Calculating When The 7
If you are contemplating filing for personal bankruptcy or making a consumer proposal in the hopes of discharging your student loan debt, you should seek the help of a Licensed Insolvency Trustee to ensure that you have satisfied the 7-year waiting period.
To be prudent, if your goal is to have your student loans discharged, you should calculate the start date on the end of your education as the latter of
- The date you actually ceased attending school, or
- the last day of your exams for your final semester
You might want to add 30 to 90 days out of an abundance of caution.
Consider Getting Expert Help
While you get familiar with your options, you probably noticed that each program is unique. They all require different conditions and have their own benefits or disadvantages. It is extremely important to make the right selection from the very beginning. Otherwise, you might end up wasting years for a forgiveness option that you are not even eligible for.;
If you want to cancel student loan debt, the best option is to get expert help. Experts, like those in Student Loans Resolved, are well aware of the industry practices. They can analyze the finances and select the most beneficial option for the borrowers. Besides, they will be by your side through the whole application process. Whenever you need help, the debt specialists will be there to lend a hand.
What Is The Bankruptcy Procedure To Discharge My Student Loans
Requesting a student loan discharge comes at the end of the bankruptcy process. A qualified bankruptcy attorney can explain what the bankruptcy process involves. However, if you know that filing bankruptcy is a possibility, there are some steps you can take to prepare for student loan debt discharge.
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Student Loan Discharge For Unpaid Refund
Like the false certification discharge, unpaid refund discharge applies to direct loans and FFEL program loans. It would come into play if your school didnt pay a refund it owed to the U.S. Department of Education or a lender. In this case, the government will give you a partial discharge in the amount your school didnt pay.
Qualifying for this refund may require a bit of detective work on your part. Contact your school to learn about its refund policies for federal aid, and ask your loan servicer for additional information.
Student Loan Discharge Due To Death
Federal student loans are also discharged if the borrower dies. In this event, a family member or representative must send a death certificate or other documentation to the loan servicer. All federal student loans are discharged. Parent PLUS loans are also canceled if the borrower or the student passes away.
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Eligibility Criteria For Perkins Loan Forgiveness
Borrowers working in public or not-for-a-profit organizations, or more specifically, elementary and secondary schools, can apply to this program to cancel student loan debt. However, additional requirements also exist. The borrower needs to satisfy one of these conditions, too:
Keep in mind that postsecondary schools do not qualify for this program. The good news is you do not need to have a certificate or license. But in return, the teacher should be directly employed as full-time staff.;
Administrative positions, including supervisors or researchers, will not be eligible for this forgiveness option. Additionally, it is possible to work part-time in multiple educational institutions to meet the full-time criteria, like the PSLF.;
Landmark Bipartisan Bill Would Allow Student Loan Discharge In Bankruptcy: Key Details
WASHINGTON, DC – MAY 19: Sen. Richard Durbin asks questions during a Senate Appropriations … Subcommittee hearing on May 19, 2021 in Washington, DC.
A new, bipartisan bill that will be introduced into the Senate would allow borrowers to discharge their student loan debt through bankruptcy.
The bill, called the Fresh Start Through Bankruptcy Act, would amend the bankruptcy code to more easily permit student loan discharges under certain conditions. The bill is sponsored by Senator Richard Durbin and Senator John Cornyn .
While it is not impossible under current law to discharge student loan debt through bankruptcy, it can be quite difficult. To do so, most borrowers must show that they have an undue hardship, which is a challenging legal threshold to meet. The bankruptcy code itself does not adequately define what undue hardship even means, so courts have created tests , to help judges issue rulings about whether or not a borrower meets the tough standard. In many jurisdictions, borrowers must prove that there is a certainty of hopelessness to their circumstances an often impossible task.
Legislative text for the bill should be released in the coming days, which will provide more details on the particulars of the reform proposals.
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How To Get Student Loans Discharged In Bankruptcy
You can discharge student loans in bankruptcy if you can prove that repayment would cause you and your dependents an undue hardship. The Bankruptcy Code doesn’t define undue hardship. So bankruptcy courts determine undue hardship by applying a test.
There’s no uniform undue hardship standard or test.
Some courts use the Brunner test. Other courts use the totality-of-the-circumstances test. And other courts use a combination of the two or some other test altogether.
