Whether the problem is credit card debt or student loan debt, the sluggish economy is exacerbating the inability of many to meet their financial obligations. Unfortunately, unlike credit card debt and other forms of debt, there are few ways to renegotiate student loans.
The main problem for student loan borrowers is that, under a 2005 law, the debts they have accumulated cannot be discharged in normal bankruptcy. That is starkly different from all other forms of debt, which can be discharged in bankruptcy, allowing the borrower to get a fresh financial start. However, there are a few options still available for student debt.
One option is known as the income-based repayment plan. Introduced in 2009, this repayment plan allows student loan borrowers to repay federal loans as a percentage of their adjusted gross income. That percentage is capped at 15 percent, and after 25 years under an income-based repayment plan, all federal student loan debt is forgiven.
For those with private student loan debt, the situation is somewhat messier. There is no income-based repayment plan available, but a temporary suspension of payments may be possible if the borrower is facing financial hardship. Of course, the best way to manage debt may be to take on as little as possible from the beginning.
Unfortunately, for people already suffering with student loan debt, there's no easy way out. Borrowers in such a situation have frequently found the assistance of an experienced attorney to be invaluable. The attorney may be able to assist with developing a repayment plan and aid in filing for bankruptcy if necessary. Although student loans cannot be discharged in bankruptcy, other forms of debt such as credit card debt can be. That may allow for the borrower to emerge from bankruptcy in a secure enough financial situation to allow paying off student loans.