Student loan repayment and discharge

On Behalf of | Feb 10, 2021 | personal bankruptcy |

Many people borrow student loans to pay for higher education. Even many years after graduate, they can still have difficulty repaying the loans.

It is helpful to understand a few of federal student loan repayment options that may be available to borrowers.


IBR, the Income-Based Repayment Plan, caps monthly payments at 10 or 15 percent of the borrower’s discretionary income depending on when the borrower first took out the loans. The payments are recalculated each year and are based on the borrower’s income and family size.

Any outstanding balance will be forgiven if the loan hasn’t been repaid in full after 20 or 25 years, depending on when the loans were taken. Also, borrowers may have to pay income tax on any amount forgiven.

REPAYE, also known as the Revised Pay As You Earn repayment plan, caps monthly payments at 10 percent of the borrower’s discretionary income. Like IBR, payments are recalculated each year. Loans are forgiven after 20 years for undergraduate borrowers and 25 years for graduate borrowers.

Discharging student loans in bankruptcy

Student loans are dischargeable in bankruptcy if the borrower can demonstrate undue hardship.

This means if the borrower had to repay the loan he or she would not be able to maintain a minimal standard of living, the hardship would continue for the loan repayment period and the borrower can demonstrate that he or she made a good faith effort to repay the loan before filing for bankruptcy.

Borrowers may have several debt resolution options available to them. An experienced attorney can explain the different student loan repayment options in more detail and also offer advice about how to address student loans in collections, if applicable.

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