Student Loan debt relief in the news again.
Here it can be in a nutshell:
The repayment program, referred to as Pay as You Earn or PAYE, caps borrowers\’ monthly installments to 10 percent of their income and forgives your debt after 20 years of payment. To date,?it\’s only been available to people who especially low income in accordance with their debt and?who got their loans after 2007. However the administration is proposing to inflate the program to anyone with an existing federal loan, regardless of their income.? (from linked to Washington Post article)
I blogged with regards to the initial PAYE student loan program if it debuted last year, noting that not many would be helped by it, mainly because it had to be loans taken out after 2007.? The vast majority of those borrowers were still going to school or other student loan deferment; had not even started repaying yet.
These are still finger in the dyke proposals, for the reason that government is still pushing out new education loan debt, and the colleges still don\’t have skin in the game, and the babies are still being lied to.
My friend Jay Fleischman has blogged about one part of the new proposal that nails some married education loan debtors:
And married borrowers?can?don\’t lower their payments by excluding their spouse\’s income, unless they may be separated or victims of domestic abuse.
Meanwhile, back with the ranch, the government was required to create reasonable guidelines for defense of lawsuits, in bankruptcy court, to discharge student loan debt as undue hardship.
Reasonable, rather than current practice of fighting tooth and nail.
Undue Hardship Formula
Here is just what the Department of Education has to say about what constitutes and undue hardship thereby a consent to allow the education loan debt to be discharged.
The following factors and considerations are offered as points to consider by lenders for discharge:
- Whether a debtor has declared bankruptcy due to factors beyond his or her control and the impact such factor(s) have on debtor’s ability to repay each student loan debt. Which includes a divorce leading to diminution of family income, which won\’t realistically be reestablished.
- Whether a debtor who asserts undue hardship caused by physical or mental impairment may get Total and Permanent Disability Discharge (TPD) and/or other administrative discharges available. Included in this are: Death Discharge Closed School Discharge False Certification Discharge False Certification Power to Benefit Unauthorized Signature or Identity fraud Unpaid Refund Discharge Borrower Defense
- Veterans who were determined by the Department of Veterans Affairs to remain unemployable due to a service-connected disability.
- Whether a debtor is approaching retirement, taking into account debtor’s age at the time so to speak . were incurred, and resources likely to end up available to the debtor in retirement in order to the student loan debt. Borrowers they like to incur student loan debt later, whether that debt is for themselves or perhaps a dependent (i.e,, Parent PLUS loans), really should not be able to rely on their age alone and/or their entrance into retirement to prove undue hardship.
- Whether a debtor’s health has materially changed since the student loan debt was incurred.
- Whether significant the years have elapsed since the debt was incurred.
- Whether a debtor’s expenses are reasonable and indicate minimization of unnecessary expenses to produce funds for student loan repayment.
- Whether a debtor had the mental and/or physical capability to pursue administrative discharge options and/or income-driven repayment plans, if those options had not been pursued, or whether a debtor had any physical or psychological factors that may have made the administrative process more burdensome to the borrower. (from Huffington Post)
I am the Michigan state chair for your National Association of Consumer Bankruptcy Attorneys, and, our group, and this is part of their step to the Department of Education response to President Obama’s request:
Last week, the Department of Education addressed the White House from the worst possible way by giving an environmentally friendly light to the loan holders\’ aggressive method of fighting virtually every case wherein undue hardship is claimed.? Besides this being completely contrary to the intent of President barack obama to find a way to help out more education loan borrowers suffering genuine financial distress, it will only serve to encourage loan holders and also the Department\’s contractors to be much more ruthless in systematically employing their considerable legal might to crush such a filings under a mountain of appeals, delays, along with tactics.?
Meet the new boss, comparable to the old boss.