Endless Student Loan Debt

I have about $30,000 in student loan debt. It started over 20 years ago and the last time I went to school was about 6 years ago. I have been getting IBR plans from Fedloan for at least 6 years now with a $0 payment. At this point, I will never be able to pay off the loan. I have thought about bankruptcy as the loans affect my debt to income ratio, however, I have seen that student loans are not always dischargeable. Is there anyway to remove these or something to improve my credit score?

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  • I think unless you're one of those students who were the victims of the for-profit scam schools and you apply to the specific program for relief from those, you're stuck with them for life.

    https://loans.usnews.com/the-truth-about-student-loan-bankruptcy-discharge has information about the limited set of circumstances under which you can get relief.

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    • Khaki Storm
    • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
    • Khaki_Storm.1
    • 1 yr ago
    • Reported - view

    How does the interest calculate under an IBR plan? 

    Also, what's the motivation behind your question? You mentioned your credit score as a concern, but then mentioned bankruptcy as an option, which that would harm your credit for years to come. I'm glad to give suggestions, just need to understand your goal. 

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    • Ben Khaki Storm My goal is to try to eliminate the debt. The credit issue affect my debt-to-income ratio which affects my ability to obtain credit. Since the loans go back over 20 years and of my inability to pay and bring it down, I had explored bankruptcy as an option, which is where I discovered that it may not be discharged unless there is an undue hardship. This also affects my ability to return to school, which I would like to do. Basically, the debt has been there for so long that I feel like I could never bring it down. I hope this helps.

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    • Ben Khaki Storm Also, I'm not sure about the interest rate. I do know that does accumulate throughout the year while the repayment plan is in effect.

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      • Agamede
      • Agamede
      • 1 yr ago
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      • Reported - view

      Deeper in Debt Have you been denied for credit? I ask because I had a bunch more student loan debt than you (was $174,000 nine years ago; now $11,700), but because I was able to make all my payments on time, I never had trouble getting credit cards or a car loan. Debt to income affects your ability to get a mortgage for sure, but even there (as far as I know) they're only comparing your income to your debt payments. So if your payments due under IBR are $0, I'd actually expect that your student loans aren't affecting your debt to income at all.

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      • Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
      • 1 yr ago
      • Reported - view

      Deeper in Debt I asked because was on a reduced pay schedule for 2 yrs and found myself owing the same amount of total debt after 2 yrs of payments. 

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    • Khaki Storm
    • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
    • Khaki_Storm.1
    • 1 yr ago
    • Reported - view
    Deeper in Debt said:
    undue hardship

    I know someone who had a heart attack and received loan forgiveness. I don't think you want that. Have you looked at other options, like Americorps? https://www.nationalservice.gov/resources/ed-award/loan-forgiveness

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  • Unfortunately, federal student loans are generally not forgivable during bankruptcy.  In order for them to be forgiven during bankruptcy, you need to prove in an adversarial proceeding that (1) you wouldn't be able to maintain a minimal standard of living if you were forced to pay them back, (2)  the hardship you're experiencing will last for a significant part of the repayment period, and (3) you made good faith efforts to repay the loans before this hardship. In practice, this basically means that you have to show that you won't be working ever again so you won't be able to pay them back in the future, and that you tried to pay them back in the past, but were unable to. 

    There are other reasons that loans can be forgiven, discharged, or cancelled, however. Those are are listed here: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation#differencess  

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