If you have taken out any loan in your life, ignoring it does not make it suddenly disappear. The same can be said for student loans. Like consumer debt, when a borrower takes out a student loan, it is done so with the notion that the money will be repaid, with interest, to the lender.
However, there are cases in which student loans are handled a little differently. The debt settlement lawyers at McCarthy Law want to educate clients on how student loans differ from other debt.
Understanding the Two Types of Consumer Debt
Consumer debt can fall into two different categories. The first category is secured debt. Secured debt is debt backed by another individual liable for that debt, like a co-signer, or the item purchased, such as a car or a house. Unsecured debt is not backed by a co-signer or collateral but is instead lent with only the promise that the money will be returned.
Student loans fall under unsecured loans but are not treated the same as all unsecured loans. Failure to repay an unsecured loan, such as a student loan, will likely result in legal action. There are a few differences between student loan debt and other unsecured loans in how they are handled when a borrower defaults.
You May Not Find Relief through Bankruptcy
For borrowers struggling to pay back unsecured consumer loans, bankruptcy may be an option. For student loans, while it is not impossible, filing for bankruptcy as a means to not pay off student loan debt is very difficult to achieve. The requirements to do this are incredibly stringent and require you to prove undue hardship that is likely to continue. Additionally, you must prove that you have made a good faith effort to pay off the debts that you owe. This applies to both federal and private student loans.
Understanding the Difference between Federal and Private Student Loans
Borrowers can take out federal student loans, which the federal government backs, or take out private student loans, which private lenders back. Federal student loans have the following protections in place:
- Forgiveness programs
- Extended or graduated repayment plans
- Income-based repayment plans
On the other hand, private loans typically have a ten-year repayment period with fewer options for borrowers to pay back the loan.
Student Debt Settlement Lawyers Can Help You
Dealing with student loan debt can be complex and confusing. If you find yourself defaulting on your payments and unsure of what the future will hold regarding your debt, it may be time to reach out to the student debt settlement lawyers at McCarthy Law.
Our clients’ testimonials speak for themselves regarding our personalized service and care with competitively low lawyer fees. For a complimentary debt analysis and savings estimate, fill out our form here or call (855) 976-5777.