Related:Brunner Test Student Loans: How to Prove Undue Hardship
No matter which test is used, bankruptcy courts are typically trying to determine whether you can maintain a minimal standard of living while repaying your student loans.
Because the U.S. Department of Education offers repayment plans based on your income, it’s incredibly difficult to prove you can’t maintain a minimal standard of living.
Private student loans, on the other hand, typically don’t offer affordable monthly payments based on income. Because of that, you may find it easier to get an undue hardship discharge of your private student loan debt .
Loan Forgiveness Cancellation And Discharge
Under certain conditions, you may have all or part of your education loans forgiven or cancelled in exchange for performing a qualifying service for a defined period of time. Although you do not have to repay the part of your loan that is forgiven or cancelled, you may owe taxes on the forgiven/cancelled amount in cases where the forgiven/cancelled amount is considered income.
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You may qualify if you are totally and permanently disabled, borrowers can request a disability discharge application. Return the completed application to the U.S. Department of Educations Total and Permanent Disability servicer. |
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Death Discharge |
If you, the borrower, die, then your federal loans will be discharged. If you are a Parent PLUS loan borrower, your loan may be discharged if you die, or if the student on whose behalf you obtained the loan dies. Contact the loan servicer for assistance. |
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Discharge in Bankruptcy |
Generally, student loans are nondischargeable under the Bankruptcy Code. If you file for a Chapter 7 or 13 bankruptcy, you must bring an action known as an Adversary Proceeding in the Bankruptcy Court, and prove to the court that repaying the loan will create an undue hardship on you and your dependents. We strongly suggest you consult with your attorney on the effect of filing a bankruptcy petition on your student loan debt. |
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Public Service Loan Forgiveness Program
This is Option No. 1. Congress created it in 2007 to encourage people to pursue noble careers that serve mankind and lessen student debt.
To qualify for the;Public Service Loan Forgiveness program;, you must be a full-time employee in a public service job. You must also make 10 years of on-time monthly payments after consolidating your federal loans in a qualified repayment program.
This option applies solely to Direct Federal Student Loans.;Private student loans;are not eligible for the PSLF program.
Before we proceed, heres a red flag: Applicants from the class of 2007 theoretically were the first ones eligible for loan forgiveness in 2017 and 99% of applications were rejected. That number has gotten slightly better with 2.4% of applications approved as of September 2020, according to the U.S. Department of Education.
Many borrowers discovered their application was rejected because they had been in an incorrect repayment plan. The Department of Education introduced its PSLF Help Tool in 2018 to try and reduce the number of rejected applications.
The PSLF Help Tool allows you to search for qualifying employers and has a series of question related to the programs requirements that should help steer borrowers through the eligibility process.
If you are deemed ineligible because some or all of your payments were not made under a qualifying plan, you might still be eligible through Temporary Expanded Public Service Loan Forgiveness.
Want To Cancel Student Loan Debt Read This Before
Before discussing your options for federal and private loans, keep in mind that finding the right program is not a piece of cake. While getting familiar with the options, you will notice that each of them has specific eligibility conditions, benefits, and drawbacks. As much as debt cancellation sounds attractive, sometimes repaying the debt can even be more effective than applying to forgiveness programs.
Borrowers need to be well aware of the accessible options and thoroughly analyze their finances before selecting a program to apply to. We understand that many borrowers do not have the necessary financial backgrounds or even enough time to think twice about forgiveness alternatives.
Therefore, it is highly recommended that the borrowers get expert help in this demanding path. Like those we work with in Student Loans Resolved; our debt specialists have years of experience. They have resolved the student loan problems of hundreds of similar borrowers. Their expertise is what allows them to choose the most suitable program for you. Before wasting your time on wrong options, make sure you get expert advice.;
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Private Student Loan Debt Forgiveness Options
Private loans, from a bank, parent or other financial institution, are repaid directly to your lender. They might include a student line of credit, student credit card or overdraft. Any term revisions must be negotiated with your student loan provider.
Private student loans are just like any other unsecured debt. There are no special rules or study period limitations to qualify for of loan forgiveness.; Any credit card debts, lines of credit or bank loans you used to fund the tuition fees and other costs of your education can be discharged in a bankruptcy or proposal with no limitations or waiting period. Read our article for more on repaying private student debt.
