Question: I am posting this message on behalf of a friend who attended a state university in upstate NY in the late 60’s and early 1970’s and who, for the last 3 decades, has been unable to pay his student loan.

I understand that at that time, a lot of students declared bankruptcy for the sole purpose of deadbeating on loans that they might have actually been able to pay off. The government responded by making it impossible for students to take a bath by declaring bankruptcy, even if you were actually bankrupt.

My friend has never held a job where he made more than just enough of a wage to get by. He has a job now, but it doesn’t pay that well, and if they attach his wages he’ll never be able to make rent. He’s afraid to open a bank account or apply for any kind of credit for obvious reasons.

What I need to know is, is there a legal way out for my friend which would allow him to live decently without his being hung up for any more years? Is there a “grandfather clause” which would apply to his particular case as far as bankruptcy would go?

Answer: He may be able to discharge his loans in a bankruptcy since they are very old, although it’s still a struggle; Ray’s site will be informative on this point.

He could also consolidate his loans with the Department of Education and pay back his loans as a percentage of his income. If he doesn’t make much then he would have no payment. After twenty-five years of income contingent repayment the unpaid amount is forgiven. Check out: http://www.ed.gov/offices/OSFAP/DirectLoan/index.html for more information. The program saved me. Also, I put up a dated site about the program some years ago: http://pegasus.cc.ucf.edu/~cotto/Direct.htm My first reaction to this post is that it is a troll. 30 years without repaying a student loan??? Hard to believe, but not impossible, I guess.

You are incorrect when you state that the government has made it impossible to have student loan debt discharged in bankruptcy. Your friend should file a petition for bankruptcy to have this debt discharged. It should be dischargeable if it has been in repayment for more than seven years. If this is actually from the early 70’s……well, you do the math.

However, I just have to ask….
Has your friend ever thought about actually attempting to repay the debt? I do not see how someone could avoid repayment (seizure of tax returns, garnishment, etc) for 30 years unless they have been intentionally living in a way as to avoid all contact with government entities. It’s too bad your friend didn’t file bankruptcy back in the 70’s when this would have been discharged without a second thought. He would have had one less thing to worry about all these years.

Now, there is the practical matter of trying to pay off 30 years of accrued interest. That snowball has become an avalanche by now. Help Rip Van Winkle find an attorney who will do a simple bankruptcy cheap and tell him “welcome back” for me.

By the way, someone posted something in this group about income contingent repayment. Not on these loans. They are way too old. Fixed 7 percent (1967 forward to October 1981(?)), 9 month grace period. These are old-school GSLs.

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