Wilmington student loans out of control?
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Student loan debt is on the rise in Wilmington and the rest of the state. Individual student loan borrowing continues to trend upward but there also good news. Overall, US educational debt default rates are dropping, but in North Carolina, it’s still a concern because delinquency rates here are higher than average. Here’s a look at the latest student loan news and what you can do about your college debt if you’re struggling to pay your loans.
NC Student Loan Data
As of 2016, student loan debt in the U.S was $1.4 trillion according to the Federal Reserve. Over the last five years, that figure rose .4 trillion dollars representing an increase of about 40%. Research from Credible Labs shows the average monthly student loan payment is $655. NC student loan payments are a little less at around $530.
The latest numbers from the U.S Department of Education show that over the past seven years, default rates dropped from 14.7% coming out of the Great Recession down to a little more than 11% currently. Unfortunately, North Carolina default rates are higher than average at 12.7%. If you’re a Wilmington consumer struggling with student loan payments, here’s what you should know.
Try Income-Based Repayment First
For federal student loans, there are income-sensitive repayment plans that may cut your current payments. These plans offer more reasonable monthly payments than the traditional 10-year plan. Plus, after 20-25 years of payments, the remaining balances can be forgiven, although any amount discharged will be on a taxable basis meaning you’ll pay tax on the forgiven debt.
Bankruptcy May Help If Other Solutions Won’t
It’s a myth that student loans can’t be forgiven in bankruptcy. In fact, most consumers don’t even ask for student loan assistance when they file bankruptcy, so they never give the system a chance. Even if your student loans can’t be discharged in bankruptcy, discharging other debt may create room in your budget to afford your student loans on an income-sensitive repayment plan.
To request student loan relief, your attorney must file an adversary proceeding along with your bankruptcy case. An adversary proceeding is a separate lawsuit associated with your bankruptcy case where you sue your student loan lender seeking relief of the debt. You must prove either fraud on behalf of the lender or prove undue hardship caused by paying your student loans.
Undue hardship is a tenet in bankruptcy law that is required for student loan relief, but the term isn’t clearly defined, so it’s left open to interpretation by the courts. Most courts use the Brunner test which asks you to prove that paying your student loans means you can’t maintain a minimal living standard, that your financial straits are long-term, and that you made a good faith effort to repay the debt.
Relieving Other Debt Can Help
Even if you can’t discharge your student loan debt in bankruptcy, dealing with other debt this way may be enough to help you regain your financial footing. With Chapter 7 bankruptcy, credit cards and medical bills can be wiped out within just a few months along with other unsecured debt that may qualify for relief.
With Chapter 13 bankruptcy, Wilmington consumers can get time to catch up on past-due debts including their mortgage, auto loans, recent income taxes, and student loans. While college can be a great investment in your future, student loan debt can wreck your finances if your income opportunities turn out to be less than you planned when you borrowed.
To find out more about the benefits of bankruptcy to help a student loan dilemma, contact the Law Offices of John T. Orcutt. Read reviews from satisfied clients then call +1-919-646-2654 now for a free Wilmington bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington to talk about your student loan debt.