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Chapter 13 bankruptcy for student loans? It’s possible

Yes, bankruptcy can work for repaying student loans because the process can remove other debts. Also, watch those 'net price calculators' when determining the price of college.

The true price of college is often a mystery. (Dreamstime/TNS)
The true price of college is often a mystery. (Dreamstime/TNS)Read moreHandout / MCT

You can file for Chapter 13 bankruptcy to help dig out from under student loans.

Note, we aren’t saying you can get rid of — or discharge — student loan debt. Instead, if you want to package and repay your student loans, it’s possible under Chapter 13 bankruptcy law, says Jay Fleischman, a student loan lawyer and operator of MoneyWise Law in New York and California.

“Americans believe that bankruptcy doesn’t help student loans. That’s just not true. Many lawyers confronted with a student loan think those are nondischargeable. The reality is this: You can treat them differently than other general unsecured credits in a Chapter 13 plan,” said Fleischman, who has been practicing bankruptcy law for 23 years.

Chapter 13 bankruptcy involves repaying a portion of your disposable income to a court-appointed trustee, for distribution to creditors over a few years, he explained.

“We find that sometimes relief from other kinds of debts allow the borrower a greater ability to pay their student loans,” he added. “It’s so useful.”

Philly lawyers: Have you worked through any Chapter 13 bankruptcies involving student loans? We’d like to hear your solutions.

Colleges underprice cost of an education

It took two professors to figure out that the price tags at colleges are highly misleading.

University of Pennsylvania professor Laura Perna is one of them, and she released a surprising study finding that colleges’ “net price calculators” — the tool parents use to determine the all-in cost of an education — often underestimate the price tag and use old data.

About 40 percent of universities in Perna’s 2019 study advertise tuition and fee data that are three or even four years old, ignoring the reality that costs typically rise each year.

“Some schools emphasized an out-of-pocket cost that includes only the costs of tuition and fees and room and board, even though going to college comes with other costs, including books,” Perna said.

Other universities said grants and loans will reduce out-of-pocket costs without making it clear that — unlike grants — loans have to be repaid with interest over many years.

“One school said on their website that the cost was zero, after Parent Plus loans. That’s just wrong,” she said.

One better pricing source?, according to Christine Roberts, who heads student lending at Citizens Bank.

Roberts is also a fan of proposals to subsidize community college, such as a bill from U.S. Rep. Andy Levin (D., Mich.) called America’s College Promise Act. U.S. Rep. Madeleine Dean (D., Pa.) is a cosponsor.

Roberts is not a fan of U.S. Sen. Elizabeth Warren’s debt forgiveness plan. “That doesn’t come close to fixing the college price problem,” Roberts said. She and other private lenders advocate for a cap on Parent Plus loans, which “will force colleges to rein in prices. Lack of loan limits feeds the irrationality.”

The America’s College Promise bill proposes that federal government and states waive resident tuition and fees for two years of community college and technical college, ensuring that academic credits are fully transferable to four-year institutions in their state.

College affordability is the true crisis, and the $1.6 trillion in student loans outstanding is a symptom of universities driving up prices without constraint. So lawmakers are looking at reauthorizing the Higher Education Act for the first time since 2008, which mandated colleges create net price calculators — one hopes with true data.

“Paying for college is too important for there to be wrong data,” said Perna.

Why are they deliberately underpricing? “Many colleges are looking to increase applications," she said, “so they present the cost in a way that encourages people to enroll their kids.”

Before you pay that tuition bill

Did you know you can appeal your kid’s financial aid award letter?

“For some families, a change in financial status may have occurred since the submission of your Free Application for Federal Student Aid form and may not reflect your current income,” notes Fred Amrein, founder of, a Newtown Square consulting and software firm that helps parents and students maximize financial aid and minimize college costs. Here’s a checklist of tuition bill items to review before you pay:

  1. Room size: Prices can vary depending on room selection with a single room being most expensive.

  2. Meal plan: College freshmen may not have a choice in the meal plan. If the plan is too costly, ask if it can be downsized.

  3. Health insurance: This fee can usually be waived with proof of your child’s health insurance.

  4. Payment plans: Check with the bursar for tuition installment plans. Is there a fee to set up the installment payment plan? The first payment is usually due in August.

  5. Federal loans: Tuition bills indicate which federal loans you are eligible for, so student and parents must understand the type of loans they will be accepting.