333 Washington Avenue North, Suite 300
Minneapolis, MN 55401


Student Loan Help

Student loan debt is rising at alarming rates. As of 2015, there are nearly 39 million borrowers carrying over $1 trillion in federal student loan debt. Student loans are not the next great economic crisis that will face our country–the crisis is here already. More and more student loan borrowers of all ages, professions, and incomes are unable to make their student loan payments. It is time to get some real help.

We offer an analysis of your student loan debt. With just 30 minutes of your time and some financial information from you, we can analyze your situation, provide you with a detailed report of all programs available to you and how they work, and then prepare a strategy to solve your student loan problems.

  • Are you unable to afford your minimum payments?
  • Are you receiving calls from debt collectors?
  • Are you in default and unsure of how to get out?
  • Are you being threatened with a wage garnishment, or the lender taking a portion of your tax refund or social security income?
  • Are you being sued for a student loan?
  • Do you think you may qualify for a discharge of your student loan but are uncertain?
  • Are you considering bankruptcy to deal with your student loans?

If you answered yes to any of the questions then call us now so that we can help you understand your alternatives and assist you with your student loan debt.

Federal Student Loans

Federal student loans have programs and options that can help borrowers. Income Based Repayment programs may reduce your payments to as low as $5 per month and excuse the remaining balances after a 20 to 25 year history of payments. Rehabilitation programs may allow you to make a payment that is “reasonable and affordable” to you based on your unique financial situation. You may be able to consolidate, regardless of your credit history, and move yourself out of "default" status. Perhaps a deferment or forbearance may be helpful to stop payments for a temporary period of hardship. There is more. If you are employed by a government, non-profit, or public organization (for example - teachers, police officers, firemen, nurses, and other public service occupations), you may be able to have your loan balances forgiven after 10 years of payments.

Some of the services that we can assist a student loan borrower with include the following:

  • Determining if you qualify for an Administrative Discharge of your student loan
  • Determining if a Deferment or Forbearance is in your best interest
  • Fighting off nasty debt collectors trying to collect on your delinquent student loans
  • Lowering your monthly student loan payment
  • Preventing or ending wage garnishments, social security offsets, judgment proceedings, and the loss of your tax refund
  • Reviewing your eligibility for student loan forgiveness programs
  • Reviewing your eligibility for student loan Consolidations or Rehabilitation to get you out of "default"
Consequences of Default

You want to avoid defaulting on your student loans because the consequences are significant. Most student loans are considered in default when the borrower fails to make required payments for 270 days. When the loan goes into default it is assigned to a debt collector, which can then add collection fees of up to 25% of the loan balance. Default loans also subject the borrower to garnishment of 15% of your wages without any judgment or court action, seizure of your tax refunds, seizure of 15% your social security benefits, and denies you eligibility for new education grants or loans. There are two methods to “cure” a default loan- consolidation and rehabilitation.


Consolidation can only be done through Direct Loans. It allows you to consolidate your defaulted student loan or loans into a new Direct consolidation loan, similar to refinancing. It is at this time that the borrower generally puts the new loan into an income based repayment program. This process takes between 30 to 90 days to complete. Not all loans are eligible for consolidation and there are limits on how many times you can consolidate.


Rehabilitation is a process where the borrower makes nine voluntary (reasonable and affordable) payments within a ten month period, at which time the loan is cured and current. The main advantage of rehabilitation over consolidation is that when a loan is successfully rehabilitated, the default notation is completely removed from the borrower’s credit report. In contrast, consolidation results in a notation that the defaulted loan was paid in full.

Deferment and Forbearance

Deferments and forbearances are only temporary fixes. They are used mainly to keep the loan out of default. A deferment occurs when the lender temporarily allows the borrower to stop making payments. For subsidized loans, the federal government pays the loan’s interest while the loan is deferred. For unsubsidized loans, the interest continues to accrue during the deferment period. Deferment rights vary depending on the type of the loan and when the loan obligation was incurred. Deferments are usually applied for with a written application. You may qualify for a deferment if you meet one of the following conditions:

  • At least half-time school enrollment
  • Graduate fellowship study
  • Rehabilitation training program
  • Unemployment
  • Economic hardship
  • Military service and post-active-duty

If you do not qualify for a deferment, you may qualify for loan forbearance to temporarily stop making your payments. All student loans in forbearance, subsidized and unsubsidized, accrue interest. Most forbearances are subject to lender discretion and the requests can be made verbally over the phone.

