Medical School Loans - Nonmatch - Bankruptcy

This forum made possible through the generous support of SDN members, donors, and sponsors. Thank you.

Faebinder

Slow Wave Smurf
15+ Year Member
Joined
May 24, 2006
Messages
3,508
Reaction score
14
Suppose someone finished medical school with the typical or even more than average amount of med student loans ($250k) and they attempt to match and 3 years (heck make a number, 7 years ) in a row don't match. Would they be able to declare bankruptcy and be rid of the loans (or some of the loans) on the account they are unable to achieve the career they are supposed to have to pay their loans?

What's the word out there with regards to this mess? (I am talking about a US citizen in the US of course).

Members don't see this ad.
 
Student loans aren't dischargable in bankruptcy, by law. I can't imagine there's any additioanl provision for folks who don't match ... I mean, you can't discharge your student loans in bankruptcy if you don't graduate. Lots of people fall into that category, for example, if they failed to graduate from undergrad.

Also, I think every US grad who passes the boards should be able to match if they apply broadly in a less competitive specialty, right?
 
Student loans aren't dischargable in bankruptcy, by law. I can't imagine there's any additioanl provision for folks who don't match ... I mean, you can't discharge your student loans in bankruptcy if you don't graduate. Lots of people fall into that category, for example, if they failed to graduate from undergrad.

Also, I think every US grad who passes the boards should be able to match if they apply broadly in a less competitive specialty, right?


US citizen with medical school loans does not equal/mean US graduate. You are never garaunteed matching. They dont toss residency contracts at you when you graduate and graduating without even a year of residency means you cant work anywhere in the US.
 
Members don't see this ad :)
Federal loans can't be declared in bankruptcy, and in 2005 neither can private loans.

I'd look on the internet for some more information, I found this site - http://www.finaid.org/questions/bankruptcy.phtml
Section 523(a)(8) of the US Bankruptcy Code, at 11 U.S.C., excepts from discharge debts for "an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or an obligation to repay funds received as an educational benefit, scholarship, or stipend; or any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual" unless "excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor's dependents".

http://www.moranlaw.net/studentloans.htm
http://www.finaid.org/questions/bankruptcy.phtml
https://www.debthelp.com/kc/203-federal-and-private-student-loan-bankruptcy--discharge-guide.html


are some others.

Pretty much you will probably have to make a good faith effort, if you don't match the first year most would try again I'm sure so lenders might try to work with you. I'm being overly optomistic I'm sure though.
 
Federal loans can't be declared in bankruptcy, and in 2005 neither can private loans.

I'd look on the internet for some more information, I found this site - http://www.finaid.org/questions/bankruptcy.phtml


http://www.moranlaw.net/studentloans.htm
http://www.finaid.org/questions/bankruptcy.phtml
https://www.debthelp.com/kc/203-federal-and-private-student-loan-bankruptcy--discharge-guide.html


are some others.

Pretty much you will probably have to make a good faith effort, if you don't match the first year most would try again I'm sure so lenders might try to work with you. I'm being overly optomistic I'm sure though.

and after the third try? fourth?
 
The chance of you being able to discharge your federal educational loans would basically be nil. The fact that you cannot work in your chosen field is irrelevant because it does not mean you can't do another job, even if it is working at the BK. If you look over your prom note and exit stuff you signed it is stated that the fact you cannot get a job in your chosen field is not a valid reason to not have to pay it back. The feds have an income sensitive/income contingent repayment option where they will take a percent of your income, divide it by 12 and that is your payment. Currently with Direct Lending if you meet the burden of the ICRP the rest of your debt is forgiven after 25 years. So in short, one could go to Med school, borrow tons and then work at the BK for 25 years and be out from underneath the rest of the debt. The logic was to encourage the more altruistic types to get a masters and go serve the poor. A Federal Lender has an income sensitive and there is a difference so if your lender is not Direct, ask them about that option.
I can't address the 3rd or 4th try for residency but would suggest you consult with someone who is more of an expert to help you assess if it's ever going to happen and if not, and pehaps begin looking for other ways to use your MD degree and transition out of practicing medicine.
There is an organization called Student Loan Justice headed by a guy who borrowed a lot, ignored it for a while and is now pretty much financially ruined. He has been leading the fight to get educational loans forgiven in bankruptcy for years but the feds aren't all that interested since the money forgiven in a bankruptcy would come out of the taxpayer's pockets-- kind of makes it a hard sell.
In the meantime, I would be exploring eco hardship (if you haven't exhausted the 3 year max), or forbearance so your credit is not being ruined along the way as well as the different repayment options. The last thing you want is a default because a state can (and most likely will) bar you from practicing if that is the case. Keep in contact with your lenders bacause the surest way to screw yourself is to ignore this all. Best of luck.
 
Adding that you can get federal loans deferred for up to 3 years for unemployment. I believe you have to register with your state's unemployment office, which is a good thing to do anyway because that gives you access to all sorts of job listings, and show that you applied for at least 6 jobs. It is OK to look for jobs in your field. Of course in your scenario, it sounds like the person already used that up.

I agree with the posts above that the person would just have to find some other way to make money and pay the loans. It's really not too unusual of a story to hear about someone who racked up student debts and wound up unable to get the job they trained for.
 
Suppose someone finished medical school with the typical or even more than average amount of med student loans ($250k) and they attempt to match and 3 years (heck make a number, 7 years ) in a row don't match. Would they be able to declare bankruptcy and be rid of the loans (or some of the loans) on the account they are unable to achieve the career they are supposed to have to pay their loans?

What's the word out there with regards to this mess? (I am talking about a US citizen in the US of course).

Death might be one of the surest way to rid yourself of the loans, though I don't think you'd appreciate that option.

Declaring bankruptcy (if you can get one declared) might go as far as deferring the loans or restructing the terms of the loan to make it manageable, but it would not rid you of the loan.
 
Declaring bankruptcy (if you can get one declared) might go as far as deferring the loans or restructing the terms of the loan to make it manageable, but it would not rid you of the loan.

And since students loans are exempt from bankruptcy protection, it's doubtful that declaring bankruptcy will have any effect on your payments. You're pretty much at the mercy of your lenders.
 
Arrgg...

Sorry. Wrong post. Just ignore
 
Top