Unlike medical bills and personal lines of credit, student loans come with extremely strict conditions that make them difficult to cancel under normal circumstances. Whereas the bankruptcy process can successful wipe away most forms of unsecured debt, including high-interest credit card bills and outstanding court judgments, student loans are governed by a different set of rules. It's nearly impossible to discharge these credit facilities through the bankruptcy process.
If you're struggling to repay your student loans and feel as if bankruptcy is the only way out of your predicament, you may face some harsh recriminations from your student lenders. After failing to make your loan payments for several consecutive pay periods, your lenders are likely to hire third-party collection agencies to recover these debts. These collection agencies will begin harassing you with multiple phone calls per day, threatening official-looking correspondence, and even menacing visits to your home or office. Although you're entitled to ask them for a complete reckoning of your debt as well as proof that they're authorized to collect on it, there's no guarantee that you'll be able to stop these activities without declaring bankruptcy.
However, the bankruptcy process is unlikely to resolve your problem. Since your loans can't be discharged in bankruptcy, it's unlikely that your lender will accept a settlement without just cause. In order for your debts to be cancelled or significantly reduced, you'll have to prove that you're permanently unable to repay your obligations.
Meanwhile, it's likely that your wages or tax refund will be garnished to help cover the cost of your outstanding balances. Since student loans take precedence over other forms of unsecured debts, your student lenders and their collection-agency partners are authorized by the IRS to seize a portion of these funds. Your lender will pursue this course of action only as a last resort and must inform you of their intent to garnish your income before it happens. If they fail to do so, you may have legal recourse.
Depending upon the amount that you owe and the amount of time that your loans have been in default, you may lose your entire tax refund to your lenders. If your debt is especially large, this may happen during several successive tax years. While you may be able to convince the IRS to block the seizure of your funds, the agency is typically reticent to intervene in private student loan disputes.