Repayment Plans and Options

There are two major types of repayment plans- balanced based plans and income based plans. Essentially, balanced based plans involve the borrower paying the student loan in full over a period of time, whereas income based plans calculate the borrower’s monthly payment using the borrower’s income, and if the borrower is unable to repay the loan within a certain number of years, the remaining balance is forgiven. Generally, the income based plans benefit the borrower much more than the balance based plans because they have lower monthly payments and you are not paying the loan in full.

Balance Based Repayment Plans

These plans require a minimum monthly payment of $50.00 and the borrower can change plans at least once a year.

Ten Year Standard Payment- This is the plan the U.S. Dept. of Education puts your student loans in if you do not select a plan. It amortizes the loan over a 10 year period.

Graduated Payment- This plan is for 10 years also, but payments start out low and adjust up every two years.

Extended Payment- This plan allows for loans that exceed $30,000 to be paid over a period of 25 years.

Extended Graduated Payment- This plan allows for loans that exceed $30,000 to be paid over a period of 25 years, with payments starting out low and increasing every 2 years.

Income Based Repayment Plans

These plans have specific eligibility criteria that can be complicated. For instance, eligibility for each program depends on the type of loan (Direct Loan, FFEL, Perkins, Parent Plus) and when the loan was taken out. In these plans, monthly payments can be zero in some cases. Borrowers who repay their loans through these types of plans have their remaining balances forgiven after 20 or 25 years. However, under the current state of the law, the forgiven balance is taxable.

Income Contingent Repayment (ICR)- This plan factors both the borrower’s income and balance of the loan to calculate a monthly payment. The repayment term can be up to 25 years and any remaining balance at the end is forgiven. The negative element of this plan is that the larger the loan balance, the less helpful the ICR plan is. That is generally why the IBR plan is the preferred plan since it does not factor in the loan balance.

Income Based Repayment (IBR)- This plan calculates the borrower’s monthly payments based on 15% of your disposable income after comparing your AGI (Adjusted Gross Income) to the poverty level for the family of equal size. The repayment term is 25 years and any remaining balance at the end is forgiven.

Pay As You Earn (PAYE)- This plan is similar to IBR, except monthly payments will be lower because the formula bases your payment on 10% of your disposable income rather than 15%. Furthermore, the repayment period is 20 years at which time any remaining balance is forgiven. This plan applies only to borrowers with both no balance before October 1, 2008 and new student loans incurred after October 1, 2011.

The New IBR- This is exactly the same as PAYE, except it only applies to borrowers with no balance prior to July 1, 2014.

Student Loan Forgiveness Programs

To encourage people to work in public service and teacher professions, Congress enacted special loan forgiveness programs. These programs have very specific eligibility requirements. For that reason, it is best to consult a qualified student loan attorney to determine if you qualify for the program.

Public Service Loan Forgiveness

This program is available to borrowers who work in public service jobs (government entity or 501(c)(3) non-profit organization) for 10 years and repay their loans through an eligible repayment plan. The remaining balance is then forgiven after the 10 years of service is completed and the forgiven balance is NOT taxed.

Teacher Loan Forgiveness

Teacher loan forgiveness includes forgiveness of up to $5000 to individuals who are full-time teachers over 5 consecutive years in certain schools that serve low-income families. For borrowers who teach 5 consecutive years as math or science teachers in eligible secondary schools or as special education teachers in eligible elementary or secondary schools, the forgiveness limit is $17,500. Borrowers with a loan balance prior to October 1, 1998 are not eligible.

Administrative Discharge

Administrative discharge, also called statutory discharge, cancels the entire student loan debt. The five (5) ways to discharge a federal student loan are as follows:

  1. Closed School- The school’s closure while the student borrower was still enrolled.
  2. False Certification- The school’s false certification of the student borrower’s eligibility, including false certification due to forgery or identity theft.
  3. Unpaid Refund- The school’s failure to pay a refund owed to a student borrower.
  4. Disability- The borrower’s permanent and total disability.
  5. Death- The borrower’s death.

