Getting rid of student loans in bankruptcy is difficult -- but not always impossible. To succeed, you must convince the court that repaying your student loans would cause you "undue hardship."
You may have heard that getting rid of student loans in bankruptcy is impossible. That's not true--but it is very difficult. To succeed, you must convince a bankruptcy court that repaying your student loans would cause you "undue hardship."[more]
For more information about student loans and bankruptcy, select your state below.
Jurisdictional relevance:
The content of this article pertains to all US states and counties.
This website from the National Consumer Law Center offers a wide variety of resources to help you handle student loan problems
Guidance and resources to help you determine whether bankruptcy can help you manage or eliminate your student loans.
Most student loans fall into one of two categories:
Direct PLUS Loans (for parents). Parents are fully responsible for paying these loans, even though they are taken out to benefit students.
The following chart, adapted from the U.S. Department of Education website, summarizes the important differences between federal and private student loans.
|
Subject
|
Federal Student Loans
|
Federal Parent Loans
|
Private Student Loans*
|
|---|---|---|---|
|
When
payments become due |
You (the parent) can choose to put off payments until the student you borrowed for graduates, leaves school, or changes enrollment status to less than half-time.
|
Many private student loans require payments while you are still in school, but some do allow you to defer (put off) payments while in school.
|
|
|
Interest
rates |
The interest rate is fixed and is often lower than private loans—and much lower than some credit card interest rates. View the current interest rates on federal student loans.
|
The interest rate is fixed and may be lower than private loans—and much lower than some credit card interest rates. View the current interest rates on federal student and parent loans.
|
Private student loans can have variable or fixed interest rates, which may be higher or lower than the rates on federal loans depending on your circumstances.
|
|
Subsidies
|
These loans are not subsidized; therefore, you will be responsible for all the interest on your loans.
|
Private student loans are often not subsidized. In the case of an unsubsidized loan, you will be responsible for all the interest on your loan.
|
|
|
Credit
check |
You don’t need to get a credit check to qualify for federal student loans (except for PLUS loans). For PLUS loans, we will check your credit before determining whether you are eligible. Learn how someone with an adverse credit history may qualify for a PLUS loan.
|
We will check your credit before determining whether you are eligible. Learn how someone with an adverse credit history may qualify for a PLUS loan.
|
Private student loans often require an established credit record or a cosigner.
|
|
Tax benefits
|
Interest may be tax deductible.
|
Interest may be tax deductible.
|
Interest may be tax deductible.
|
|
Loans can be consolidated into a Direct Consolidation Loan. Learn about your consolidation options.
|
Loans can be consolidated into a Direct Consolidation Loan. Learn about your consolidation options.
|
Private student loans cannot be consolidated into a Direct Consolidation Loan but may be refinanced.
|
|
|
Postponement options
|
If you are having trouble repaying your loan, you may be able to temporarily postpone or lower your payments.
|
If you are having trouble repaying your loan, you may be able to temporarily postpone or lower your payments.
|
You should check with your lender to find out about options for postponing or lowering your loan payments.
|
|
Repayment plans
|
There are several repayment plans, including an option to tie your monthly payment to your income.
|
There are several repayment plans, including an option to tie your monthly payment to your income.
|
You should check with your lender to find out about your repayment options.
|
|
Prepayment penalties
|
There is no prepayment penalty fee.
|
There is no prepayment penalty fee.
|
You need to make sure there are no prepayment penalty fees.
|
|
Loan
forgiveness |
You may be eligible to have some portion of your loans forgiven if you work in public service. Learn about our loan forgiveness programs.
|
You may be eligible to have some portion of your loans forgiven if you work in public service. Learn about our loan forgiveness programs.
|
Although many private lenders do not offer loan forgiveness programs, some student loans from state agencies can be forgiven in certain circumstances.
|
|
Where to get help
|
Contact your loan servicer first. If you have difficulty with your loan servicer, send us feedback.
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Contact your loan servicer first. If you have difficulty with your loan servicer, contact the Consumer Financial Protection Bureau for assistance
|
*Private loans differ by lender and by type of loan. Be sure you understand the terms of your loan, and keep in touch with your lender about any questions you may have.
To find out what type of loan you have and learn more about its terms, see What If I Don't Know What Kind of Loan I Have?
For a detailed history of federal student loan programs, we like this article from the Federal Education Budget Project of the New America Foundation.
PLUS Loans are federal student loans for graduate and professional students and parents of undergraduates. PLUS loans made to parents can't later be transferred to the child. The parent who receives the loan must repay it.
Borrowers can take out PLUS Loans up to the cost of attendance, which is determined by the school, minus any other financial aid the student receives. For PLUS Loans made between June 30, 2013 and July 1, 2014, the interest rate was 6.41%. PLUS Loans made between June 30, 2014 and July 1, 2015 carry an interest rate of 7.21%
You must pass a credit check to obtain PLUS Loans. If you don't qualify on your own, you may be able to get PLUS Loans with a cosigner (the Department of Education calls this person an "endorser").
