If you have high student loan debt in New Jersey and are struggling to pay your monthly bills, you may be thinking bankruptcy is your only option. Unfortunately, bankruptcy does not discharge student loans except under extreme circumstances. However, if you have federal loans there is alternative for you to make your monthly payments more affordable.
According to Federal Student Aid, the courts may discharge your loan in bankruptcy if you can prove paying back the loan causes undue hardship. In order to do this, you must meet three factors:
- You are unable to meet minimum living standards with repayment
- Your financial situation does not look like it will change over the term of the loan
- You have made a good effort to pay back the loan up to this point
If you are able to prove all three things, the court may discharge the entire loan, part of the loan or modify the terms, such as interest rate or length, of the loan.
U.S. News reports that a successful discharge may be easier with a private loan, but that the federal government offers an alternative for loan repayment to make it easier for borrowers. The income-driven repayment plan (IDR) takes into account you and your spouse's income, your family size and your location when determining your monthly payment. As long as you continue to make the payments every month, the government will forgive your student loan after a certain period of time. For some borrowers, the monthly payment may be very low, or even $0, making it possible to meet your obligation without having to file bankruptcy.