‘My degree has not led me to greater income or opportunity.’ I’ve been paying my student loans for over 25 years. Should I just declare bankruptcy?

Question: I have a degree, and I’ve been paying the student loan for about 25 years. I switched to income-driven repayment in 2011. The loan servicing company tells me that since I started IDR later, instead of starting in 1997, I have to pay for about another decade to have my loans forgiven. I had heard that after 20-25 years the loans are wiped. Now the amounts keep going up, with my salary changes, but it is obvious that this will never end. My degree has not led me to greater income or opportunity. Can I bankrupt my loans? I have heard of student loan strikes, not paying the loan in protest of unethical contracts, where the banks know you can’t pay them back. What should I do?

Answer: While the bankruptcy route may sound appealing from a forgiveness standpoint, it’s most likely not the answer to your problems. Indeed, it’s very difficult to discharge student loans in bankruptcy, and to do so requires demonstrating undue hardship in what’s called an adversarial proceeding. “Undue hardship is generally interpreted as meaning that you are currently unable to repay your student loans and maintain a minimal standard of living for yourself and your dependents, that this situation must be likely to persist for most of the life of the loans, and that you’ve made a good faith effort to explore repayment options like income-driven repayment, deferment and forbearance,” says Mark Kantrowitz, student loan expert and author of Who Graduates From College? Who Doesn’t?.

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Student loan forgiveness and income-driven repayment plans

You may instead want to consider loan forgiveness. It sounds from your note as if your lender thinks that you may qualify. And indeed, if you’ve been working full-time in a public service field, directly for a government agency or 501(c)(3) or nonprofit organization, you may qualify for Public Service Loan Forgiveness (PSLF). This program forgives the remaining debt after 120 qualifying payments (roughly 10 years) in an income-driven repayment plan in the Direct Loan program. What’s more, “there is currently a limited PSLF waiver that allows payments made on FFELP loans in any repayment plan to count toward forgiveness, provided that you consolidate the loans into the Direct Loan program and file a PSLF form using the PSLF Help Tool by October 31, 2022,” says Kantrowitz. 

The remaining debt after 20 or 25 years worth of payments in an income-driven repayment plan is forgiven, but prior payments made in a standard, graduated or extended repayment plan do not count. That may be why you’ve been paying your loans but they didn’t count until recently. “Income-contingent repayment (ICR) and Income-based repayment require 25 years, the pay-as-you earn repayment plan (PAYE) requires 20 years if you have only undergraduate loans and 25 years if you have graduate school loans, so depending on the type of repayment plan you’re on, you may only have 10 to 11 or 15 to 16 years left,” says Kantrowitz.

What about refinancing your student loans?

Because you have federal loans and are on an income-driven repayment plan, you most likely do not want to refinance your student loans. However, readers who have private loans with higher rates may want to: see the lowest student loan refinancing rates you may qualify for here.

Beware of a student loan strike

Though it may seem tempting, a student loan strike will likely just make your situation worse. If you default on your student loans, collection charges of up to 25% can be deducted from every payment before the rest is applied to the interest and loan balance. What’s more, the federal government can garnish your wages up to 15% without a court order and the 15% garnishment is more than the amount paid under an income-driven repayment plan. “The federal government can also offset income tax refunds and Social Security disability and retirement benefit payments. There is no statute of limitations on federal loans,” says Kantrowitz.

And remember that when you don’t make payments, you risk defaulting on your debt, which carries a slew of negative consequences including collection fees and damaged credit. “It’s never a good idea to purposely default on your debt. Instead, “aim to get your payments as low as possible by enrolling in an income-driven repayment plan,” says Anna Helhoski, student loan expert at NerdWallet.

Letters edited for clarity and brevity.