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Program could impact student loans and personal bankruptcy

A great many college students emerge from school with a shiny new degree and an equally impressive burden of student loan debt. For some, paying back that debt will pose a problem, as the job market fails to yield sufficient income to cover both the cost of living and debt service payments. To make matters worse, many students leaned heavily on loans and credit cards to get through their college years, and have a pile of consumer debt that also must be addressed. Some Arkansas residents will consider personal bankruptcy as a way to gain the breathing room necessary to move forward.

Assistance might also come in the form of a new program that will allow some borrowers to gain a measure of relief from their federal loan obligations. The program is known as Repaye and will be available later this year to individuals who took on federal direct loans. Repaye offers those borrowers to make payments on their student loan debt based on their current level of income.

The monthly payments will be based on the borrower's discretionary income, and will be capped at 10 percent. Discretionary income is defined as any earnings in excess of 150 percent of the established federal poverty level. This means that those who are still struggling to establish themselves after college will have the opportunity to do so while still making progress on their student loan debt.

For those in Arkansas who have a high level of consumer debt on top of their student loans, Repaye may only offer a partial solution. In such cases, seeking personal bankruptcy protection might still be a viable option for debt relief. While student loans will still remain after the conclusion of the bankruptcy process, many other forms of debt can be eliminated. This can give borrowers the breathing room needed to cover their living expenses and take advantage of programs such as Repaye.

Source: americanprogress.org, "Proposed Student Loan Repayment Plan Would Extend the Same Income-Based Terms to All Federal Loan Borrowers", Antoinette Flores, Aug. 18, 2015

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