Student loan payments may be lowered for millions

The Obama administration recently announced that it will be expanding the federal government's student loan repayment program to allow more borrowers to make reduced loan payments according to their income level. The change would expand eligibility for an existing loan repayment plan that limits monthly payments to 10 percent of the borrower's discretionary income.

Although controversial, the expansion could result in an additional 5 million student borrowers becoming eligible for reduced payments and eventual debt forgiveness through the federal program.

Average Texas grad owes $24,000 in student loans

More than half of all graduates from Texas colleges and universities last year had student loans, according to The Project on Student Debt. Those individuals owed an average of about $24,000 apiece. While high, these figures suggest that Texas graduates are actually better off overall than the national average when it comes to student loan debt; nationally, about 70 percent of 2013 grads had student debt, with an average debt load of over $29,000.

Unfortunately, most student loans cannot be discharged through bankruptcy and usually must be paid off one way or another. However, in many situations, bankruptcy can still be a useful option to student borrowers who are having trouble making ends meet.

Often, people who are unable to keep up with their student loan payments are also struggling with other debts at the same time, such as credit cards and medical bills.

Depending on their specific circumstances, these borrowers may be helped by filing for bankruptcy.

Bankruptcy options to alleviate student debt burden

Even though it most likely will not result in the elimination of their student debts, Chapter 7 "liquidation" bankruptcy can help make student loan payments more manageable by erasing some or all of their other types of debt. In many cases, this is enough to greatly reduce their monthly bill payments, allowing them to focus on repaying their student loans and other important essentials such as food and housing.

Another option for some student loan borrowers is a different type of bankruptcy known as Chapter 13, or "debt reorganization." During this type of bankruptcy, a person's debts are not immediately eliminated, but instead are reorganized according to priority and placed on a payment plan.

A Chapter 13 payment plan typically lasts for three or five years, during which time the borrower is protected from collection actions such as repossession and foreclosure. Because of this feature, reorganization bankruptcy often appeals to indebted homeowners who need time to catch up on their payments in order to stay in their homes.

After the Chapter 13 repayment plan has ended, some or all of the borrower's remaining debts may be discharged - although, as with Chapter 7 bankruptcy, student loans are typically ineligible for discharge.

Get legal advice about debt options

To learn more about bankruptcy and other options for alleviating student loan debts, set up a time to meet with an experienced bankruptcy lawyer in your area. He or she can help you evaluate the options that are available for your individual circumstances and choose the path that will work best for you.