There are options for those who need to repay student loans, but getting them deferred, forgiven or cancelled can be difficult. The consequences of a default can be serious, including collection attempts and damage to one’s credit score. Below are some options for when it’s time to repay student loans.
Options for Repayment
Borrowers have several options when they cannot afford to make regular payments on student loans. Those choices include:
* Delaying through a deferment or forbearance program
* Getting it canceled and eliminating remaining payments
* Bankruptcy discharge
* Getting on a sliding-scale repayment plan
* Loan consolidation
Those options are explained in greater detail in the sections below.
Deferment
In certain cases, a borrower might be able to get their student loans deferred. A deferment allows one to stop payments for a set period of time if they qualify. For example, the borrower may be eligible for a deferment if they are returning to school, looking for employment or if they are unemployed. Depending on the loan type, deferment can allow one to stop payments and interest accrual. For other loan types, the borrower can only defer on the principal and interest continues to build. A bankruptcy lawyer can help the client figure out what type of deferment they may be able to receive.
Forbearance
If one isn’t eligible for a deferment, they may delay payments through loan forbearance. Student loan debt forbearances are where the lender allows the borrower to put off payments for a while. However, the borrower should remember that interest continues to accrue and the total will be higher when the forbearance is over. Loan forbearance is easier to get than a deferment because they aren’t linked to loan type and they’re not governed by the rules of student loan cancellation.
Bankruptcy Discharge
Another option for times when one cannot repay student loan debt is to attempt to get them discharged in bankruptcy. This is difficult to do under current bankruptcy laws but it is possible if the client can prove that repayment would pose an undue economic hardship. Courts consider factors such as age, health, expenses, income and the length of time the financial issues may last.
Student loan debt is very hard to get rid of, but there are options available, including discharge. To have the greatest chance of getting loans discharged through bankruptcy, the borrower should visit us to talk to a bankruptcy lawyer as soon as possible.
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