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Student loans typically not eligible for refinancing

If you have a mortgage that was financed at a higher rate of interest, should interest rates fall as they have over the last few years, you have the option of refinancing that debt to newer, lower interest rates. If you have a 30-year mortgage, a few percentage points reduction can save you thousands of dollars over repayment period of the loan.

But those with student loans don't have that luxury. Student loan interest rates are set by Congress. And only Congress can change them, which seems unlikely given Congress's inability to do much of anything. The fact that student loans generate $34 billion in income for the federal government means Congress is even less likely to want to reduce that number. For individuals overwhelmed with debt, including student loans, bankruptcy may provide their only option.

While student loans are not easily discharged in a bankruptcy, it is possible if your are able to show extreme hardship. This is a difficult standard to meet, but sadly, in today's weak employment market, more debtors may qualify.

Even if your personal and financial condition are not sufficiently dire to qualify for a student loan discharge, a Chapter 13 bankruptcy could allow you to eliminate much of your other debt, like credit card bills and other loans, and this might free up enough of your income that you could begin to make tangible progress in repaying your student loans.

Because financial circumstances are unique, it is important to speak with a bankruptcy attorney, who can review your debts and income, and suggest the best strategy for dealing with your situation.

Source: Time, "Why Can't People with Student Loans Refinance at Better Rates?" Dan Kadlec, Feb. 20, 2013

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