In some cases, you may be able to discharge your student loan before it is paid in full according to the original loan terms. When a loan is discharged, you have no further obligation to pay it, and your lender is not entitled to make any further attempts to collect from you—basically, you’re done with the loan. Two common ways to discharge a student loan are through bankruptcy and by seeking a disability discharge.
File Bankruptcy to Discharge Student Loans
Filing bankruptcy can be one way to discharge a student loan, if you can prove that paying off the loan will impose an undue hardship on you and your dependents. Many (though not all) courts use the Brunner test, which requires the bankruptcy filer to demonstrate three things:
- that the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans;
- that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and
- that the debtor has made good faith efforts to repay the loans. (Brunner v. New York State Higher Educ. Servs. Corp., 831 F. 2d 395 (2d Cir. 1987)).
If you cannot prove undue hardship, you may be able to file a Chapter 13 bankruptcy to deal with federal and private student loans under an effective repayment plan.
Disability Discharge for Student Loans
Even if you are currently receiving disability payments through Social Security, you may not meet the Department of Education’s definition of “total and permanent disability,” as EDuses a different and more restrictive definition than some other government departments. However, we have had success in helping clients obtain disability discharges without filing bankruptcy. It is a difficult process that requires accurate completion of forms and the cooperation of medical professionals, but it’s an option that may be available to some borrowers. Contact us for more information and to see if you can qualify.