Student Loan Issues

Many of you out there have student loans. You are not alone! Look at these staggering statistics:

   Nearly 20 million Americans attend college each year. Of that 20 million, close to 12 million – or 60% – borrow annually to help cover costs

   There are approximately 37 million student loan borrowers with outstanding student loans today.

   There is roughly somewhere between $902 billion and $1 trillion in total outstanding student loan debt in the United States today.

   About $864 billion is outstanding federal student loan debt while the remaining $150 billion is in private student loans. Private student loans are not made or backed by the federal government.

   $24,301 = The average student loan balance $54,000 = Minimum balance owed by top 10% of borrowers $100,000 = minimum balance owed by 3% of borrowers $200,000 = minimum balance owed by top 1% of borrowers.

   Among all bachelor’s degree recipients, median debt was about $7,960 at public four-year institutions, $17,040 at private not-for-profit four-year institutions, and $31,190 at for-profit institutions.


Student Loans and Bankruptcy

Can you discharge student loans in a bankruptcy? Generally not. You have to show an “undue hardship”. This is VERY hard to show. If you attempt to discharge a student loan in bankruptcy the Court will look at:

   Your past, present, and reasonably reliable future financial resources;

   A calculation of your and your dependent’s reasonable living expenses, and,

   Any other relevant facts and circumstances surrounding each particular bankruptcy case.


Student Loans and Administrative Solutions / Discharges:

Can you discharge your student loans “administratively”? In other words can you discharge your student loans directly with the U.S. Department of Education (without filing bankruptcy)? It’s possible in some limited circumstances. For most people a more realistic goal is to get the loan out of default and set up a LONG TERM and Affordable plan to pay the loan back. A long term solution is not only possible but it’s mandated by the Higher Education Act. (HEA).


Disability Related Discharge:

According to the United States Department of Education (“ED”), in order to receive a Disability related discharge of your student loans, a physician must certify that you are unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that (1) can be expected to result in death; (2) has lasted for a continuous period of not less than 60 months or (3) can be expected to last for a continuous period of not less than 60 months. IF you are a VETERAN, you will be considered permanently and totally disabled for purposes of a student loan discharge if you provide documentation from the U.S. Department of Veterans Affairs (VA) showing that you have been determined to be unemployable due to a service-connected disability. For most people however a more realistic goal is to bring your loans current if they are in default and then set up a long term affordable payment plan.


” Closed School” Discharge:

If a school closes before you graduate, you may be able to discharge the loan. Generally, you must have either been enrolled or withdrawn within 90 days of the closure.


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