Office Location

Coan, Lewendon, Gulliver & Miltenberger, LLC
495 Orange Street
New Haven, CT 06511
New Haven Law Office Map

Our New Haven office, built in 1900 and beautifully preserved

Changes may be in store for student loan repayment program

Student loans have ballooned out of proportion to other forms of debt in recent years, to such an extent that the situation has increasingly referred to as a crisis. Nationwide, about seven out of every 10 people who graduated from college in 2013 had student loan debt, at an average of $29,400 apiece, according to data compiled by The Project on Student Debt.

In Connecticut, the student debt situation is slightly better than average but still alarming. About six out of 10 college seniors who graduated in Connecticut last year owed money on their student loans. On average, those graduates owed about $27,816 each.

Change could lower payments for millions

In an effort to ease the crippling student loan debt affecting many of today’s young people, the Obama administration recently announced its plans to reduce the monthly payments required for millions of people throughout the nation. The President said he would take executive action to cap student loan payments for many borrowers at 10 percent of their discretionary income.

That change would be an expansion of an existing program put in place in 2010 that calculates student loan payments based on the borrower’s income level. The program is currently limited to people who took out their loans after 2007, but Obama says he wants to expand it to include borrowers with loans from before that time, thus lowering the monthly payments for an estimated 5 million additional borrowers.

Student loans and bankruptcy

One of the reasons that student debts are so troubling for many people is that these debts are typically very difficult to discharge through Chapter 7 bankruptcy. Unlike many other types of debt that are relatively easy to discharge, such as medical debt and credit card balances, student loans are only dischargeable under certain rare circumstances. However, this does not mean that bankruptcy cannot still be helpful to borrowers who are struggling with student loan debt.

Depending on their circumstances, people with substantial debts in addition to their student loans may be able to have some or all of their other debts discharged through Chapter 7 bankruptcy, thereby reducing their overall financial burden and potentially making their student loan payments more manageable.

Another option for some student loan borrowers may be Chapter 13 bankruptcy, which allows them to restructure their debts and catch up on their late payments over a period of a few years. This option is often especially appealing to homeowners who have fallen behind on their mortgages and other debts, as it can be used to protect against foreclosure during the repayment period.

Legal help is available

If you are struggling to keep up with your debts and would like to learn more about the possibility of filing bankruptcy, be sure to talk your situation over with a knowledgeable bankruptcy lawyer in your area.