Does Bankruptcy Clear Student Loans
Borrowers who are employed full-time in qualifying jobs in the public service sector may have their remaining student loan debt forgiven after just 10 years in the income-based repayment program and this forgiveness would be tax-free thanks to a ruling from the U.S. Treasury last year. Qualifying for Income-Based Repayment To find out if you qualify for income-based repayment on your federal college loans youll need to contact your lender and provide information about your financial situation - youll need to demonstrate "partial financial hardship" as defined by federal regulations. Only federal Stafford and Grad PLUS student loans in good standing along with consolidations of these college loans are eligible for income-based repayment. Federal Perkins loans are eligible only if theyve been included in a federal student loan consolidation.
10. After 25 years of repayment the remaining balance was forgiven. In 1996 the Debt Collection Improvement Act of 1996 allowed Social Security benefit payments to be offset to repay defaulted federal education loans. 11. In 1998 the Higher Education Amendments of 1998 struck the provision allowing education loans to be discharged after 7 years in repayment. 12. In 2001 the US Department of Education began offsetting up to 15% of social security disability and retirement benefits to repay defaulted federal education loans. In 2005 "the law change" as we call it in the Bankruptcy field further narrowed the exception to discharge to include most private student loans. Since private student loans were given protection from discharge in bankruptcy there has been no reduction in the cost of those loans.
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For borrowers who are on the governments income-based repayment plan any outstanding federal college loans can be discharged prior to full repayment if the borrower has made her or his monthly loan payments for 25 years. Borrowers who go to work for the government or the public sector can have their federal college loans forgiven after 10 years. Federal college loans can also be forgiven in the event the borrower dies or becomes permanently disabled. Non-federal private student loans on the other hand arent required to offer any of these payment-deferment or discharge provisions. It is at the lenders discretion whether to offer a struggling borrower deferred or lower monthly loan payments and even whether to discharge the private student loan upon the borrowers death or permanent disability.
Because we know that borrowing to attend college is not going away steps to offset the bite of borrowing to attend college should be taken as far in advance as possible to reduce and manage your debt. Here are some steps to you can take to ensure you are borrowing responsibly. 1. Avoid Falling into The Loan Trap - If at all possible avoid borrowing; however if you are like most students attending college you have no other choice but to do so. When it comes time to borrow do not be tempted to borrow the full sum available to you personally on the loan loan of the loan doing so can give you a false sense of financial security. Often when you get the maximum amount of a student loan it is usually more than you can afford to repay. This usually happens when students take out a need-based loan.