financial hardship, page-2

I am sure that if your friend speaks to the banks and says that he can't pay the repayments at all, then the loan will go into a 'hardship' department associated with the bank, and from then on they look after the loan. I am pretty sure that interest stops being accumulated during this time and your friend can tell the bank exactly how much he can afford to pay a month even if it's a token amount (~$100 month).

He can do this for a few months, saving in the mean time, and every few months they call you up to see if his situation has changed. If it hasn't he can continue with the hardship plan or negotiate a slightly higher repayments, though much lower than he had previously...

While on the hardships plan, he can save on the side without paying interest on the loans to get himself above water... Not sure how long a bank will keep you on the hardship department, however, I know that at the end of the financial year sometimes the bank can "write off" the loan from their books, and at that point you can negotiate a pay out figure, they generally accept around 60% of the total value of the loan...