Student Loans in Chapter 7 or Chapter 13 Bankruptcy
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Can I Discharge My Student Loans In Bankruptcy?
Getting rid of student loans in bankruptcy is difficult -- but not always impossible. To succeed, you must convince the court that repaying your student loans would cause you "undue hardship."
You may have heard that getting rid of student loans in bankruptcy is impossible. That's not true--but it is very difficult. To succeed, you must convince a bankruptcy court that repaying your student loans would cause you "undue hardship."[more]
For more information about student loans and bankruptcy, select your state below.
What's the difference between federal and private student loans?
Most student loans fall into one of two categories:
Federal loans, which are funded or guaranteed by the federal government
Private loans (sometimes called "alternative" loans), which are nonfederal loans funded by banks or other lenders such as credit unions, state agencies, or schools.
If you need to borrow money to pay for college or career school, start with federal loans.
Direct PLUS Loans (for parents). Parents are fully responsible for paying these loans, even though they are taken out to benefit students.
Federal loans offer many advantages over private loans
lower, fixed interest rates and
more flexible repayment options such as
Income Driven Repayment options
Full or partial Loan Forgiveness for
Public Service Employment
Disability
Defunct Colleges
Corinthian, et al
The following chart, adapted from the U.S. Department of Education website, summarizes the important differences between federal and private student loans.
Subject
Federal Student Loans
Federal Parent Loans
Private Student Loans*
When payments become due
Payments aren’t due until after you graduate, leave school, or change your enrollment status to less than half-time.
You (the parent) can choose to put off payments until the student you borrowed for graduates, leaves school, or changes enrollment status to less than half-time.
Many private student loans require payments while you are still in school, but some do allow you to defer (put off) payments while in school.
Private student loans can have variable or fixed interest rates, which may be higher or lower than the rates on federal loans depending on your circumstances.
Subsidies
If you have financial need, you may qualify for a loan for which the government pays the interest while you’re in school on at least a half-time basis and during certain other periods. This type of loan is called a "subsidized loan."
These loans are not subsidized; therefore, you will be responsible for all the interest on your loans.
Private student loans are often not subsidized. In the case of an unsubsidized loan, you will be responsible for all the interest on your loan.
*Private loans differ by lender and by type of loan. Be sure you understand the terms of your loan, and keep in touch with your lender about any questions you may have.
Student Loans FAQ >
What's the difference between Direct Loans, Stafford Loans, and FFEL Loans?
Most existing federal student loans came from just two loan programs: the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan (FFEL) Program. The FFEL program was canceled as of July 1, 2010, which means that loans made on or after that date are Direct Loans. Loans made between August 10, 1993 and July 1, 2010 may be either FFEL or Direct Loans, depending on the lender.
The basic difference between the two federal loan programs is that Direct Loans are funded by the U.S. Department of Education. FFEL Loans, on the other hand, came from private lenders. Those older loans were backed up ("guaranteed") by the federal government.
Types of FFEL Loans. The FFEL program was created in 1965. Under the program, student or parent borrowers may have received one or more of the following types of loans: Subsidized or Unsubsidized Stafford Loans (formerly known as Guaranteed Student Loans (GSLs) or Federal Insured Student Loans (FISLs), Federal PLUS Loans or Federal Consolidation Loans. Many FFEL loans have been sold to the U.S. Department of Education, so you may be currently paying off FFEL loans as if they were direct loans.
Types of Direct Loans. The Direct Loan program was created in 1993. Under the Direct Loan program, you may have received one or more of the following types of loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, or Direct Consolidation Loans. Direct Subsidized or Unsubsidized Loans were sometimes called "Direct Stafford Loans," but that terminology is not used for newer loans. You will repay these loans directly to the U.S. Department of Education.
PLUS Loans are federal student loans for graduate and professional students and parents of undergraduates. PLUS loans made to parents can't later be transferred to the child. The parent who receives the loan must repay it.
Borrowers can take out PLUS Loans up to the cost of attendance, which is determined by the school, minus any other financial aid the student receives. For PLUS Loans made between June 30, 2013 and July 1, 2014, the interest rate was 6.41%. PLUS Loans made between June 30, 2014 and July 1, 2015 carry an interest rate of 7.21%
You must pass a credit check to obtain PLUS Loans. If you don't qualify on your own, you may be able to get PLUS Loans with a cosigner (the Department of Education calls this person an "endorser").
A Perkins Loan is a federal student loan for low-income undergraduate or graduate students. From July 1, 1972 until October 17, 1986, these loans were called National Direct Student Loans (NDSLs). Before July 1, 1972, they were known as National Defense Student Loans, or NDSLs.
