Hello, I'm your host, Mr. Chuck. I'm a retired accountant, turn truck driver, I have reduced my debt to zero in a short matter of time, debt reduction to achieve financial freedom takes commitment, confidence determination, is your student loan debt, hurting your credit score? Are you having trouble getting other loans because of it, and you're not sure what to do. I'll be back in one moment to discuss these and other topics about student loan debt. Together, we're going to explore our finances and figure out how to improve them. reduce debt increase wealth is a podcast to inform those to improve personal finances, whether it's eliminating debt or making smart investments. If you're struggling to pay off your student loan debt, you're not sure what you can do. That's what this episode is about. If you're getting ready to go to college, or you're already in college, and you think this episode is about how to get student loans, this is not that episode. This episode is how and what you can do to either reduce, have you student loan forgiving, discharged or cancelled by the federal government. But before you can even start doing that, you need to know what type of student loans you have. What I'm talking about here, for bins for Givens discharge, cancellation only applies to federal student loans. They do not apply to private financial institution, student loans. And I thought about that for a little bit. And I remember back a few years like 10 years ago, when I President Obama was talking about forgiving student loans, but I realize and I know that he never did such a thing. But he did one thing. On July 1 2010, the federal government took over all student loans. So at that time, if you had a student loan through a credit union or a bank, and they loaned you the money, they then turn that money or that loan over to the federal government, which makes it a little muddy. How do you know if you have a federal student loan or a private student loan? Well, you need to contact whoever your pan and find at information out if you're not sure. I'm not sure if the banks or credit unions even do student loans anymore, because the federal government took all that over with the argument that they could do it cheaper. Before 2010, you would go to any bank or credit union, and you say I want to apply for a student loan, they would look at your you know, information. If they had access to federal funding for student loans, they would probably use that money, they would loan you the money. And then they had one year to either pay the federal back or to turn a loan over to the federal agency Department of Education. Most financing institution turn the loan over to the Department of Education. So that means you could have gone to a credit union or a bank and received a federal student loan, you'd have to know that what type of loan but if your loan is referred to as a direct something loan, direct, subsidized direct plus direct consolidation. It's probably a federal student loan of some type. It's important to know that what can you do you're struggling? It's your student loan is dragging down your credit rating because you owe a whole lot of money as of March of 2021. The only thing that the federal government has done is make any forgiveness or cancellation of student loans, not taxable income to you until year. 2024 I believe it was. So it says small window you got three years to get that forgiveness cancellation or discharge on your student loan and not have to pay income tax on the amount that got discharged. I'm gonna jump right into one of my articles student loan forgiveness. This is from student aid.gov. It's the federal student aid website. These are things they can get your loan discharged. If you qualify, and a course any federal program, it generally means you have paperwork you have to fill out and apply for it. So let's start with this. And I believe these things were in force long before the July 1 of 2010. It doesn't give me any dates forgiveness, cancellation or discharge of your loan means you're no longer required to repay some or all your loan. Find out by using the links below. You can find this in my show notes the differences between forgiveness cancellation and discharge, the terms forgiven forgiveness, cancellation and discharge mean nearly the same thing, but through use in different ways. You're no longer required to make payments on your loans due to your job. This is generally called forgiveness or cancellation. If you're no longer required to make payments on the loan due to other circumstances, such as a total and permanent disability, or the closure of the school where you received your loan. This is generally called a discharge types of forgiveness, cancellation and discharge public service loan forgiveness, this is available for direct loans. If you're employed by a government or not for profit organization, you may be able to receive loan forgiveness under the Public Service Loan Forgiveness PSLF program PSLF forgive forgives the remaining balance on your direct loans after you made 120 qualifying monthly payments under a qualifying repayment plan while working full time for a qualifying employer. Well, you got to do a lot of qualifying and that so that's 10 years. So he worked for a government agency, it's federal, state, city, county, Township, any federal agency directly for the federal state governments, you can qualify. But you have to have 10 years of paying your loans before you qualify. And you have to fill out a paperwork. They recommend yearly to make sure that you qualify and you still qualify. So if you go to