The Consumer Financial Protection Bureau is examining the problems people are having with student loans. The most pressing problem is that student loans cannot be discharged in bankruptcy most of the time. This can leave desperate borrowers with no workable solutions. The worst problems are with private student loans. Often the private student loans have higher interest than government-backed loans, and there may be no structured procedures for you to file in times of hardship. Private student loans don't necessarily have income-contingent repayment plans or any consolidation options. (Federal loans can only be consolidated one time.)
As a consumer lawyer, I regularly get called by people with student loan problems. I have a few suggestions that work sometimes but far from always.
1. When you are having a hardship WRITE to your lender and ask for relief.
2. If the lender does not provide a workable payment plan, be a squeaky wheel. Make formal written complaints to the lender, the CFPB, and your congressional representative. I have seen cases of private student loans (where the congressional complaint shouldn't make a difference) get special consideration after a call from a congressperson's constituent services office. Congressional complaints also let your representative know how important it is to get statutory relief in the form of lower interest rates and bankruptcy dischargeability.
If you get sued on a student loan, you should at least talk to a consumer lawyer and possibly a bankruptcy lawyer. Sometimes the party that sues you is an assignee who can't prove the assignment or is claiming the wrong amount. Sometimes the loan actually can be discharged in bankruptcy through a showing of substantial hardship. Even if the student loan can't be discharged, you may get enough relief on your other bills to keep up your student loan payments.
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