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Frequently Asked Questions

 

Can my student loan debt be discharged to bankruptcy?  Although regulations say that loans may be discharged due to bankruptcy, the reality is that they will not be discharged.  In order to successfully discharge by bankruptcy, the borrower must prove that the loans create an excessive debt burden.  Since all other debts have been discharged through the bankruptcy process, the remaining student loans are not considered excessive debt – so you are stuck with them.

 

If student loans have collection activity suspended during the bankruptcy process, they will return to an active status as soon as the bankruptcy case is released by the courts.  However, during the bankruptcy process many borrowers drift into trouble without realizing it.  Even your attorneys successfully notify your loan servicers of the bankruptcy proceedings and have the collection or account activity suspended, an automatic activity triggered by the federal student loan process can often time shift the loans back into a payment status.  For example, if a students status changes and shifts the loans into grace, the bankruptcy status frequently does not carry forward.  If the borrower does not take appropriate action to contact the servicer and place the loans back into a bankruptcy status, their loans may ultimately default.  Remember it is always the borrower’s responsibility to maintain the correct status with their loans servicer.

 

Why does my student loan debt to keep increasing?  If you’re in repayment plan that does not make a full interest payment   or if your loans have been in a deferment or forbearance, then your loan balance is probably going up instead of down.  While interest is paid on most subsidized loans during deferments, interest will accrue on unsubsidized loans and during periods of forbearance, interest will accrue on all loans.  Unpaid interest will be capitalized and added to the loans principal.  Since simple interest is calculated on the unpaid principal, the borrower’s payment will be increased due to the increase in the loans principal.  This is often called the snowball effect; whatever you call it, this can lead to student loan debt that can spiral out of control.  For more information, view Repayment Tip: The True Cost of Borrowing, under the student loan section.

 

My loans are on an IBR repayment plan.  Some months I can pay more than my schedule payment; is there a way to do this?  There’s never prepayment penalty for Federal student loans.  So you may make additional payments under any Federal loan repayment plan.  If in order to have the most impact on your education debt, you should contact church servicer and arrange to have the additional payments applied directly to the loans principal.  You may even target a specific loan and have all additional monies applied to that loan until it is cleared.  This is generally a good way to have a morale boost of having a loan payoff. So if you have a small loan balance of the few hundred dollars, you may want to designate payment towards this specific loan.

 

However, if there are outstanding fees such as late payments or outstanding interest that have not been capitalized, these amounts may need to be cleared first.  If you make an additional payment and do not designate where you want the money applied, generally it will be applied to the next payment.

 

I spoke to my servicer and asked for six months of forbearance.  Now I found that they only gave me one month - what can I do?  Forbearance is granted at the discretion of the lender or servicer.  When you get a verbal forbearance over the telephone, it is easy to have the terms get mixed up.  As a general rule, many servicers will simply bring your loans current with a verbal forbearance.  To ensure you receive the length of forbearance that you are asking for, it is best to make the request in writing using the servicer’s forbearance request form.  Even then, the servicer may choose to grant the shorter term than you requested.  If this is the case, you may send the request another forbearance request when this period has ended.  Just a note of caution, if you are unable to make your scheduled loan payments, before requesting a forbearance please make sure that you investigate all of your repayment plan options.