Student loans are some of the easiest loans to obtain and often the hardest to repay. Many Florida residents are struggling to repay their student loans. To make matters worse, these loans are not ordinarily eligible for discharge in bankruptcy, which means that obtaining student loan debt relief can be problematic.
When Congress passed the law barring virtually every college student from discharging student loans in bankruptcy, both federally guaranteed and private student loan lenders seemed to practically give the money away knowing that it would have to be repaid somehow. This has created a massive amount of student loan debt in the United States that has reached upward of $1.2 trillion dollars. Approximately $855 billion of that money is in Federal Direct loans, and only $440 billion is considered to be in routine repayment.
That means that over $400 billion, or approximately 40 percent, in federal loans are considered to be troubled debts in different stages. Some are in deferment, some are in forbearance and some are actually past-due or in default. Other borrowers are participating in income-based repayment or pay-as-you-earn programs. The bottom line is that millions of borrowers are unable to make the payments after graduation, and many would more than likely say that they did not anticipate this eventuality when they were given the money.
Unless changes are made in the current law, most Florida filers will not find student loan debt relief through bankruptcy. However, discharging other debts in a Chapter 7 could help free up income needed in order to make at least income-based payments. A Chapter 13 could also help to clear up other debts in order to allow for the repayment of these loans. It would be advisable for anyone struggling with student loan debt to discuss all of the available options with an attorney before moving forward.
Source: finance.yahoo.com, “The Ugly Truth About the Federal Direct Student Loan Program“, Mitchell D. Weiss, April 13, 2016