In most cases, bankruptcy cannot discharge student loans. Usually the only viable way in which student loans can be discharged is through proving permanent disability or through death, neither a good option. Another method of discharging or challenging federal student loans is if the educational institute closes prior to one graduating. This occurs more commonly in business and trade schools, and may help one argue that student loans should not have to be repaid.

Prior to 1998, some people could avoid repayment of their student loans through bankruptcy. Tougher laws in 1998 in the US made it virtually impossible to prove financial hardship great enough to have student loans forgiven through bankruptcy. Even permanent disability of a spouse or child is only reason enough for deferment but not loan forgiveness.

It is thus important not to ignore student loans, and to do all possible to borrow as little as is needed. When one does not maintain a payment schedule on student loans, the loans can go into what is called default. Once a loan is officially considered in default, options for repayment shrink dramatically.

If one remains current on student loans and does not go into default, there are a variety of ways to defer paying student loans. First, attending school part-time, taking a minimum of six units per semester can defer loan repayment. Second, financial hardship may also allow one to defer payments until a later point. Temporary disability can also help one defer loan repayment for up to three years. All these methods usually require extra paperwork proving school attendance or a medical condition, for example. The extra paperwork can be well worth it to avoid having loans in default status.

When a loan is in default status, the company that owns the loan has several options. Huge fees can be assessed to the loan, which make the ultimate repayment price much higher. Student loan companies can also garnish wages, or take income tax refunds to pay back a portion of a loan. This does not count as an actual willful payment made by the person. The loan remains in default status.

The normal seven-year limit in which creditors can collect a debt does not apply to student loans, even private student loans, as per changes to the law in 2005. In fact in 2005, US law changes meant that even private student loans are exempt from bankruptcy proceedings. This means that until a private or a federal student loan is repaid in full, a lender can continue to demand payment.

The fact that student loans cannot be discharged through bankruptcy should give students pause when taking out loans. Considering attending less expensive schools to help reduce education debt is just one possible answer. Searching for scholarships can be another. Working while attending school, though difficult, may also help reduce student loan payments, which will continue to follow one until the loan is completely repaid.