It's no secret that the United States is facing a major student loan crisis. With education costs rising faster than the core rate of inflation, the average student must carry tens of thousands of dollars in student debt in order to complete his or her education successfully. Students who attend expensive elite institutions may take on even more debt. With a glut of graduating college students flooding a stagnant job market, the country's student debt problems are liable to get far worse. Unfortunately, it's unlikely that meaningful public-policy steps will be taken to address this problem in the near future.
If you're struggling to repay your student loans, you'll need to assess your financial situation before determining how to proceed. Depending upon your employment situation, you may be eligible to pay off some of your student loans using a federal or school-sponsored loan forgiveness program. You'll need to demonstrate that your income is inadequate to support your burden of student debt.
However, it's important to note that you'll be held to extremely stringent "low-income" standards. In other words, your student lender will expect you to put virtually all of your disposable income towards your student loan payments before agreeing to refinance or forgive a portion of your loans. Before you can see a substantial reduction in your student loan burden or enjoy a relaxed repayment plan, you'll need to demonstrate that your student loan burden is literally bankrupting you.
If you've been struggling with student debt for many years, you may be able to apply for wholesale loan forgiveness during formal bankruptcy proceedings. While student loans generally can't be discharged during the bankruptcy process, a judge may agree to forgive a portion of your debt under certain strict circumstances. For this to occur, you'll need to prove that you stand no chance of earning enough money to pay off your debts within a reasonable time frame.
Most financial professionals advise against taking out additional loans to pay off previous debts. There are a few exceptions to this rule, including debt consolidation loans and home equity loans. However, these credit vehicles are typically used to pay off high-interest unsecured debts like credit card bills. Most debt consolidation lenders aren't legally permitted to pay off student loans. If you're thinking about taking out a private loan to pay off your student debts, you'll need to determine whether you can afford to repay your new loan. You'll probably find the new obligation to be just as difficult to manage as your old student loans.