Forgive bankruptcy student loans

Joe Biden says that if he is elected president, student loans are forgiven in the event of bankruptcy.

Here’s what you need to know.

Student loans

Former Vice President Biden has said he will support Senator Elizabeth Warren’s plan to grant student loans in the event of bankruptcy. As a presidential candidate, Biden advocated bankruptcy student loans, although as a US senator, he opposed the student loan forgiveness in bankruptcy, such as when he voted for the Abuse Prevention Act. and consumer protection in 2005. In a virtual town hall in Illinois on Friday, Biden told voters that he would support Warren’s plan that Biden would also broaden his appeal to supporters of fellow presidential candidate Senator Bernie Sanders .

The Brunner test: financial difficulties

Traditionally, unlike mortgages or credit card debt, student loans cannot be liquidated in the event of bankruptcy. However, there are exceptions, particularly if certain conditions relating to financial difficulties occur. For example, a Navy veteran had $ 221,000 of student loans dumped in bankruptcy. These conditions are reflected in the Brunner test, which is the legal test in all fields of the circuit, except the eighth circuit and the 1st circuit. The eighth circuit uses a totality of circumstances, which is similar to Brunner, while the 1st circuit has yet to declare a standard.

Put simply, the Brunner the standard says:

  1. the borrower has mitigating circumstances that create difficulties;
  2. these circumstances are likely to continue for a term of the loan; is
  3. the borrower tried in good faith to repay the loan. (The borrower should not actually make payments, but simply attempt to make payments, such as trying to find a viable payment plan.)

Differences exist between federal districts, but this is the basic framework. To settle student loans in the event of bankruptcy, an adverse proceeding (a bankruptcy court case) must be filed, in which a debtor claims that paying the student loan would create undue suffering for the debtor.

Does this average biden support student loan forgiveness?

Unlike Sanders, who proposed to forgive all $ 1.6 trillion of student loan debt, Biden does not support the large-scale forgiveness of the student loan, but does have his own $ 750 billion student loan plan. Biden and Sanders both support the public service loan forgiveness program. Instead, President Donald Trump has called for an end to the public service loan forgiveness program in his annual budget for a simplified income-based repayment plan.

What can you do if you are struggling to make student loan payments?

If you are struggling to make student loan payments, the good news is that you have several options. Trump has temporarily waived interest payments on federal student loans to help borrowers who will be financially affected by the coronavirus.

Here are some steps:

1. Income-led reimbursement: For federal student loans, consider an income based repayment plan such as IBR, PAYE or REPAYE. Payment is based on discretionary income, family size and other factors, and you can receive student loan forgiveness after 20 or 25 years.

2. Payment of other debts: Pay off credit card debt first (particularly if the interest rate is higher than the student loan interest rate). Credit card consolidation is the process of paying off existing debt with a fixed rate credit card at a lower interest rate.

3. Contact your lender: If you are struggling financially because of coronavius ​​or something else, contact your lender to discuss alternative payment options. Don’t wait until the last minute to face your student loan debt.

4. Funding for refinancing students: Student loan refinancing rates are incredibly cheap right now and start at 1.9%. The Federal Reserve cut rates again yesterday (the second time this month), which has led to student loan refinancing rates falling to near-historic lows. To qualify, you will need a credit score of at least 650 and sufficient monthly income for living expenses and debt repayment. If you do not meet these requirements, contact a dealer for approval and to obtain a lower interest rate.

This student loan refinancing calculator shows how much you can save with student loan refinancing.

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