and at least holding those creditors at bay for a few years. But that doesn’t discharge the debt, and since student loans are one of the very few debts that cannot be discharged, a person can come out of a chapter 13 case owing more in student loans than they did at the beginning. So when it comes to student loans, most of the time bankruptcy is not the best option.

Fortunately, there are other ways of dealing with student loans which have nothing to do with bankruptcy. As it happens, I am the only attorney in the western half of Tennessee who has special training in dealing with student loans!

couple stressed over finances

The Dept. of Education has set up a number of different programs for dealing with federal loans.

  • A person who is totally disabled can have their loans forgiven outright.
  • A student who never should have been allowed to attend that school or seek that particular training can have their loans administratively discharged (without bankruptcy).
  • Certain school teachers can automatically have from $5,000 to $17,500 of their loans forgiven.
  • Anyone who is employed by a registered nonprofit or a governmental entity (federal, state or local) can apply for Public Service Loan Forgiveness, by which a portion of their debt is forgiven after making a number of payments (but they must first be enrolled in one of the income-driven repayment programs mentioned below).
  • A person whose student loans have gone into default can either consolidate those loans or go through a rehabilitation process to get out of default. (Which of those routes to take depends on your exact circumstances.)
  • Most importantly, there are a number of income-driven repayment programs that can apply to just about anyone with federal student loans. In most cases, the end result is lower monthly payments (often dramatically lower; sometimes literally zero), AND after a certain amount of time has passed the remainder of the debt is forgiven!

There are too many different programs to outline here, but there are a couple of good rules of thumb for determining if you should dig further.

  1. If your total student loan debt is greater than or equal to your annual income, then you should check it out.
  2. If you are making your student loan payments without great hardship and without sacrificing any other debts, then you should probably stay on that track unless you would qualify for Public Service Loan Forgiveness or one of the other administrative discharge options noted above.

My student loan service works as follows:

  • The first step is to determine what types of loans you have, whether you might qualify for one or more of the administrative discharge options noted above, what repayment options are available to you, and how much those monthly payments would be. My fee for all of that is a flat $199.
  • If you would benefit from loan consolidation and/or one of the income-driven repayment options, then I can help with that as well. In most cases, there is a flat fee of $750 for both, or $500 if you only need one or the other.
  • Rehabilitation is slightly more complicated, but in most cases, there is a flat $750 fee for that.
  • The income-driven repayment plans typically have a term of 20 or 25 years, and you must re-submit your income every year. You can do that yourself, or I can do it for you for a flat annual fee of $250.
  • Please note that none of these federal programs apply to private student loans. There is a separate strategy for dealing with private loans which I will not divulge here, but it is fairly simple. In most cases, I would outline that for you as part of the initial $199analysis fee.
  • While the vast majority of services would involve one of the flat fees described above, there are a few situations where the fee might be higher, or I might have to charge by the hour. If you are being sued by student loan creditor then I can defend that lawsuit, but how much I charge will depend on how much they claim that you owe, which court the lawsuit is in, and a few other variables.

Remember, I am the only student loan attorney in the western half of Tennessee, and I do cover the whole state. Please feel free to call or write with any questions.

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