Financial Q&A: Readers' money questions answered

What steps to take to try to discharge a 20-year-old student loan, now in default.

Q:
How can a 20-year-old student loan that has been in default for nearly the entire time and is completely unrepayable by the debtor be dealt with? Is there a way to make an offer that the lender would accept that would be less than the more than $200,000 that is due? His family members would love to chip in if the debt would be cleared. The burden of the unpaid debt has been emotionally difficult for this poor man who has no money whatsoever.

M.L., via e-mail

A: Contact the collection agency, advises Mary McGrath, a Certified Public Accountant and certified financial planner in Champaign, Ill. Ask them for a form called "Statement of Financial Status" that the debtor will need to fill out. Once the lender receives this information, it is then in a position to renegotiate the loan. This may mean changing the payment schedule or reducing the amount due. That would be the first step.

Typically, these loans cannot be discharged in bankruptcy. There are special circumstances, however. If the individual is considered disabled, for instance, the loan may be discharged. Otherwise, the borrower will have to complete the forms and go through the steps to see if it qualifies to be discharged.

Ms. McGrath thinks that family members who want to help should provide funds for this person to see a lawyer who specializes in bankruptcy and who is familiar with student loans, since they are covered under a separate part of the bankruptcy code. Good legal advice may help emotionally and get the ball rolling in the right direction to get this matter resolved.

Questions about finances? Ask us at:

Work & Money Q&A

The Christian Science Monitor

1 Norway Street

Boston, MA 02115

E-mail: Work and Money

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK