Santa Barbara
60° F
Santa Maria
48° F
San Luis Obispo
55° F
54° F

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


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.


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
  • Triple Fatal Auto Accident on Highway

    3 Dead In Early Morning Accident, Driver Arrested For DUI

    The 101 southbound through Santa Barbara reopened just before 12:30 Monday afternoon as authorities investigate what they say was a deadly two car DUI accident.

  • Witnesses to Fatal Crash

    Eyewitnesses See Triple Fatal Crash from Roadside Camp

    A homeless couple watching the freeway from their campsite in Santa Barbara this morning, witnessed the triple fatal accident that took the lives of two teens and a young man.

  • Triple Fatal Auto Accident on Highway

    DUI Driver in Fatal Early Morning Accident Ordered to Detox Program in 1995

    The Santa Barbara woman arrested for DUI in the early morning accident that left three people dead early Monday morning has a lengthy court record out of Ventura County. Kimberly Kreis, 52, was ordered to serve 30 days in a detox program as far back as 1995.

    The car that Kreis was driving crashed into a disabled Mazda near the Castillo off-ramp of the southbound 101 freeway in Santa Barbara. Two 17 year old North Torrance High School students were killed in the accident- Jessica Leffew and Danielle Murillo. 20 year old Brian Lopez also died in the wreck. The driver of the Mazda, Eric August, is hospitalized in critical condition.

    A NewsChannel 3 investigation found records out of Ventrua County that appear to show that Greis has at least one prior conviction involving drugs and or alcohol, and in 1995 she was ordered to serve 30 days in a Cottage Hospital detox program.

    CHP investigators are still trying to piece together why the Mazda veered right into a guardrail, causing it to flip onto it's roof before coming to rest in the middle of the southbound freeway, which set into motion the deadly accident.

    CHP Officer Jonathan Guiterrez, said "A lot of things could have happened, He could have fallen asleep. We just don't know at this point."

  • Santa Barbara Fatal Accident Folo

    Extensive Investigation into Triple Fatal Accident

    An extensive investigation is underway to determine the cause of death in a triple fatal rollover accident Monday morning in Santa Barbara.

  • Parents of Mallory Dies Sue Congresswoman, Her Former Aide, and U.S. Government

    The parents of a young Santa Barbara woman killed in a high profile, DUI case are suing Congresswoman Lois Capps, her former aide Raymond Morua, and the U-S government in federal court.

  • Larry Lee Cal Poly Coach

    Cal Poly Baseball Earns No. 1 National Ranking

    The Mustangs achieved the school's second No. 1 national ranking in Division I as Collegiate Baseball Newspaper has placed Cal Poly atop its Top 30.

  • fuzion_store_business_santa_barbara

    UCSB Group Boycotts Business For Promoting Deltopia

    A UCSB student group is boycotting a local business for creating the Deltopia Facebook page, which they said brought in thousands of outsiders to the small college town.

  • girl_child_coughing_sick_whooping_cough

    Contagious Diseases Making a Comeback in California

    Deadly diseases that were a thing of the past are making a comeback in California.

  • Slideshow: 3 Dead In Early Morning Accident, Driver Arrested For DUI

    The 101 southbound through Santa Barbara reopened just before 12:30 Monday afternoon as authorities investigate what they say was a deadly two car DUI accident.

  • Netflix file

    Brian Snyder/Reuters

    14 alternatives to Netflix

    Out of love with Netflix? Check out these alternatives to the company's instant streaming and DVD-by-mail services.