Are Student Loans Forever?
We all know some things are forever, for instance:
“A diamond is forever.”
“A marriage is forever.”
“Ignorance can be fixed, but stupid is forever.”
Many debtors believe that student loans are also forever, but that is not the case. While most bankruptcy debtors do not qualify for reducing or eliminating federal student loans through bankruptcy, there are several government programs that assist borrowers with eliminating student loans. Debtors emerging from bankruptcy with student loans should review their options for repaying these loans, including government-sponsored programs.
- The Department of Education’s Public Service Loan Forgiveness Program allows workers employed at most government and nonprofit agencies to eliminate their student loans after 120 monthly loan payments. These payments may be made at a reduced rate based on the employee’s income. To qualify, the employee must work at least 30 hours each week for a public service organizations. After ten years the worker can apply for loan forgiveness which will erase any remaining balance on eligible student loans, including Direct Loans and Direct Consolidation Loans.
- Teachers who first took out Direct Loans or Stafford Loans in October 1998 or later can also take advantage of the Teacher Loan Forgiveness Program. This program allows teachers to eliminate up to $17,500 after five years of service in certain schools or educational service agencies that serve low-income families. To receive the full amount, you have to be a highly qualified secondary-school math or science teacher or special education teacher serving children with disabilities. Teachers in other areas can get up to $5,000.
- Perkins Loan borrowers are eligible for several forgiveness and cancellation opportunities. Many educators in elementary and secondary schools, firefighters, law-enforcement officials, nurses and active-duty military personnel in hostile-fire areas qualify to have as much as 100% of their Perkins Loan balances canceled under certain conditions.
Student loans are not forever, but managing your non-dischargeable student loan debt requires careful planning and diligence. If you are emerging from bankruptcy with student loans, review your repayment options with your attorney as part of your plan for future financial success.