Although they're typically issued with far lower interest rates than comparable credit cards or personal loans, student loans can quickly become expensive. Unlike other unsecured debts that can easily be discharged during the bankruptcy process, student loans are difficult to shake.
There are only a few circumstances in which a student loan's payment schedule can be altered or terminated. The first involves a "temporary hardship" caused by a period of chronic unemployment or an unexpected financial shock. There is no legal recourse by which to earn a reprieve from your student loans due to a "temporary hardship." You'll need to inform your creditors that you're experiencing this condition and hope that they're willing to negotiate a new repayment plan that spreads the burden of your loan over a longer period of time. Since student lenders rarely agree to refinance their loans, you may find such direct negotiations to be unproductive.
The second involves personal bankruptcy. While student loans can't normally be discharged as part of the personal bankruptcy process, there are certain circumstances in which they may be forgiven or reduced by a bankruptcy judge. Once you've filed for bankruptcy, you'll need to convene your bankruptcy judge and your student lenders to enter an official claim of "undue hardship." Your judge is likely to issue an undue hardship designation only if it is clear that you'll be unable to maintain employment or earn more than your current wage on a permanent basis. To earn this designation, you'll need to claim some form of disability or show that you're unable to switch to a more lucrative occupation.
There must be good cause for your claim: Since your student loans take precedence over all of your other unsecured debts, your lender can lay claim to your assets, garnish your wages or even seize your income tax refund to help recoup their losses.
In fact, they may even be able to garnish your spouse's income tax refund. In most cases, they'll take the entirety of your own tax refund before moving on to your spouse's unless you're unemployed and have nothing to seize. To prevent your spouse from losing his or her entire refund, you'll need to attach an "injured spouse" form to your joint return and specify that you contribute no meaningful income to the family's finances. This binding document bars your student lender from garnishing your spouse's tax refund.