Federal Student Loan Forgiveness For Disability: Requirements
If youre a federal student loan borrower facing long-term disability and cant work, you may be eligible for student loan forgiveness through Total and Permanent Disability discharge .
Nelnet assists the Department of Education with this program. To be eligible, youll first have to demonstrate that you are totally and permanently disabled. You can do that in one of the following ways:
| What disabilities qualify for student loan forgiveness? | |
|---|---|
| 1. If youre a veteran | Submit documentation from the Department of Veterans Affairs showing that you are unemployable due to a service-connected disability. |
| 2. If youre receiving federal benefits | Submit a Social Security Administration notice showing that you are receiving disability insurance or Supplemental Security Income and that your next scheduled disability review will be within five to seven years. |
| 3. If youre otherwise disabled | Submit certification from a physician proving that you are totally and permanently disabled, meaning that you suffer a physical or mental impairment that meets the following criteria:
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What You Should Know If You Cannot Pay Your Student Loans
It is very common for individuals graduating from university or community college to be burdened by significant debt. Often, this debt is from student loans. In some instances, students may also carry other types of unsecured consumer debt primarily credit card debt.
This article will address the key issues facing people who owe a significant amount of money because of student loans.
This is the Second Article in a Series of Four Dealing with Student Bankruptcy.To learn more about student loan debt and waiting periods, read on. You can also skip to another section by clicking one of the links below:
Discharging Student Loans For Undue Hardship
You have probably heard student loans are excepted from discharge in bankruptcy unless you can prove that you or your dependents would suffer undue hardship if forced to pay them back. This is a notoriously high bar to meet. Very few student loan borrowers can show that they are completely unable to pay back some or all of their student loan debt due to undue hardship.
However, not all student loans are the same. Some private student loans fall through the cracks in Bankruptcy law and can be discharged as ordinary unsecured debt.
Under Section 523 of the federal Bankruptcy Code, a student loan meeting the following criteria is only dischargeable if the debtor can prove undue hardship.
unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtors dependents, 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 of the Internal Revenue Code of 1986, incurred by a debtor who is an individual
There are three circumstances under which private student loans can be discharged as unsecured debt.
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What Other Options Are Available
Even if private borrowers are most likely unable to cancel student loan debt, they can still find ways to make the repayment process easier. For example, student loan refinancing is one of the most beneficial ways to reduce debt obligations. It is possible to access lower interest rates and monthly payments through refinancing. As a result, the debtors will be better able to repay the debt on time.;
Another solution can be getting help from debt settlement companies. Such companies create a plan for borrowers to save some money every month. As a result, in a short period, the borrower accumulates a considerable amount of funds.
Next, the debt settlement company negotiates with the lender to settle the lump-sum amount that the borrower saved. Usually, this amount is lower than the original student debt. However, the lender might agree to a lower amount as it will be a one-time payment rather than a small payment for a long period.;
Undue Hardship And Student Loan Discharge
To succeed in having your student loans discharged, you must demonstrate that not having them discharged would cause you to experience “undue hardship.” For a bankruptcy court to take your side, you will have to meet specific conditions. The problem is that there is no uniform set of conditions.
However, your student loan creditorswhich may include lenders, servicers, and collection agencies, depending on the types of loans you have and how far behind you are on paymentsmust;also meet specific conditions. They must satisfy the preponderance of the evidence standard, a high standard that requires them to prove that their claims against you are valid. They must also prove that your loans meet the conditions of section 523.
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Student Loan Cancellation Programs
Perkins loan cancellation.;Borrowers with federal Perkins loans can have up to 100% of their loans canceled if they work in a public service job for five years. In many cases, approved borrowers will see a percentage of their loans discharged incrementally for each year worked. The Perkins loan teacher benefit is for teachers who work full time in a low-income public school or who teach qualifying subjects, such as special education, math, science or a foreign language.
How To Apply For Public Service Loan Forgiveness
To apply for PSLF, you must fill out an Employment Certification Form every year and make pay stubs, W-2 forms or other documentation available as requested.
If you have met the repayment requirements, submit a PSLF application to the Department of Education. If its approved, the remaining balance of your loan will be forgiven.
But be aware, the whole PSLF program is in limbo until President Biden or Congress submit a plan for changing the program. Its possible that monthly payments would also be slashed. People earning less than $25,000 a year and couples earning less than $50,000 would pay nothing toward their loans until their incomes rose above those levels.
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