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Options for struggling student loan borrowers

Many college students today are unable to pay back student loan debt post graduation. Fortunately, there are options available for struggling borrowers.

Since 1985, college tuition has risen a whopping 538 percent. As a result, over 70 percent of college students today graduate with student loan debt. Presently, there is $1.2 trillion in outstanding student loan debt in the U.S. and almost all are federal loans. The average student today graduates with $25,000 in student loan debt. Those with advanced degrees often walk away with $100,000 or more.

Given this statistic, it's common for some borrowers to receive their first student loan statement that equates to an average monthly mortgage payment.

Fortunately, there are options available for federal student loan borrowers who are facing massive monthly student loan payments.

Income Based Repayment

Under the Classic IBR program, federal student loan borrowers who have a partial financial hardship can apply to receive a monthly student loan payment capped at 15 percent of their adjusted gross income. Borrowers who make timely payments under this program will receive a discharge of outstanding loans after 25 years.

Under the 2014 IBR law, students who borrow federal student loans after July 2014 and have a partial financial hardship can apply to receive a monthly student loan payment of 10 percent of their adjusted gross income. A total discharge after timely payments under the 2014 program will be granted after 20 years.

Income Contingent Repayment

Under the ICR program, borrowers with Federal Direct Loans are eligible to apply and need not have a partial financial hardship. Monthly payments under the ICR program are capped at 20 percent of adjusted gross income. Like the IBR program, borrowers will receive a total discharge after 25 years of timely payments.


Borrowers who took out federal student loans after September 30, 2007 who have a partial financial hardship can apply under the Pay-As-You-Earn Program. Monthly student loan payments are capped at 10 percent of the borrower's adjusted gross income and a total discharge is granted after 20 years of timely payments.


Bankruptcy may also be an option for borrowers struggling under insurmountable student loan debt. Discharging student loans in bankruptcy is difficult-but not impossible. A bankruptcy trustee may grant a student loan discharge if borrowers can prove that repaying their student loans would constitute an "undue hardship."

Finding the right option for you

Which option is the best will depend on individual circumstances. Many student loan borrowers have additional debt which could play a part in determining the best course of action. Contacting an experienced bankruptcy attorney who can explain each option in greater detail and offer advice on specific situations is advised.

Keywords: student loans, bankruptcy, debt relief options

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