Our ABI presentation on the new DOJ Guidance and how to discharge federal student loan debt in bankruptcy went well today, here’s a couple instant reviews!
Reminder, ABI’s presentation for the new DOJ bankruptcy attestation discharge process is today at 3:00 p.m., here’s the link: https://abi.org/events/student-loans-in-2023-is-bankruptcy-finally-a-viable-option?utm_source=social&utm_medium=banner&utm_campaign=abiLIVE_studentloan23&mibextid=unz460
We are presenting along with Chad VanHorn from South Florida to explain how to file these cases, and give practical tips along the way! I’m sure the ABI will have a recording of this national webinar available on their website if you can’t make it .
I’m jointly presenting a webinar this week for the ABI on the new DOJ procedures to allow the discharge of federal student loans. The intent of the DOJ in reviewing student loans for discharge is to help create a process that allows:
Turns out yes. I just read a pretty cool story in the New Yorker about a 91 year old lady, perfectly healthy, obtained a full forgiveness under a “compromise and settlement authority” provided for under the Higher Education Act of 1965. Although it is a last ditch effort as there are many other ways to obtain forgiveness now.
There is an easier way. The IDR Waiver program will allow for someone like this to consolidate their older federal loans to Direct Loans (provided this is done before May 1, 2023), and after 20 years of repayment all undergrad loans would be forgiven. 25 years for grad loans. I believe this lady would have qualified for that as well – although I don’t have access to her loan history to know for certain.
But if you miss that May 1 deadline, or the IDR Waiver, TPD, BDTR or PSLF don’t fit your circumstances for some reason, then this is a way out – used mostly when the Department of Education believes it would be more costly to collect the loan, or when it cannot locate the original promissory note.
What is the IDR Waiver?
The Short Version: if you have an older FFEL loan, even a prior FFEL Consolidation Loan, make sure to consolidate this to a newer Direct Loan asap if you want all of the relief this program allows (contact us if you have any doubts or concerns about losing prior IDR time, interest rate increases, effects on PSLF etc.) While the deadline to do so is May 1, the servicers are busy and it doesn’t pay to wait until the deadline!!
For many years, student loan servicers steered struggling borrowers into forbearance instead of guiding them toward income driven repayment. Income driven payment generally caps payments at no more than 10 percent of income, and ultimately leads to loan forgiveness after 20 or 25 years of repayment. Many of these loan servicers also failed to accurately track borrowers’ progress toward forgiveness. Some of these companies had no system for tracking payments and identifying when borrowers would qualify for forgiveness.
The Brunner standard is a legal test used in certain circumstances to determine whether a borrower’s federal student loans can be discharged in bankruptcy. The test was established by the U.S. Supreme Court in the case of Brunner v. New York State Higher Education Services Corp. (1987).
The Brunner test has three prongs:
Settling private student loans typically involves negotiating with the lender to reach an agreement on a new payment plan or a lump sum payment that is less than the full amount owed. Here are the steps to settle private student loans:
There are several ways to discharge federal student loans, including:
The Borrower Defense to Repayment (BDTR) program has undergone so many changes over the past decade it’s hard to keep track.
Notably, I wanted to set the record straight for those who may be receiving weird messages about their pending BDTR apps.
Only the 2019 Borrower Defense Rule imposed a statute of limitations on borrowers, and that rule only applied to loans that were issued after July 1, 2020– it does not apply to most of the BDTR applications. Unfortunately, when ED created its borrower defense application, it used a single application for all three standards without adequately differentiating what warnings would be shown to borrowers applying under different standards. As a result, borrowers get misleading warnings that don’t actually apply to them at all. There are no limitations periods for the 2016 or 1994 Rules (although there are some restrictions on when borrowers can receive a refund of amounts paid towards the loans implicated by the borrower defense application).
Did you realize that we have free videos on what to do about your student loan on our YouTube Channel “Student Loan Sidebar”? Here’s a post from a few hours ago from one of our followers:
Reboot Your Life: Tampa Student Loan and Bankruptcy Attorney Blog