For more details on PLUS Loans, see the U.S. Department of Education website.
A Perkins Loan is a federal student loan for low-income undergraduate or graduate students. From July 1, 1972 until October 17, 1986, these loans were called National Direct Student Loans (NDSLs). Before July 1, 1972, they were known as National Defense Student Loans, or NDSLs.
The interest rate on Perkins Loans is lower than the rate for other federal student loans, and the loan comes with more flexible terms -- such as additional repayment and cancellation options. And Perkins Loans are subsidized by the federal government, meaning you don't pay interest on the loans while you are in school or during periods of deferment.
Also, unlike other types of federal student loans, Perkins Loans are made by your school, using a combination of school and federal funds. This means the school is considered your lender, and you should contact the school directly if you have questions about your loan.
For more information, see Perkins Loans on the Federal Student Aid website.
When it comes to managing student loan debt, most of your choices depend on whether your loans are federal or private. If you're not sure what kind of loans you have, use the National Student Loan Data System. Choose "Financial Aid Review" and supply the requested information to get a list of all federal loans made to you.
To use the system, you will need to supply:
The FSA ID replaced the Federal Student Aid PIN on May 10, 2015. If you haven’t logged in to a U.S. Department of Education (ED) online system since then, you’ll need to create an FSA ID before you can use U.S. Department of Education online systems.
Once you get to the list of your loans, you can click on each loan to get details about it, including exactly what kind of federal loan it is and who services it.
If you have student loans that aren't on the national database list, it means they are private loans. For more information, you'll need to contact the financial institution that made the loan.
A deferment allows you to temporarily stop paying your federal student loans. You qualify for a deferment if you meet certain conditions -- for example, if you are unemployed and looking for work, or if you return to school at least half time. If you are eligible for a deferment, you can postpone payment on both the principal and interest of your loans. In some cases, the federal government will even pay the interest for you. In other situations, interest continues to accrue during the deferment period.
For more information, see How Do I Postpone My Student Loan Payments?
A student loan forbearance, like a deferment, allows you to postpone or reduce your federal student loan payments for a set period of time. However, it is often easier to get a forbearance than a deferment -- for example, you may qualify even if your loan is in default, or if you are experiencing financial hardship that falls short of conditions for deferment. The downside is that forbearance is usually more expensive than deferment. Interest always accrues during a forbearance, causing your loan balance to grow.
For more information, see How Do I Postpone My Student Loan Payments?
Default is what happens if you fall behind on your student loan payments. For most loans, if you fail to make a payment for 270 days (that's nine months) the loan will go into default. After that, your school, the loan servicer, or the government can take action against you to get back what you owe. You may face serious legal and practical consequences if you default on your student loans.
To learn how to avoid default, see What If I Can't Pay My Student Loans?
For more information about the consequences of default, see What Happens If I Default on My Student Loans?
If your loans are already in default, see How to Get Out of Student Loan Default.
Skipping payments or defaulting on a student loan can have serious and lasting effects on your credit. When a delinquency or default notation appears on your credit report you may have more trouble with basic financial tasks such as:
Most negative information is removed from your credit report after seven years, but student loan defaults may remain on your record much longer. Defaults for a federal student loan may be reported for seven years after the most recent of the following dates:
(See 20 U.S.C. §§ 1080a(f).)
If you default on a federal Perkins loan, the default can remain on your credit record until you pay the loan in full. (See 20 U.S.C. § 1087cc(c)(3).)
The consequences of default go well beyond damage to your credit report. To learn more, see What Happens If I Default on My Student Loans?
If your loans are already in default and you're looking for solutions, see How to Get Out of Student Loan Default.
Pell Grants are in the news lately since the Federal Government announced that federal Student Loans will get loan forgiveness of $10,000 and up to $20,000 for those who qualified for a Pell grant.
Pell grants are currently awarded to students whose "expected family contribution" to their college is less than $5846, and can range from $650 to 6,495.
Pell grants are awarded based on the information in your FAFSA application.
If you find yourself in a dispute with the holder or servicer of your student loan, you should first take steps to resolve the problem directly. If that doesn't work, the following services are available to assist you.
If you're having difficulty with the lender or servicer of your federally guaranteed student loan, you can get help from the Department of Education. For guidelines, visit the Federal Student Aid Ombudsman website or call 877-557-2575.
If you're having trouble with private student loan company or a collection agency, you can turn to the Consumer Financial Protection Bureau (CFPB). The CFPB provides services to assist you in resolving complaints about your private student loans. For more information, visit the CFPB Student Loan Complaints website or all 855-411-2372.
For more details and additional resources, including additional tips for working out student loan problems without filing a formal complaint, see How to Get Help With Student Loan Problems.
We built this website to get you the answers you need about getting out of student loan debt. When you choose your state or enter your zip code on our home page, you will quickly learn how to get organized so you can:
Our goal is to guide you to reliable information about managing your loans, providing resources tailored for State when available.
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