There’s a lot of buzz right now regarding student loans, especially in light of the new repayment plan put into place by the U.S. Department of Education on December 21, 2012, called the Pay As You Earn Repayment Plan. So what exactly is the Pay As You Earn Repayment Plan? How is it different from the Standard Repayment Plan? What is loan consolidation? Is there any way to have my student loans forgiven? We are covering this in a three-part blog series meant to help you understand all the terminology and how your choices with respect to your student loans affect your finances. Part 1: Repayment Part 2: Consolidation Part 3: Forgiveness & Discharge
It is a harsh reality of today’s post-collegiate environment – two-thirds of all students now graduate with burdensome debt that can follow for many years to come. Following a recent news story on CBS Evening News, a comment was made that a student CAN have their federal student loans discharged in a Chapter 7 bankruptcy IF it is found that repayment of the loan would impose a hardship on the borrower. If only it were that easy… Discharging private student loan debt in bankruptcy currently requires a showing of “undue hardship,” a standard too often difficult to prove and very rarely met. The website FinAid estimates that less than 1% of private student loan borrowers in bankruptcy attempt to seek a hardship discharge of that obligation, and less than half of those people are successful. Courts typically refer to the following three requirements that a person must meet to qualify…
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