Michael Koch, Esq. Lockhart, Britton & Koch Michael Koch, Esq. Lockhart, Britton & Koch
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How to deal with burdensome student debt (and avoid scams)

Student debt is a fact of life for nearly 50 million Americans. Some high-income earners stay on top of their debt or pay it off entirely thanks to stable jobs. Yet millions of others aren't so lucky, falling behind on payments that frequently total more than a mortgage.

Most types of unsecured debt - credit card debt, medical bills and payday loans, for example - can be effectively wiped out through bankruptcy. Yet student loans are notoriously difficult to get out of. They can only be discharged in cases of "undue hardship" - a tough standard to meet.

If you have student debt, you've likely been bombarded with ads and phone calls promising student debt reduction (or even outright loan forgiveness). Beware: Many are scams. They make money by charging you fees for repayment plans that you could apply for on your own, for free, through Federal Student Aid. Some may enroll you in reduced payment plans but then pocket the money themselves, leaving you in default. Some may charge exorbitant interest rates that prevent you from ever making a dent in your debt. Some might even steal your personal information and then vanish.

What to watch out for

Nerdwallet has compiled a watchlist of suspicious companies to avoid. However, many of these unscrupulous companies simply resurface under a different name. It's important to be vigilant when weighing your options for student debt. Steer clear of supposed debt solutions that:

  • Claim to be an official federal student loan servicer but aren't on this list
  • Charge monthly or upfront fees for getting you into a repayment plan
  • Offer immediate loan forgiveness
  • Request that you sign a power of attorney giving them authority to handle your finances
  • Ask for your FSA ID, social security number or other personal information

As a general rule, if it sounds too good to be true, it probably is.

What other options might be available

Despite the prevalence of scams, there are legitimate options for making student debt more manageable. For example, you may wish to consider:

  • Applying for an income-based repayment program to reduce your monthly payments
  • Requesting a deferment or forbearance (to temporarily put your payments on hold)
  • Pursuing a consolidated loan
  • Seeking credit counseling from a reputable agency that's accredited through the National Foundation for Credit Counseling
  • Applying for loan forgiveness if you work in public service (and meet other qualifications)

If other types of debt are interfering with your ability to make your student loan payments, it may be wise to consider bankruptcy to get rid of those debts.

Of course, every situation is different, and there is no one-size-fits-all solution. The best approach is one that's tailored to fit your unique needs.

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