Did you know student loan debt has reached astronomical levels in the U.S. with 44.7 million Americans carrying an estimated $1.71 trillion in education debt.
The average class of 2019 graduate left school with $29,900.00 in student loans. Prior to the pandemic, 11.1% of students were more than 90 days in default. Defaults were halted as a part of pandemic relief measures from the CARES Act. Additionally, most federally funded student loans temporarily reduced interest rates to 0%. The moratorium on default is set to expire in September 2021 for most federal student loans. Unfortunately, borrowers are having to brace for impending return of student loan payments.
President Biden has laid the groundwork for potential student loan forgiveness. Although he has offered no specific proposal or grant yet, he has stated he supports congress to immediately cancel $10,000.00 worth of student loan debt. As the stats show above, most debtors owe an average of three times this amount in student loans. However, no pending legislation is imminent or final.
With the September 30, 2021, many people are worried about the Loan servicers beginning collections actions in October 2021. Many of my clients are anxious as this is unchartered territory. Some have asked if bankruptcy can student loan debtors. Unfortunately, filing for bankruptcy usually cannot discharge student loan debt. You essentially must be physically unable to work and / or there is little to no chance of making an income to pay off your loans. This is an exceedingly difficult burden to meet, even with the help of a skilled attorney.
Income based repayment plan for student loans can be an effective way to lower payments. Most federal student loans are eligible for at least one income-driven repayment plan. If your income is low enough, you can apply for an income-based payment. It could be as low as $0 per month. However, each student loan company is different. Some are willing to work with their borrowers and some can be difficult. There is so much uncertainty surrounding the status of Student Loans after the Cares Act provisions expire later this year. I have advised my current clients to check in with us for assistance to make sure the loan balances do not get out of hand.
If these alternatives do not work, filing for a Chapter 13 bankruptcy may be your only option. Under a Chapter 13, you can stop the student loan collection efforts for up to five years. A Chapter 13 can give you a chance to breathe and allow your attorney to negotiate with the Student Loan creditors. Many of my clients have found that after receiving a bankruptcy discharge on other debts, they are able to afford their student loans. For further information, feel free to contact an attorney at Kelley, Lovett, Blakey & Sanders for a free consultation.