One of the biggest mistakes that many students make is assuming that they will be able to discharge their student loans in bankruptcy. While bankruptcy protection available for nearly every other type of debt, many students assume that if they cannot pay their student loans, they will be able to get out of the debt.
Unfortunately, it is next to impossible to get out of student loan debt. In order to do it, a person has to prove to a judge that he or she has absolutely no hope of ever paying the debt back. In every case that has been approved over the past ten years, the former student was either dead or in a coma.
To make matters worse, a bank or the federal government is allowed to come after the paycheck of someone who defaults on his or her student loans. In addition to garnishing wages, they are also allowed to garnish tax refunds, Social Security checks, and any other government payments.
Because student loans cannot be discharged in bankruptcy, it is usually recommended that former students come up with some way to make payments on the loan. If making the minimum monthly payments is too difficult, it might be time to consider loan consolidation. Through this process, student loans are essentially refinanced. It’s possible to get a lower interest rate, a longer payment period, and better loan terms through consolidation.
Do not make the mistake of expecting to get out of your student loans by filing bankruptcy. Instead, be proactive about taking charge of your finances and research your options to get your student loans paid off.