Are You Ten Years Out of School and Still Struggling with Student Loans?
Recent student loan policy changes by the Biden Administration can help people still struggling with student loans. These are new rules making it possible to discharge your student loans in bankruptcy. In bankruptcy, you can clear your federal student loans if you can clear these three hurdles.
1. You Have to Be Bankrupt
This new policy allows you to get rid of your student loans by filing bankruptcy. In most cases to file bankruptcy, you have to be below the median income: that means, making less money that half the people in Virginia (or your state, where you are.)
Before this new policy, you had to be almost starving. Certainty of hopelessness was the rule. Now, you have to be worse off than most people. Worse off than most people–that’s something you can show. Under the old certainty-of-hopelessness rule, there was no chance. “That door is nailed shut,” That’s what the bankruptcy chief judge here said under the old rule.
2. You Have to Be Ten Years Out of School
The standard repayment plan for federal student loans is ten years. At the end of ten years, if you’d been able to stay on the standard plan, you’d be paid off. This new policy agrees that ten years of struggling with student loans is long enough.
3. You Have to Have Tried to Pay
This new policy gives you a lot of ways to show you tried to pay. Making payments is of course the best way to show you tried. But there are others. Applying for a lower payment shows you tried. Applying for a payment deferment–surprise–shows you tried! Signing up with a scammer who promised to help–even that shows you tried!
Did you just blow off the student loans? Then this new student loan bankruptcy policy won’t help you. You have to have tried something.
This New Plan is NOT Automatic
Student loans are still not just another debt in bankruptcy. (Before the Education Amendments of 1976, student loans could be discharged in bankruptcy just like any other debt.) It’s a separate legal step and it requires its own court case–an adversary proceeding–and its own attestation form. It’s not automatic. The government and the judge have to agree. But if you can clear these three hurdles, you shoulds be able to clear your student loans.
Do I have to Be Ten Years Out of School to Be Eligible Under Biden’s New Policy?
There are other factors that can also work. Never got your degree is one. Or a medical disability. Being over sixty-five. Or chronic unemployment. If any of those factors apply to be, you may be able to clear your debts under the Biden Administration new policy.
Are Student Loans a Good Enough Reason to File Bankruptcy?
I’ve talked to over a thousand people who were struggling with student loans. All of them had other financial problems too. If student loans are part of a financial burden that you can’t carry any more, it’s time to talk to a bankruptcy lawyer.
Want to Find Out More?
Getting your NSLDS is the first step to finding out if bankruptcy can clear your student loans. The NSLDS is the National Student Loan Data System. Your NSLDS file will give you most of the info we need on your loan. I have instructions on how to download your NSLDS file here.