14 Jul We owe $200K in student loans. How can we get rid of this debt?
Q. My husband and I have accumulated a lot of debt over the last 10 years: college loans ($200,000), a home equity line of credit ($50,000) and we have upcoming dental expenses ($50,000). We particularly don’t like the idea of outstanding college loans and would like to get this debt off our shoulders. What do you recommend?
— In trouble
A. That sure is a lot of debt.
Student loans have become a huge problem for so many people.
Unfortunately, it’s very hard to get student loans discharged in bankruptcy, said Karra Kingston, a bankruptcy attorney in Union City.
But it’s not impossible, she said.
“Debtors must show that they have an undue hardship and will never be able to afford to repay their student loans,” she said. “Under this test, it makes it very hard to show that individuals can’t pay back their student loans.”
To tackle student loan debt, the first thing that individuals need to consider is whether their student loan is private or federal, she said.
“Individuals with federal student loans can contact their servicer to see if they qualify for some sort of assistance,” Kingston said. “Many student loan programs have income-based repayment options that allow borrowers to pay a certain amount back based on their income.”
There are also other programs that can help individuals with student loans, but it’s best to discuss the options with your loan servicer, she said.
“Other plans allow individuals to discharge their loans based on public service and different fields of work,” she said. “Individuals can look at their options here to see if they qualify for any loan forgiveness options.”
If none of those options work, you may be able to consolidate all of your federal loans into one student loan or get on a forbearance plan, she said.
Just keep in mind that you may lose certain options, such as the income-based repayment plans, if you consolidate, so be sure to understand all the ramifications of such a move.
Private student loans are a little more difficult to tackle, Kingston said.
“Unfortunately, private student loans don’t always have as good options as federal student loans,” she said. “A few options for people with private student loans is to refinance their loan for a lesser interest rate or to try and negotiate a settlement with them.”
Sometimes, if you can afford to offer a lump sum settlement, the private student loan lenders will work with you, she said.
As for your other debt, you should work with a nonprofit credit counselor.
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This story was originally published July 13, 2021.
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