Relief Of Student Loan Debt
Student loan debt is one of the most common types of debt in America. In 2018, the average student loan balance was more than $32,000—and that doesn’t include the interest. This leads many people to consider filing for bankruptcy to discharge their student loans. But before you do, it’s important to understand what happens when you discharge your student loans through Chapter 7 bankruptcy or Chapter 13 bankruptcy (as well as options outside of bankruptcy that could help).
What Is A Student Loan And Why Should I Discharge It?
A student loan is a type of unsecured debt that must be repaid after graduation. Student loans don’t require collateral like mortgages or car loans do; therefore, there isn’t anything else secured by them besides your future earnings potential after college graduation. Student loans are also issued by private lenders and not the federal government like other types of unsecured debts such as medical bills or credit card balances (which can be discharged in Chapter 7 bankruptcy). However, unlike these other types of unsecured debts which are discharged in both Chapter 7 and 13 bankruptcies (including those incurred before medical school), only some types of student loans can be discharged through these two chapters – usually depending on whether they were obtained using federal funds or not [1-2].
If you’re struggling to repay your student loans, there are several options available that can help reduce or even discharge your debt.
If you’re disabled and unable to work due to your disability, the government offers several options for relief. Borrowers who are permanently disabled might qualify for total and permanent disability discharge (TPD), which discharges all of a borrower’s loans. If a borrower dies while still in repayment status, his or her co-signor may be eligible for a closed school discharge (CSD). In addition, if death occurs before finalizing an income-driven repayment plan with the Department of Education (DOE), DOE will use its discretion when determining whether it is appropriate to continue making payments on the deceased person’s behalf based upon its assessment of hardship factors outlined in 20 CFR 685.183(i)(2).
Income-based repayment plans
Income-based repayment plans are available for federal student loan borrowers with a high debt-to-income ratio. If you’re eligible for one of these plans, your monthly payments will be based on either your discretionary income or the amount you owe compared to your discretionary income, whichever is lower.
- How do income-based repayment plans work?
Your monthly payment will be based on the following:
- The amount you need to pay each month to cover all of your debt by 2023 (this includes interest)
- Your family size and household income. Your monthly payment under this plan can range from $0 per month to 15% of your adjusted gross income (AGI). You may have other options if you make less than 150% of the federal poverty level—check out https://studentaid.ed.gov/sa/repayment/iibrp/#if_i_qualify_. If you’re interested in applying for an IBR or PAYE plan, go ahead and apply! If approved, you could have lower payments right now while still paying down some principal on your loans over time.
If a student loan is discharged or forgiven, can it be reinstated?
If a student loan is discharged, it cannot be reinstated. If the debt is forgiven, it can be reinstated. If the debt is discharged and then forgiven, it can be reinstated.
If a student loan is discharged and repayed or forgiven again at some point in the future, it will not qualify as having been previously discharged or forgiven in determining whether you can discharge that same debt under section 523(a)(8) of title 11 of the United States Code because that would result in an “unreasonable result” under section 523(a)(8).
Which loans are eligible for debt relief?
If you have defaulted on your student loans, then this option is available to you. However, it’s important to know that only federal government-issued student loans are eligible for forgiveness of debt. Federal government loans include:
- Stafford Loans
- PLUS Loans
- Consolidation Loans
You also can apply for relief from private or state-owned lenders if they are federal guaranteed. These include:
- Perkins Loans (guaranteed by the Department of Education)
The federal government offers several options to relieve the debt burden.
The federal government offers several options to relieve the debt burden. These include:
- Debt relief – if you’re having trouble making payments due to a hardship, you may be able to apply for a deferment or forbearance. If your loan is not eligible for these types of temporary breaks from payments, you might qualify for an income-driven repayment plan. This option caps your monthly payments at 10 percent of your discretionary income (income minus 150 percent of the poverty level), even if that number is less than what’s currently owed. The length of time that it takes to repay depends on how much money you make and how much time has elapsed since graduating with your degree. After 25 years (for loans taken out before July 1, 2014) or 20 years (for loans taken out after this date), any remaining balance will be forgiven—but not discharged! If a loan is discharged or forgiven under these conditions, can it be reinstated? Yes—but only in certain circumstances when applying through Student Financial Aid Services within six months after cancellation takes place.
If you are struggling with student loan payments, there may be options available to help you. You can apply for income-based repayment plans or look into debt relief programs that may be available in your state. It’s important to know the details of these programs so that you can take advantage of them and reduce your debt burden as much as possible. If a student loan is discharged or forgiven, can it be reinstated? This question was answered by the U.S. Department Of Education after receiving questions from borrowers who did not understand the difference between discharge and cancellation of federal student loans.