If not, your best approach might be to attempt to negotiate a settlement with the lender

If not, your best approach might be to attempt to negotiate a settlement with the lender

If you have a private student loan with lenders such as these two, you may more easily obtain loan repayment relief. You may choose to contact the lender and make an upfront request to lower your monthly payment, with an interest-rate reduction or lengthening of your loan term. Lengthening the loan term in the long run, of course, means that you ultimately end up paying more, which isn’t a great option.

However, many private lenders staunchly refuse to broach the topic of settlement until the loan goes into default, in which case you may experience the following:

Although it is possible to meet with success, the record shows consumers have had an extremely difficult time passing the test and getting student loans – federal or private – canceled in bankruptcy

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  • Default on your student loan online payday loans South Carolina by ceasing all loan payments
  • Your lender turns its attention to you because the last thing it wants is a nonperforming loan
  • Begin talks with your lender, convincing it you’ve been operating under the tightest of budgets with virtually no discretionary spending (make sure you have proper documentation – such as credit card and bank account statements -to back your assertion)
  • Your lender will probably offer short-term relief in the form of a lowered interest rate for a few months
  • Instead, seek out a settlement that involves complete loan cancellation in exchange for a cash payment from you that is significantly lower than your remaining loan balance

In negotiating with your lender, focus on your inability to pay under the loan’s current terms. You want the lender to know the hardship you are experiencing in keeping up with payments. By doing so, you remain focused on convincing the lender that receiving some amount of payment from you is better than leaving you in a position that results in zero payments to them.

Bankruptcy

One remaining option for federal or private student loan cancellation is filing for bankruptcy. However, this does not represent the best path to student loan cancellation. Bankruptcy courts set a high bar for bankruptcy filers before they will discharge any type of student loan debt. You must show that continuing to shoulder the repayment obligations of your student loans would cause you undue hardship. Courts have interpreted “undue hardship” by applying various tests and requirements.

Historically, most courts have used the Brunner Test to determine whether you have “undue hardship” before they will discharge your student loan obligations.

Although it is possible to meet with success, the record shows consumers have had an extremely difficult time passing the test and getting student loans – federal or private – canceled in bankruptcy

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  • Inability to maintain a minimal standard of living – your current income and expenses will fail to maintain a minimal standard of living for you and your dependents if you remain obligated to repay your student loans
  • Persistence of conditions during repayment period – the circumstances contributing to your inability to maintain a minimal standard of living will probably continue for a significant portion of the loan repayment period
  • Good-faith attempt to repay student loan(s) – you’ve made a sincere effort to stay current on your student loan payment obligations

Although it is possible to meet with success, the record shows consumers have had an extremely difficult time passing the test and getting student loans – federal or private – canceled in bankruptcy

  • U.S. Department of Veterans Affairs’ (VA) documentation confirming its determination that you are unemployable due to a service-connected disability

Or, if someone who dropped out of school in 10th grade attended a plumbing technology program in a state that requires plumbers to have a high school diploma or GED, then that individual is eligible for a discharge.

A lot of income-based repayment programs and other repayment programs are great tools for borrowers in bad financial situations. But I really view them as bandages because they are not solving the root problems. A lot of lawyers and doctors have the option to go into a deferment period. I did for three years and accrued almost $30,000 in interest. These are gimmicks offered by the Department of Education. I understand they are tools to help borrowers from defaulting. But philosophically, you should be focused on getting out of debt by increasing your income or focusing on budgeting, not falling prey to a lot of these federal programs.

Although it is possible to meet with success, the record shows consumers have had an extremely difficult time passing the test and getting student loans – federal or private – canceled in bankruptcy

  • You had an outstanding balance on the date you obtained a Direct Loan or FFEL after Oct. 1, 1998

Consider carefully before you make a commitment to the program and be certain you can fulfill a two-year commitment because the consequences of not completing your service are serious. You will default on your obligation and become liable to repay all the payments you’ve received, including interest and amounts withheld for federal taxes. You are also subject to monetary damages specified in your original contract with the NURSE Corps.

There is over $150 billion in outstanding debt from private loans, which means plenty of borrowers of need assistance. Some movement by private lenders has shown promise that seeking private student loan forgiveness might become easier. Wells Fargo, the second largest lender of private student loans, began a loan modification program back in 2014 that works to significantly reduce payments through lowered interest rates. Shortly after, Citizens Bank similarly began modifying its student loans.

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