the website, federal student aid, go down. If you're a government employee or work for a nonprofit, and they have a list, they got a link there that can help you then you The next one is teacher loan forgiveness. It's available for direct loans and feel loans f e l loans don't know what that is, must be something. If you're teach full time for five complete and consecutive academic years. And a low income elementary school, secondary school or educational service agency, you may be eligible for forgiveness up to$17,500 on your direct loan or f e l program loans note you may not receive a benefit for the same qualifying payments or periods of service for teacher loan forgiveness, and public service loan forgiveness. So it's either or teacher and would be faster. I would do that five years instead of 10 years. Again, they have a link and they're going given you $17,50 of forgiveness, or maybe tha help you get your maybe you master degrees paid off faster or maybe pay off your bachelor' degree a little bit faster i better nothing. If you do thi with the next three years, tha$17,500 will not be subje t to federal income tax start ng this year. If you're in a 10% bracket, that would be $1,75. If you're in a higher bracke, definitely be more it'll e well worth it. And if you ow more than that, then you're gonna have to pay off the remain ng balance keep making paymen s. Okay, the next one is closed school discharge. It's availa le for direct loans, f e l prog am loans and Perkins loans. If your school closes while ou're enrolled, or soon after ou withdraw you may be eligib e for discharge of your federa student loan. That's all it say. So the school has to close hile you're going there, or soo after you withdraw, maybe ou know there was going to clo e and you transferred, well, hen the student loans that w re Pacific to that school that c ose can be discharged. Again, you fill out paperwork, and we got Perkins loans, cancel ation and discharge plays only f r Federal Perkins loans, he may be eligible to have all or a p rtion of your Perkins loans ancelled based on your employ ent or volunteer service, or dis harge under certain circus conditions. This includes Perkin Loan teacher cancel ation total and permanent disabi ity discharge applies for basica ly all loans. If you're totall and permanently disabl d, you may qualify for a discha ge of your federal studen loan and or teacher educat on assistant for college and hi her education teach grant servic obligations discharge due to death, federal student loans re discharge due to death of the borrower, or the student on who e behalf of PLUS loan was taken ut discharged in bankru tcy. I'm going to talk about his later. As it says here, his is the federal studen aid. In some cases, you can ha e your federal student loan d scharge after declaring bankru tcy. However, discharge and ba kruptcy is not an automa ic process, and we're going o talk about this later on. In this episode, then we have b rrower defense repayment, you ma be eligible for discha ge of your federal studen loan based on borrower or def nse to repayment. If you took o t the loan to 10, a school and a school did someth ng or failed to do someth ng related to your loan, or to he educational services that t e loan was intended to pay fo. The specific requir ments to qualify for a bar or defense to repayment discha ge varies depending on when y u received your loan. And again, they got to link through, that w uld probably be a very diffic lt thing to prove false certif cation discharge, he may be eli ible for a discharge of your f deral student loan. If your s hool facially certified your e igibility to receive a loan, npaid refund this charge if you withdraw from the school and th school didn't make a requir d return of loan funds to the lo n servicer, you may be eligib e for a discharge of the portio of your federal student loan t at the school failed to return So you dropped out and you wo ld do a refund and they they d dn't refund the money to the lo n servicer, or if they gave i to you, it's too bad, you're not going to get discha ged, oh, he got your money ack. He should have used it to ay the loan. But if they didn't pay it, if they said there as gonna pay it back to the lo n originator and they did not do that you could get discha ged for that portion of it eli ibility for parent bars, okay, t's got a student for whom y ur borrower cannot comple e his or her program becaus the school close you receiv eligibility to receive the lo n was falsely certified by the school. Your eligibility to rec ive the loan was falsely certif ed through identity theft. The school withdrew that studen withdraw from school but the sc ool didn't repay a refund of you loan money that was requir d to pay under applicable laws a d regulations how to apply or forgiveness, contact your l an servicer if you think you're qualify if you have a Perkin loan, she should contact the sc ool that made the loan or the lo n servicer that school has de ignated loan payments during application review. Depend ng on the type of forgiv ness cancellation as discha ge you're applying for, you ma have to make payments during the application review. Check ith your loan servicer to find o t whether you must contin e making payments during the ap lication review period. They'r saying you do if your applic tion was approved, if you qualif forgiveness, cancel ations, this charts of only a portion of your loan, you're responsible for repaying the re aining balance I applic tion was denied well, then y u got to keep on paying. And al this does not apply if you're in default of