Category: Student Loans

Income Based Student Loan Programs

When student loan payments in repayment become too much for your monthly budget, income based student loan programs are there to help make the payments more affordable.  These income based repayment options adjust your payment to a percentage of your discretionary income, the income difference between the household’s adjusted gross income and 150% of the poverty line.

These programs include:

  1. PAYE PLAN- Pay as you Earn Plan. This income based repayment program is also for Federal Direct Loans and requires that you be a new borrower as of October 2007 with a loan disbursement on or after October 2011. After a showing of “partial financial hardship“, a calculation showing that your standard repayment exceeds a payment based on 10% of your adjusted gross income less 150% of the poverty line. After 20 years of payments, any unpaid amounts will be forgiven. The forgiveness amount will be imputed as income by the IRS, so the there may be a few payments to the IRS after the forgiveness.
  2. REPAYE PLAN-Revised Pay as you Earn. This more generous version of the PAYE program was launched by the Department of Education in 2015. The program is available to all borrowers with Federal Direct Loans, not just new borrowers under the definition provided in the PAYE plan.
  3. IBR PLAN- Income-Based Repayment.  This program looks at your income and family size every year to adjust the payment through a re-certification where a new application is submitted each year.
  4. ICR PLAN- Income-Contingent Repayment.  This income based repayment program is only available for Federal Direct Loans. Be careful with this program because sometimes the income contingent payment could calculate to higher than the standard repayment monthly payment!

To find out whether your loans qualify for one of these programs and more detailed information about these programs, visit


Help! I can’t afford my Student Loans!

Student Loans are a special kind of unsecured debt. This debt is non-dischargeable in bankruptcy, so while bankruptcy can help you free up funds for the payment of student loans by helping you to get rid of credit cards, repossessions, and old income tax obligations, in most cases it cannot get rid of your student loans. I often tell clients that it is easier to get rid of Uncle Sam (taxes) than it is to get rid of Aunt Sallie (student loans).

But, this does not mean you are stuck. There are things that you can do to help yourself with student loan payments that you cannot afford:

  1. Pick up the Phone.  Call your student loan  provider to see what programs are available to lower your payments or give you temporary relief from the payments. Just remember when you are on the phone to push to get information about all the programs available to you.  Do not just follow the instructions from the representative on the phone.  Servicers, such as Navient, are being sued by the U.S. Government for failure to provide borrowers with information and help.  In these suits, the servicers have claimed that in enrolling borrowers in the programs that were less time consuming and labor intensive for the servicers rather than the best program for the borrower that it was unreasonable for the borrower to expect the student loan servicer to act in the best interest of the borrower.  So be careful and do your homework!
  2. Get your Income Information Together.  An income based repayment plan may be a better option than temporary relief from any payment.  It easy in a fit of financial panic to take the option that frees up the most monthly income for other items needing your attention, but this decision may bite you in the butt later when payments must be made and the balance is quite a bit bigger than you remember.  You must choose which option is the best fit for you.  Which is best for you? The program that gives you the lowest payment or the program that most affordably allows you to pay off the student loan?
  3. Stick to the Plan.  If you default on a plan to repay or modified payment, work to either cure the default or research a new plan that is a better fit.  A good resolution is not a default ruining your credit report and your student loan balance getting larger.
  4. Refinance.  Refinancing part or all of your student loan may be a good solution.  There are a variety of companies that allow for the refinancing of student loans.  Refinancing may make the payment more manageable by extending the terms of repayment and lowering the interest rate.  Some companies allow you to extend the payments out to 25 years.  The downside is that the options for forbearance or deferment may not be available once the loan is refinanced.  There are a variety of websites that provide information about student loan refinance, such as,, and Once again, make sure to do your research!


non-dischargeable debts

What is a non-dischargeable debt in bankruptcy?

When I first meet with a potential client, we discuss what debts are non-dischargeable debts under the bankruptcy code and what debts bankruptcy can help with. This is often the part of the consultation where we discuss the reason driving the client to file bankruptcy and the goals of the case. Bankruptcy can help with the client’s debts in most cases, but with certain debts the help is not in the form of a discharge of the obligation entirely.

What debts can bankruptcy help with?

Unsecured debts are debts that do not have collateral to look toward if the clients stops paying on the balance. These debts outside of bankruptcy could confiscate paid off cars, garnish wages, and/or freeze bank accounts for payment through a lawsuit and judgment. Unsecured debts in a chapter 7 bankruptcy often do not receive any payment. In a chapter 13 bankruptcy, this class of creditors often receives pennies on the dollar before the remainder of the obligation is discharged.

Unsecured Debts that can be discharged in bankruptcy:

  • credit cards
  • hospital bills
  • home or investment property foreclosure deficiencies
  • repossession deficiencies
  • business guarantees
  • IRS tax penalties

Secured Debts are obligations where if you stop paying the lender, the creditor/lender can repossess the collateral. The personal obligation can be discharged leaving only the lien for the following Secured Debts:

  • car leases
  • equipment leases
  • car loans
  • promissory note obligations to first mortgagees and/or second mortgagees (lien stays on property) on a property that client decides to surrender
  • HOA obligations on a property that client decides to surrender

What are non-dischargeable debts in bankruptcy?

There are other debts that may be unsecured, but are not dischargeable under the bankruptcy code provision 523.

These debts are examples of debts that cannot be discharged:

  • domestic support obligations (only child support and alimony in chapter 13; any DSO in a chapter 7)
  • IRS tax debt
  • student loans
  • trust account debts-Sales Tax and 941 obligations
  • debts procured from a misrepresentation or fraud

For more questions about your debts and whether bankruptcy can help, call the bankruptcy attorneys at the Bankruptcy Law Offices of James Schwitalla for your free consultation (305) 278-0811!

Is it really possible to discharge student loans in bankruptcy?

Yes, but only for a very select few.

Student loans can be similar to a tattoo. When you were young with endless possibilities, it seemed like a good idea. So many people are plagued by student loans and cannot get ahead of the Sallie Mae snowball. What relief is there? Can bankruptcy help?

Unfortunately, bankruptcy cannot help the majority of borrowers. It is heartbreaking that I have to tell clients that there is nothing bankruptcy can do to get rid of these untouchable loans (unless you can meet the impossible Brunner standard). The Brunner standard requires that the debtor in a bankruptcy prove in an adversary proceeding (a lawsuit inside of a bankruptcy) that you can never payback the student loans. This three prong test requires a showing of (i) good faith attempts to pay; (ii) that the debtor is living on a very basic budget that doesn’t allow for payment; and (iii) that the debtor has no future possibility of paying the loans back.

The difficulty of dealing with student loans is a down economy is a hot topic receiving national attention. See New York Times article “Last Plea on School Loans: Proving a Hopeless Future”. For now, discharging student loans is a hard fight and one that is hard to win.

Contact a Miami Bankruptcy Lawyer today for further information.

Can I discharge student loans in a bankruptcy if I am only a co-signer?

Unfortunately, no.

Co-signing means that you are guarantying payment on a loan. You are promising to pay if the primary cannot make the payments. You are on the hook too.

You just have to make sure that the primary person makes the payments, otherwise you are still obligated and there is nothing you can do in a bankruptcy to get rid of the obligation.

Find out more by contacting a bankruptcy lawyer in Miami today.