Student Loans
A new study by LendEDU, an online marketplace for student loan financing, shows that Arizonans are well below the national average when it comes to student debt. According to an article in The State Press, the average college student in Arizona owes about $23,594 compared to a national average of $28,400. To do this study, LendEDU calculated the average student debt in all 50 U.S. states and their congressional districts. The report also said that about 53 percent of Arizona’s college grads still have student loan debt compared to the national average of 60 percent.
Here are a few other interesting findings from this study. Analyzing legislative history, LendEDU found that Congressional Democrats are twice as likely to support college affordability legislation compared to Republicans. However, students graduating from congressional districts with Democrats end up with 25 percent more student loan debt compared to Republican-held states, the study found.
Nate Matherson, CEO of LendEDU tells The State Press that he thinks Arizona is doing well when it comes to student debt because there are more in-state students or because colleges are more affordable and they are providing more financial aid. This report can be viewed as a positive for education in Arizona. However, it doesn’t completely change the fact that student loan debt continues to be a burden for many Arizonans, particularly when they are in rough financial times.

Strategies to Deal with Student Loans

The best time to take control is when you are still up to date on your payments – even if you’re struggling to make them. Eyeball your options that could help lower your monthly payments, offer forgiveness, temporarily postpone your payments or lower your interest rate. For those with federal student loans, income-driven payment plans can help cap your monthly payment at a percentage of your income.
Student loan refinancing is another option that can help you save money on loan payments by lowering your interest rate. It helps if you have good credit. Your options may be more limited if you have private student loans because private lenders are not as flexible. However, if you are struggling to make payments, you should still go ahead and ask your lender if there is a way to at least temporarily lower or postpone your payments.
If you’re late on your payments or if you’ve missed payments, catch up as soon as possible to avoid damaging your credit history. You are eligible for income-driven repayment plans until your federal loan goes into default. As long as you don’t allow that to happen, you still have options to lower your loan payment or even hit the pause button while you get back on track. If you have private student loans, call your lender as soon as you start to fall behind on your payments. Your lender will most likely be willing to work with you. Unlike federal loans, private loans go into default one day after you miss a payment. So, it would be in your best interest to take control of the situation before that happens.

Student Loans and Bankruptcy

When you are overwhelmed by significant financial burdens, bankruptcy might offer you a way out and a fresh start. Chapter 7 and Chapter 13 bankruptcy help individuals wipe out some of their debts or reduce the burden by helping them schedule payments to creditors over a period of time. A number of debts such as medical debt and credit card debt can be discharged by filing Chapter 7 bankruptcy. Generally speaking, student loan debt may be tough to discharge, even in a Chapter 7 bankruptcy. However, there are circumstances in which it can still be done.
So, how do you begin this process of finding out whether your student loans can be discharged in a bankruptcy? To start with, you must a file what is known as a Complaint to Determine Dischargeability. This is an action that is separate from your bankruptcy filing. Once you file this complaint, you must meet certain requirements for the court to approve discharge of the student loans. Regardless of whether you are filing Chapter 7 or Chapter 13, if you meet the requirements, you may be able to have your student loans discharged.

Discharging Student Debt

In order to successfully discharge your student loans in a bankruptcy, you must be able to prove that repaying your loans would in fact cause you “undue hardship,” which is measured by the Brunner test. This test requires those filing bankruptcy to meet specific criteria in order to be eligible to have their student loans erased. Under the Brunner test, you have to prove poverty, which means you cannot maintain a standard of living while also paying loans. Second, your finances will likely stay the same during repayment. This is known as the “persistence” standard. Finally, you have to show that you made a good faith effort to pay off your student loans.
These are not simply established. For example, meeting the “persistence” requirement test can be challenging because it may be difficult to ascertain whether your financial situation will remain the same for the majority of the repayment period. If you are unable to provide adequate evidence, a court may go ahead and presume that your income will go up over the period of time, which means you will be able to make the student loan payment.
That said there are other factors that may play a role including serious disabilities, insufficient education, obligations to dependents, your age and lack of other assets. Other courts may use what is known as the “totality of the circumstances” test where they will look at all relevant factors in your case to determine it amounts to an undue hardship for you to repay your student loans.
The best way to determine if you can discharge your student debt is by contacting an experienced Arizona bankruptcy lawyer who can help you evaluate your options. The knowledgeable Mesa bankruptcy lawyers at The Zolman Law, PLLC have helped numerous clients over the years get a fresh start and secure their future. Call us at 480-745-1770 to find out how we can help you.