your loan. So wha's that mean? If you're in default of your student loan, that means you are unable or you quit making payments for more than one month 234 months and they consider their loan under default. If you qualify for any of these items, say it says teacher or you work for the government or a nonprofit You have to get the loan out of default, before you can apply for any of this forgiveness. Now the good thing is there's two. If you click on the link, there are two things you can do, you can do a consolidation loan, which all those missed payments and that is still on your credit score, you can do a loan rehabilitation, which means that all your late payments or non payments are gonna be removed from your credit score, it may be a little more difficult. If you have a rehabilitation, I default loan the record of the default view removed from your credit history. However, your credit history will still show late payments that were reported by your loan holder before the loan went into default. If you consolidate it a default loan to record a default as well as late payments reported before the loan one and two, the fault will remain on your credit history. late payments will remain on your credit report for seven years from when they were first reported. It's important that you fully understand their rehabilitation, you got to understand the difference between the two programs. But you got to do that first before you can get any type of forgiveness. Also, if you are a low income person, there are other programs. So now you went through all that you checked it out in you know you don't qualify for any of those. You're not a teacher you don't work for the government and you don't work for a nonprofit. Your school didn't close. Nobody still jet Danity and you never had dropped out or had a partial refund that didn't get pay. None of that stuff applies to you. What else can you do to help yourself with your student loan debt? Well, there is a program for that it's called income driven repayment, income driven repayment. IDR plans are designed to make your student loan debt more manageable by reducing your monthly payment amount. If you need to make lower monthly payments or if you're outstanding federal student loan debt represent a significant portion of your annual income. One of the following income driven plans may be right for you revise Pay As You earn repayment plan, pay as you earn repayment plan, an income based repayment repayment plan, income contingent contingent repayment plan that's four different plans basically all doing the same thing. But one's revised meaning your had a repayment plan, but it was revised, I assume that's what that means. So if you don't have one of those, and you're looking to lower your monthly payment for your federal student loans, one is gonna be a federal student loan. borrower is currently on a IDR plan who needs to recertify and make changes to the repayment plan. You can't use this tool if you're in default on all your student loans. Or if you only have a PLUS loan you borrowed as a parent. So you got to be the actual student who borrowed the money and you have to not be in default, meaning you're still making timely payments, but maybe it's too much of your income, maybe you change jobs or lost a job and you're in process of looking for a job or changing a job, then you may qualify for one of these plants. course there's a application and you need to fill out paperwork, you will need to make one IDR application while you only need to submit one IDR application to be considered for the IDR plans, you'll be required to come back and recertify your income information each year, how long does it take about 10 minutes or less? And then I have a bunch of questions and answering. So if you're struggling, and it's because of your student loans, federal student loans is a highly percentage portion of your income. Say that your student loan is 60% of the money you make. You're going to qualify for one of these income driven repayment plan request, he can go to student a.gov and up top it says manage loans and then under manage loans. It has apply for income driven repayment plan. Now let's get to bankruptcy. So the first thing you need to do before you start this process is figure out do you have a private student loan or do you have a federal student loan in order for everything I just talked about? It has to be a federal student loan It's kind of muddy, whether it's either or, but you, your service provider person, that company you're paying, should be able to tell you at least that much information. And also, if you got the loan through a school, let's say you was already in college, he wants to the financial aid officer, and the officer did a four year, I'm gonna say you're most likely got a federal student loan, if you have a federal student loan, he can do everything I just talked about. Or if your financial institution classifies your loan as a student loan, they may not even classify it as a student loan. If it's a recent one, they may just say it's a personal loan. And I don't care what you use the money for. But can you file for bankruptcy and get your student loans discharged in bankruptcy? Well, typically, no. Because federal debt is not discharged in bankruptcy, that means federal income tax and federal student loan debt are not dischargeable in bankruptcy. And that happened back a few years ago, where they passed a new bill. And they didn't The reason was they didn't want somebody to go and borrow a bunch of money through the federal government go to college, get your degree get a high