CHAPTER #32 Student Loans

If you are permanently and totally disabled, or your school closed suddenly, you can apply for a discharge yourself. If disabled, visit https://studentaid.gov/manage-loans/forgiveness-cancellation/disability-discharge. If a closed school, visit https://www2.ed.gov/offices/OSFAP/PEPS/closedschools.html. You may be eligible for a 100 percent discharge of your William D. Ford Federal Direct Loan (Direct Loan) Program loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans if you were unable to complete your program because your school closed, and if

• you were enrolled when your school closed;

• you were on an approved leave of absence when your school closed; or

• your school closed within 120 days after you withdrew.

Do you have a loan insured by a state or local government, and you’re not permanently disabled, and it is not for a closed school? Then, bankruptcy will not discharge the loan. Rarely can you show it would be an “extreme hardship” to pay something on it, even if you are old, most judges will say. Chapter 13 bankruptcy can provide some relief, though. You can control your other debts so you can make your student loan payments. You can also pay some of your student loan debt alongside other creditors, giving your student loan a proportional share of your payment. Here is an example: You owe $25,000 in government insured student loans you can’t discharge, with a $300/month payment. You have $30,000 in credit cards, with minimum payment of $600 per month. A $10,000 lawsuit when you crashed your car wants to garnish your $1500 biweekly gross before taxes paycheck and take 25% ($375 biweekly) for themselves. What to do? Chapter 13! If you do nothing you pay $300 to the student loan, $600 to the cards, and $750 to the lawsuit. That’s $1650 a month. Your gross is only $3000 most months, and you only net after taxes about $1900 a month. You can’t live if you have to pay $1650 a month to creditors. Chapter 13! How does it work? Your budget is tight. You can afford to pay $600 a month for debt, no more. Your Chapter 13 Plan proposes to pay that $600 per month to the Court, and they don’t get to take any more collection action. You pay $600/month for 36 months, and never have to pay anyone except the student loan balance again. And it includes attorney fees.

Since your student loan is about 40% of your total debt, it gets 40% of your payment, or about $240 a month, pretty close to what you were paying before. The other creditors and your attorney fee of about $125/mo. get the rest. Of course, no one is going to get paid 100%, because your plan is only going to pay in $21,600. But that will pay about $8,000 on your student loan, and another $8000 to satisfy the $30,000 credit cards and lawsuit, plus your own lawyers’ fees. You get a discharge on $12,000 of the cards and lawsuit after 36 months. No Chapter 7 for government insured student loans, educational benefits to qualified schools, or pure tuition loans whether government-insured, or privately held. But, what about a loan where you got some extra money to help out while you went to school, from a private lender, and spent it on stuff other than tuition. That’s a private, not a governmental student loan, and that type of loan can be discharged under Chapter 7 or 13, just like credit cards or accidents.

To find out if the student loan you have is a federal student loan, Check at Register at https://studentaid.gov/help-center/answers/article/what-is-nslds or register at My Federal Student Aid to find information about your student loan, including the federal loan servicer. If it turns out to be a private loan like Signature Student Loans and EXCEL Loans LAWLOANS and Law EXCEL Loans Smart Option Student Loans. EFG Loans Career Training Loans Private Consolidation Loans you may qualify to have it discharged along with other debt under Chapter 7 or Chapter 13 Plans. Navient services both government, and private loans. https://navient.com/in-repayment/private-student-loans.html to find out which yours is. So, if your loan was made by a PRIVATE lender, and was NOT solely to pay higher ed expenses for you, spouse or dependent, for education during an academic year, it MIGHT be a student loan that is DISCHARGEABLE in either Chapter 7 or Chapter 13 proceedings!

Such loans are NOT government insured, to attend UNQUALIFIED schools, and for OTHER THAN TUITION: (“Private Undergraduate Loans”), (“Private Graduate Loans”), private credit consolidation programs (“Private Consolidation Loans”), programs marketed directly to consumers (“Direct-to-Consumer Loans”), (“Career Training Loans”) and programs that provide private supplemental funding for certificate-seeking, continuing education, undergraduate and graduate students at eligible degree-granting institutions or non-degree granting institutions (“Smart Option Student Loans”), which can be used by borrowers to supplement their FFELP loans in situations where the FFELP loans do not cover the cost of education or to cover education at non-Title IV institutions and programs for undergraduate, graduate and health professional students (“EFG Loans”), that provide borrowers with private supplemental funding.

Find out your student loan details, and contact Geraci Law if you are overwhelmed with debt. Even if you can’t discharge it, you may be able to consolidate or eliminate other debt so you can pay off that student loan before you retire!