The interest rate on Perkins Loans is lower than the rate for other federal student loans, and the loan comes with more flexible terms -- such as additional repayment and cancellation options. And Perkins Loans are subsidized by the federal government, meaning you don't pay interest on the loans while you are in school or during periods of deferment.
Also, unlike other types of federal student loans, Perkins Loans are made by your school, using a combination of school and federal funds. This means the school is considered your lender, and you should contact the school directly if you have questions about your loan.
For more information, see Perkins Loans on the Federal Student Aid website.
Student Loans FAQ >
What if I don't know what kind of loan I have?
When it comes to managing student loan debt, most of your choices depend on whether your loans are federal or private. If you're not sure what kind of loans you have, use the National Student Loan Data System. Choose "Financial Aid Review" and supply the requested information to get a list of all federal loans made to you.
To use the system, you will need to supply:
your Social Security number
the first two letters of your last name
your date of birth, and
your U.S. Department of Education PIN number.
The FSA ID replaced the Federal Student Aid PIN on May 10, 2015. If you haven’t logged in to a U.S. Department of Education (ED) online system since then, you’ll need to create an FSA ID before you can use U.S. Department of Education online systems.
Once you get to the list of your loans, you can click on each loan to get details about it, including exactly what kind of federal loan it is and who services it.
If you have student loans that aren't on the national database list, it means they are private loans. For more information, you'll need to contact the financial institution that made the loan.
Student Loans FAQ >
What is student loan deferment?
A deferment allows you to temporarily stop paying your federal student loans. You qualify for a deferment if you meet certain conditions -- for example, if you are unemployed and looking for work, or if you return to school at least half time. If you are eligible for a deferment, you can postpone payment on both the principal and interest of your loans. In some cases, the federal government will even pay the interest for you. In other situations, interest continues to accrue during the deferment period.
A student loan forbearance, like a deferment, allows you to postpone or reduce your federal student loan payments for a set period of time. However, it is often easier to get a forbearance than a deferment -- for example, you may qualify even if your loan is in default, or if you are experiencing financial hardship that falls short of conditions for deferment. The downside is that forbearance is usually more expensive than deferment. Interest always accrues during a forbearance, causing your loan balance to grow.
Default is what happens if you fall behind on your student loan payments. For most loans, if you fail to make a payment for 270 days (that's nine months) the loan will go into default. After that, your school, the loan servicer, or the government can take action against you to get back what you owe. You may face serious legal and practical consequences if you default on your student loans.
Skipping payments or defaulting on a student loan can have serious and lasting effects on your credit. When a delinquency or default notation appears on your credit report you may have more trouble with basic financial tasks such as:
getting a mortgage, car loan, or credit cards
renting an apartment
maintaining favorable interest rates on your existing loans or credit cards
opening bank accounts
obtaining insurance policies
getting a cell phone contract, or
getting a job.
Most negative information is removed from your credit report after seven years, but student loan defaults may remain on your record much longer. Defaults for a federal student loan may be reported for seven years after the most recent of the following dates:
when it's paid off
when it's first reported, or
if you rehabilitated the loan, when you re-default on it.
If you find yourself in a dispute with the holder or servicer of your student loan, you should first take steps to resolve the problem directly. If that doesn't work, the following services are available to assist you.
Filing a Federal Student Loan Complaint
If you're having difficulty with the lender or servicer of your federally guaranteed student loan, you can get help from the Department of Education. For guidelines, visit the Federal Student Aid Ombudsman website or call 877-557-2575.
Filing a Private Student Loan Complaint
If you're having trouble with private student loan company or a collection agency, you can turn to the Consumer Financial Protection Bureau (CFPB). The CFPB provides services to assist you in resolving complaints about your private student loans. For more information, visit the CFPB Student Loan Complaints website or all 855-411-2372.
Learn More
For more details and additional resources, including additional tips for working out student loan problems without filing a formal complaint, see How to Get Help With Student Loan Problems.
Student Loans FAQ >
About This Website
We built this website to get you the answers you need about getting out of student loan debt. When you choose your state or enter your zip code on our home page, you will quickly learn how to get organized so you can:
choose the right payment plan
lower or put off your monthly payments
cancel your student loans, if possible
avoid defaulting on your loans -- or get out of default if it's too late
get help with student loan problems, including finding a lawyer in State
file a complaint agains a student loan lender
and more.
Our goal is to guide you to reliable information about managing your loans, providing resources tailored for State when available.
Who We Are
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