paying job, but before they start that job, they file bankruptcy, and they get all their debt wiped out before they even start working. So they want to keep that from happening. So generally speaking, no, but there is but it's difficult, and it would be expensive, because to get a discharge on their bankruptcy. It's not a normal bankruptcy thing, you should find an attorney that knows about federal student debt before through the bankruptcy because we're going to talk about that. The first thing to do is call a must prove financial hardship and they have their Brunner test and then the Brunner standard says one to borrow or has extenuating circumstance creating a hardships, such as they cannot repay their student loan and maintain a minimum standard of living to those circumstances are likely to continue during the repayment term of this student loan. And three, their borrower has made good faith attempt to repay the loan, the borrower does not actually have to make the payment, but merely attempt to make payments, such as tried to find a workable payment plan. So that's the framework that you have to pretty much prove, in order to have a student loan discharge through bankruptcy and advisory proceeding. A lawsuit within bankruptcy court must be fire filed, where the debtor claims that pain that student loan would create an undue hardship for the debtor met before 1976. You could do discharge your student loans and banker and they give you a little more history here. But here's the catch. One, you'll need to have a attorney that knows that, too. That attorney is gonna be expensive, and you have to pay him when you go to claim undue hardship. Just the fact that you're paying their attorney to do this for you, is grounds enough for the judge to throw it out. So don't go much farther. And your student loan debt is not discharged in bankruptcy, you're in a catch 22 if you try to do it, the right thing. And if you don't do it, you're pretty much just get screwed. If you're struggling to make student loan payment. Here's some helpful strategy income driven repayments which I just covered. Here, your payment is based on your income, family size and other factors and typically lower than the standard repayment plan. Your monthly payment could be as low as zero after a certain period of time, such as 20 or 25 years, for example, your fellow student loans, not private student loans can be forgiving. However, you would likely owe income taxes on amount on student loans that are forgiving. But starting in 2021 through 2024, I believe it was that no longer applies. So I'll be back in one moment and give you my final thoughts on what you really should do. If you listen to this podcast using an apple podcast app, please rate and review this podcast for all your non Apple users. You can download iTunes on a Windows machine and go to the upper left hand corner, select podcast, do a search, reduce that increase Well, you can then rate and reviewed the podcast and also follow the podcast. I appreciate any feedback that I'm Get. So you listen to this podcast and maybe something in there applies to you, but you need to still go and do the paperwork. You're a school teacher in a low income school, you work for a government agency, whether federal state, city, county, Township, or a tribal entity or a nonprofit organization, you may be able to get some of your student loan debt forgiven and not have to pay it. If none of that applies to you, and nothing short of bankruptcy is your choice, then you might have to do the income repayment, income driven repayment plan, which you can find at the Federal Student Aid website. The problem with that is you may have a 10 year loan if they adjust your payments down, because of your income, you're gonna add time as or every place I've seen, says 20 or 25 years that may not today help you with your credit rating, but it definitely can help you lower your payment to get other debt under control. If you're on an income driven repayment plan, make the minimum payment that they set up for you set up a an emergency fund, build it up so he could quit using credit cards. But creating new debt, get the credit cards all paid off first. Once you've done that, then work on getting your student loan debt paid down. Even though your income may only say you owe $100 a month. Once that credit card debt is gone, you build up an emergency fund at least 1000 or $2,000. Then keep building up the emergency fund and every three or four months or whenever you have two 3,000x dollars in there over what you need for your emergency fund. Make a Payment on your student loan debt, try to get paid off before 2025 years. In the long term. You'll be better off as far as your credit rating and everything else. If you draw it out 2025 years. Here's an article I have in my show notes. It's from the Business Insider calm. Only 32 student loan borrowers ever had qualify for full forgiveness through an income driven repayment plan. Remember, in order to be get the forgiveness, you must not be in default. He can't even get on an income repayment plan driven income plan until you're out of default. You may have to go through the rehabilitation process on this loan. In order to qualify for that. There'll be a long journey. Hopefully your employment opportunity will improve and you'll be able to pay off your debt much faster. So that you get out of debt and move on in life and not have to worry about any student loan forgiveness. I don't think the federal government is in any hurry to fully give loan forgiveness to anybody, much less those who are struggling