Santa Barbara
79° F
Clear
Clear
Santa Maria
76° F
Clear
Clear
San Luis Obispo
76° F
Clear
Clear
Ventura
73° F
Clear
Clear

How to lower your student debt

Published On: Sep 03 2013 10:51:38 AM CDT
Updated On: Sep 04 2013 04:35:20 AM CDT
Student loans

mj0007/iStock

By attorney Tina Caraballo, Special to THELAW.TV

You lost your job in 2008 and eagerly signed up for retraining. With promises of employment, you began learning a new career field and incurred thousands of dollars of student loan debt. Now it's 2013, you have a beautiful framed degree, but no job and mounting debt, including the unpaid student loans. While it is of little comfort, you are not alone.

Recent data from the Federal Reserve shows that student loan debt accounts for the majority of non-mortgage household debt, passing credit cards, auto loans, and other loans.

Reasons for the increase in student loan debt include increased education costs, dwindling job opportunities, and stagnant wages. The looming crisis is the inability of unemployed or low paid graduates to ever repay their crushing student loan debt.

Is there any relief in bankruptcy for the student loan debt? Probably not. Student loan debt is non-dischargeable in bankruptcy unless the debtor is able to demonstrate re-payment would impose undue hardship on you and your dependents. In making the determination, the bankruptcy court uses a three-part test to determine hardship: (1) repayment will not allow you to maintain a minimal standard of living, (2) that the hardship will continue for a significant portion of the repayment period, and (3) that you made good-faith efforts to repay the loan before filing for bankruptcy. The majority of the reported opinions allowing student loans to be discharged are related to medical issues. Others include elderly people with limited incomes and no chance of increasing earnings. In some instances, the court orders the lenders to agree to partial repayments and repayment on better terms than available through the conventional programs.

Not paying your student loans may result in unexpected consequences. Many employers consider credit in making hiring decisions, so your student loan default may cost you a job. If you are lucky enough to land the job, the government may garnish your wages and keep your income tax refund. Social Security disability and retirement benefits may also be offset. Perhaps most shocking, in 1991 the government removed the statute of limitations on its ability to collect defaulted student loans, which means they can come after you for as long as you are alive.

So what help is available if you are unable to make payments?

-- Deferment: A period during which repayment of the total sum of the loan, interest, and any interest that has capitalized is temporarily delayed.

-- Forbearance: Allows you to stop making payments or reduce your monthly payments for a period of 12 months.

-- Changing repayment plan: Depending on your qualifications, this can help you obtain lower payments.

-- Cancellation: In certain limited circumstances, your student loans can be canceled, forgiven, or discharged. For example, if you are totally and permanently disabled, you may be relieved from having to repay your federal student loans. Some teaching and public service jobs qualify for loan discharge. Discharge may also occur if the school closes or falsely certifies your eligibility to receive the loan. Your student loan debt is discharged upon your death as well.

Other than the conventional options set forth above, what can be done? On Jan. 23, 2013, Sen. Dick Durbin introduced a bill (S. 3219) that would allow private student loan debt to be discharged in bankruptcy like any other private debt, as it was prior to 2005. While this only pertains to 20 percent of the outstanding student loan debt, it is a step in dealing with the crisis. A workable income-based repayment alternative has also been proposed (the current income-based option has been described as "mind-numbing in its complexity").

Another proposal floating around is to create classes of student loan debt. One class would not be dischargeable in bankruptcy and the other would be dischargeable. The class of the loan would be tied to the institution's history of placing its graduates in jobs. Still others advocate addressing the debt-based education system that is the root of the problem. The ultimate resolution will likely include aspects of all the proposals.

The author, Tina L. Caraballo, is the founder of the Caraballo Law Firm, P.L., a Florida based law firm that assists clients in achieving a fresh start through bankruptcy.

Comments

The views expressed are not those of this company or its affiliated companies. Please note by clicking on "Post" you acknowledge that you have read the Terms Of Service and the comment you are posting is in compliance with such terms. 
blog comments powered by Disqus
  • Body of Isaiah Sanchez Recovered at Cachuma Lake

    Santa Barbara County sheriff rescue crews have found a body near the place where Isaiah Sanchez went missing.

  • Ellwood Fire

    Explosion at Goleta Apartment Complex Leaves One Man Hospitalized

    Santa Barbara County Fire crews responded to an explosion and fire at an apartment complex on 447 Ellwood Drive in Goleta.   Fire officials received the call at around 7:00 p.m. One person was injured and taken to the hospital with severe burns.  The apartment manager helped put out a small fire that broke out after the blast. The explosion and fire are still under investigation.  The fire did not spread to any adjoining apartments.

  • dangerous dogs

    Orcutt Family Starts Petition to Change County Ordinance

    An Orcutt family is fighting to keep their dogs from being euthanized, and is now trying to change a county ordinance on aggressive dogs. The family has an online petition spreading their message on the internet in an effort to get the Santa Barbara County Board of Supervisor's attention.

    Peggy Henning remembers the day her family welcomed Daisy and Duke into their family like it was yesterday.

    "They immediately just became part of the family," said Henning. "They were very friendly with all the guests we had coming over."

    But things changed when Daisy and Duke got loose. They liked chasing cats.

    "Dogs are pack animals and that is their default instinct," said Henning. "If they are bonded or litter mates, it intensifies that. They would get out of the confines of our house or yard and this instinct would come to the surface."

  • Santa Paula Reserve Police Officer Resigns After Posting Video About Bicyclists

    Volunteer posted a YouTube video joking about running over bicyclists.

  • Juvenile Hall Court to Host Gang-related Murder Trial

    The so-called "U-Haul murder trial" is expected to be another high security, gang-related trial that requires extra time and money to make it work at the Santa Barbara County Juvenile Hall courtroom which is seen as the most practical venue.

  • JT Stone Will Serve as Interim Head Football Coach at Santa Barbara High School

    Stone has 14 years of coaching experience at the youth and high school level.

  • Roundbout Giving Drivers in the Santa Ynez Valley a New Way Around

    An intersection that's become very busy because of its location near wine country and the Chumash Casino is now expected to be much safer.  The final phases of work on the roundabout in the Santa Ynez Valley are taking place.

  • New Family Friendly Tasting Room Opens in Solvang

     A new winery in Solvang recently opened their doors, and they are making their tasting room open to everyone.

  • Slideshow: Rescue Crews Find Body In Cachuma Lake

    Santa Barbara County sheriff rescue crews have found a body near the place where Isaiah Sanchez went missing.

  • Slideshow: Blondes VS Brunettes Charity Football Game

    A charity football game at the Polo fields in Carpinteria pits the Blondes vs Brunettes. The all-women football teams duked it out on Saturday to raise funds for the Alzheimer's Association. Both teams fought fiercely but in the end, only one came out the victor.

    Photography by Oscar Flores.