Read on to learn more about how Chapter 13 bankruptcy can help you manage your student loan debt. Generally, the only way to discharge student loans through bankruptcy is to prove that paying them back is an “undue hardship” for you.
(Learn the basics of how Chapter 13 bankruptcy works.) Your bankruptcy discharge does not wipe out certain types of debt. This is extremely difficult to prove and is usually only granted in rare circumstances (such as severe disability).
This is essentially free money that you don’t have to pay back. Only as a last resort should you take out a private student loan.
Explore federal and state grant programs, like the Pell Grant, as well as scholarships that may be available from state government, private organizations or the school you plan to attend. The interest rates and repayment terms on federal student loans generally are more favorable than those you are likely to obtain with private loans. So, although you should aggressively seek out all forms of student aid, you definitely should fill out the Free Application for Federal Student Aid, or FAFSA, the form necessary to qualify for federal student aid programs.
Except in rare circumstances, student loans cannot be discharged in bankruptcy.
But if you are struggling to make your student loan payments, filing for Chapter 13 bankruptcy can allow you to delay or reduce your monthly obligations.
Interest rates can vary greatly and can be as high as 18% in some cases.
Private student loans can also have an origination fee attached to them on top of the interest rates and principal amount of the loan.