Student Debt Options

There are options that one can try while trying to navigate repayment and avoiding default.  Be clear that many options are denied if you fall into default.  Make sure you stay in touch with your student loan provider to be clear when default may set in.

1. Deferment:  A deferment excuses you from making student loan payments for a set period of time because of a specific condition in your life — such as returning to school, economic hardship, or unemployment. Interest will not accrue on subsidized loans during the deferment period.

2.  Forbearance: your loan holder gives you permission to stop making payments for a set period of time or to temporarily reduce payments. Interest always continues to accrue during forbearance. In some circumstances, forbearance may be available even if you have default

3.  Cancel your student loan — meaning that you no longer have to pay it. This is very difficult to receive and rarely provided.  Usually it involves that you paid tuition to your school and your school closed.  The closure of your school denied you the benefit of receiving your education.

Cancellation may also work on occasion if you work in a certain occupation after school. This usually involves some promised employment in governmental position or teaching profession that traditionally has a ceiling of earning capacity. Certainly if you are severely disabled or if you die, your debt may be cancelled. Often, when you cancel your loan, the government will also reimburse you for payments already made, and help clean up your credit record. In some situations, you won’t be able to cancel the entire loan, but you may be able to get rid of a portion of the loan.

4. Discharge through bankruptcy 11 U.S.C 523(a) (8).  Your student loan can be discharged through proof of a hardship. See in Re Brenner.  This test is very difficult and varies from state to state and judge to judge.  One judge found that it was not a hardship for a debtor to reduce her medication intake.  However, the US department of Justice and US department of Education seem eager to negotiate and provide for amazing repayment options through the bankruptcy options

5. Always check online for separate programs from the US Department of Education and their “hardship” test.


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