Student loan troubles? A lawyer can help

Student loan troubles? A lawyer can help

Sona Sulakian
 | 
 Over 44 million Americans owe about $1.5 trillion in student loan debt. About 90% of student loans are from the federal government. Many borrowers were struggling to pay down loans even before the pandemic. 

In March, one of President Trump’s first steps at the start of the pandemic was to suspend loan payments, stop collections, and temporarily set the federal student loan interest rate at 0%, which has been extended to the end of the year 2020.

However, this measure will have little impact on reducing the principal amount of these debts. For students really struggling financially and close to default, this measure isn’t really helpful. Borrowers below 150% of the poverty level already have no payments under an income driven repayment plan. So wealthier borrowers will benefit the most from this measure. Furthermore, this measure applied only to certain federal loans–Direct loans and federal FFEL loans–neglecting 9 million borrowers who hold other types of loans.

If you find yourself struggling to pay down your student loan debt, you may want to talk to a student loan lawyer about your rights and options. 

Actions To Take Now
Senior policy counsel at the Center for Responsible Learning, Attorney Whitney Barkley-Denney shared her advice with us for borrowers struggling with student loan debt. 

First, check your credit score. In May, a class of million of student loan borrowers sued five of the largest student loan servicers for illegally damaging their credit and mishandling CARES Act money. 

Student loan payments, including interest accrual, are set to resume January 1. So start making sure that your loans are in the best position to be repaid. 

Call your loan servicer and explain your financial situation. You may qualify for an income-driven payment plan, maybe even a $0 repayment plan. 

How an attorney can help
An attorney can help you understand your rights and options, and how you can consolidate your loans and start over in the payment process.

An attorney can also represent your interests in negotiations with the loan servicer or debt collection agency and handle credit disputes. For example, under the
Borrower Defense to Repayment Statute, you may have a defense to repayment if you can show that you were defrauded by your schools or college.

Third party debt relief companies, also known as student loan debt relief companies, often claim that they can help student loan borrowers manage their student loan repayment for a fee. But these companies often offer services you could do yourself. You might even be worse off after using these services as these companies may be fraudulent, damage your credit, or make unauthorized changes to your repayment plan. 
An attorney can also help you resolve defaults or delinquencies, file for bankruptcy, and apply for a loan discharge. 

According to Barkley-Denney, bankruptcy is becoming easier for student loan borrowers to access. If you have federal loans, there are really good programs out there. Private loans are a little harder because there is less flexibility. But you can always move to a place where it is easier to file for bankruptcy. However, Barkley-Denney would like more clarity from Congress whether private loans are dischargeable in bankruptcy.

Hopeful next steps for Congress
For students getting sued because they defaulted on their loans, the Department of Education has extraordinary power to get repaid, says Barkley-Denney. The government can take your tax return or social security payments and garnish your wages. For now, the CARES Act has stopped the seizure of tax returns and social security for unpaid student loan debt. 

Barkley-Denney is looking to Congress for discharge of some amount of the student loan portfolio. She notes that often borrowers have small amounts of loan debt. The Center for Responsible Learning conducted an analysis last year to measure the effects of a $10,000 discharge across the board. For the majority of loans in default, a $10,000 discharge would get rid of all student loans. In May, some members of Congress sent a letter to House leaders calling for a universal $30,000 per borrower discharge of student loan debt. 

Barkley-Denney encourages borrowers to contact their Congressional representatives and ask for some discharge of student loans and a further forbearance extension.

Although not everyone needs a student loan lawyer, it can be really helpful to have an attorney advise you of your rights and explore your options. 


This article is intended to convey generally useful information only and does not constitute legal advice. Any opinions expressed are solely those of the author, not LawChamps.
Sona Sulakian

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