All of the above administrative discharges have detailed and specific requirements which must be met to qualify for such a discharge. It is best to consult with a qualified student loan attorney to understand the requirements and regulations.

Private Student Loans

Alternatives for private student loans are more limited than those available for federal student loans. Private student loans are not eligible for any government based student loan assistance or forgiveness programs. Options to address private student loans include negotiation of lump sum settlements or monthly payment plans, defending a collection lawsuit, and bankruptcy (undue hardship in chapter 7 if you qualify, and/or discharging the loan if it is a “non-qualified” student loan; or, stopping the lawsuit and making payments in chapter 13).

Often times the private student loan is easier to resolve after the creditor brings a lawsuit because the consumer now has access to all of their legal rights under the law. It also means the creditor (the lender that issued the private loan, or another company that acquired the loan) has the burden of proving the debt. In many cases this is difficult for the creditor to do. The potential defenses in the private student loan lawsuits include:

  • The statute of limitations has expired.
  • The creditor cannot prove they own the loan or how they acquired it.
  • The creditor cannot provide evidence to support the balance sought in the lawsuit.
  • The creditor has improper paperwork.
  • The creditor cannot get their documents in evidence because they do not have a competent witness to testify.

Discharging private student loans in a bankruptcy through an adversary proceeding is possible if you qualify for an “undue hardship” or have private student loans that are “non-qualified”.


The test for “undue hardship” used by Minnesota bankruptcy courts is called the “totality of the circumstances” test. Three factors are evaluated to determine undue hardship under this test: (1) the debtor’s past, present, and reasonably reliable future financial resources; (2) a calculation of the debtor’s and her dependent’s reasonable necessary living expenses; and (3) any other relevant facts and circumstances surrounding each particular bankruptcy case.


In 2005, Congress amended section 523(a)(8) of the Bankruptcy Code to except from discharge private student loans that are “qualified education loans.” Qualified education loans are defined in both the Tax Code and the Higher Education Act as debts incurred solely to pay for (i) qualified higher education expenses (ii) at an accredited institution by (iii) an eligible student. Qualified higher education expenses are defined as the “cost of attendance” which is a sum determined by the institution, to cover tuition, fees, room, board, and books.

This is not only a question of bankruptcy law, it is foremost a question of tax law, because the interest paid on a qualified education loan can be deducted from the taxpayer’s income tax. And you can be sure that the IRS will not allow taxpayers to bend the rules to deduct interest paid on educational loans that do not meet these strict requirements. So, how do we prove that your loan is not a qualified education loan?

  • Ineligible Schools: We check your school against the Department of Education’s Title IV eligible school list for the year in which you attended. If the school does not appear, the school was not Title IV eligible, and the loan could not be a qualified education loan.
  • Ineligible Money: We check your “cost of attendance” and compare that to the total of amount of money you received from all federal, state, and private sources, including scholarships, grants, work-study, and loans. If you borrowed even one dollar more than was necessary to cover the “cost of attendance,” the private loan was not incurred solely to pay for qualified higher education expenses and is not a qualified education loan.
  • Ineligible Students: We check to be sure you met all the requirements to be an eligible student under the Higher Education Act. Were you registered for selective service? Were you a high school graduate? Had you exceeded your annual or aggregate Stafford borrowing limits? All of these elements are necessary to retain eligibility under the Higher Education Act, and where a student was not eligible, no money lent to that student could be qualified.

To see if bankruptcy is a possible option to discharge your private student loans, you will want to consult with experienced counsel to explore this option further. We are having success right now in cases with private loans and “undue hardship” where no reasonable repayment options exist and also in cases where the private loan does not meet the “qualified educational loan” requirement. We recently made new law in Minnesota with respect to “non-qualified” private student loans. See Schultz vs. Navient Solutions, Inc., 2016 WL 8808073 (Bankr. Minn. 2016).

With over 30 years' legal experience working with consumers to solve their financial problems, I am confident I can help you with your student loan debt. My goal is to prepare a comprehensive plan to resolve your student loan issues so you can live a better life.

333 Washington Avenue North, Suite 300, Minneapolis, MN 55401 Phone: (612)349-2728 / Fax:(612)349-2726