How to Eliminate Student Loan Debt
June 24, 2015

Three Ways to Eliminate Student Loan Debt

How to Eliminate Private Student Loan Debt

Clients always ask us how they can eliminate their private student loan debt.  The overwhelming majority of clients with private student loan debt have federal student loan debt and there is precious little that can be done about federal student loan debt.  Private student loan debt offers a little bit more flexibility.

Option #1

Pay it off.  This option is often overlooked but deserves a mention. Often a parent or close friend will have funds in a some type of retirement account and can loan it to the student on decent terms with a long-term repayment plan the student can live with.

Option #2

Go Bankrupt.  Yes, this is an option but it is sadly only available to very few students.  In order to discharge a student loan in bankruptcy, you have to show that repayment would be an undue hardship.  That may not sound like a formidable obstacle, but it is in practice because the hardship has to be persistent. A student typically must show that not only is it an undue hardship to pay now, the future is so bleak that this situation is unlikely to change over the long-term.  Those with some type of permanent disability are the most likely to be able to discharge their private student loan debt in bankruptcy.

Option #3

Negotiate a Reduction in the Balance Owed. Private student loan debt, unlike federal student loan debt, can often be reduced through a process undertaken by a legal professional.  Depending on a student’s individual facts and circumstances, private student loan debt can be reduced by as much as 60%.  The key is having the right representation who can tell the student’s story to the lender and help them understand why it is in everyone’s best interest to accept a lesser amount in full settlement.  For those who are struggling with their private student loan debt and can’t pursue option #1 or option #2, contact a qualified student loan attorney with experience in this type of settlement negotiation.

Private student loan debt need not remain in place until the student’s children start needing tuition assistance of their own.  There is a real solution for those who have more debt than can be reasonably repaid.

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