Disability Discharge of Federal Student Loans

The borrower’s permanent and total disability is grounds for a student loan discharge. Borrowers with FFELs, Direct Loans, and Perkins loans are eligible for this discharge.[1] This includes consolidation loans. The definition of disability changed as of July 1, 2010. The new definition is less restrictive and is more favorable for borrowers because it allows discharges to be granted to borrowers who are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, can be expected to last for a continuous period of 60 

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Other Profession-Related Loan Cancellation Programs

The Department of Education administers a loan-forgiveness program for certain child care providers with FFELs or Direct Loans.[1] Under this program, borrowers who have received an associate’s or bachelor’s degree in early childhood education or child care and who are providing full-time child care services that serve certain low-income communities are eligible for forgiveness of up to 100% of their total eligible loans. Only loans made after October 7, 1998, qualify.  In January 2004, the Department of Education published the application for this cancellation program.[2] The 2008 HEA reauthorization law created a number of new job-related cancellation programs, including loan 

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Perkins Loan Forgiveness Program

The Perkins Loan Forgiveness Program was the first to provide for cancellation of loans for teachers in low-income school districts. A 2005 Second Circuit decision broadened the Perkins Loan Forgiveness Program to include numerous occupations related to teaching, public interest law and social work. Since the Second Circuit decision, the Department of Education has clarified its position in a “Dear Colleague letter” explaining that the program has indeed expanded to include numerous occupations that are considered socially desirable professions. A short list of covered occupations include: Full-time nurses or medical technicians; Full-time law enforcement or correction officers; Full-time staff members 

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Teacher Loan Forgiveness Program

Teachers who are full time and work five (5) consecutive years in certain schools that serve low income families are eligible to erase $5,000.00 of their federal student loans. Math or Science teachers in eligible secondary schools and special education teachers in eligible elementary or secondary schools are allowed to erase up to $17,500.00 of their student loans in return for five (5) consecutive years of employment in certain schools that serve low income families. The Teacher Loan Forgiveness Program under the FFEL Program and the Direct Loan Program apply only to borrowers with no outstanding loan balances as of 

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Loan Forgiveness Program

This program is available to all borrowers who work in public service jobs for ten (10) years and participate in a eligible repayment plan (IBR or ICR). The remaining balance of the student loan (principal and interest) is forgiven after ten years of public service is completed. The program applies only to Direct Loans which encompasses Stafford, Plus, and Consolidation loans. Some borrowers may find it advantageous to consolidate their direct loans with their non-direct federal government loans in order to take advantage of this benefit. Borrowers with non-direct loans should consolidate with direct loans as soon as possible because 

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Student Loans: The Next Debt Bubble:

Total student loan debt in the U.S. is expected to reach $1 trillion this year — more than the nation’s total credit-card debt. The consequences of default are severe. Unlike most debt, student loans are almost impossible to dispose of through bankruptcy. If students fail to repay, their tax refunds can be withheld and wages and Social Security payments can be garnished. Lawyer turns topless dancer to pay the bills

Student Loans and Bankruptcy

Chapter 13 Bankruptcy restructures your debt in order to make financial obligations to creditors manageable. Debts commonly included in Chapter 13 bankruptcy cases are past due mortgage payments, car loans and student loans. Nothing absolves you from having to pay back your student loans, but Chapter 13 helps you get a handle on the payments. A Chapter 13 bankruptcy may also erase up to 100% of your unsecured debt; credit cards, medical bills, store cards and personal loans. At present, Americans owe $829 billion in student loans. If a student falls behind in their student loan payments, the Department of 

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DISCHARGING STUDENT LOANS IN BANKRUPTCY

Student Loans and Chapter 7 Bankruptcy Most student loans are obtained from a lending institution and are ultimately guaranteed by the United States Department of Education. In many situations the loans are guaranteed by a middle entity, usually one of the forty-seven state guarantee agencies. The Pennsylvania Higher Education Assistance Agency (PHEAA) is such a guarantee agency. If a student defaults on a student loan, the original lender seeks reimbursement from the guarantee agency. Once the lender is repaid, the guarantor then holds the promissory note and commences collection action. PHEAA has state statutory authority to commence an administrative action 

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