During this unprecedented time of COVID-19, many people are unable to make their ends meet, including their rent or mortgage, credit cards, or other obligations. Many people are under the assumption that when it comes to student loans, that they have no option but to repay their loan and that bankruptcy or other options are not available. However, this is not always the case.
First, there are several circumstances in which a loan payment is not required when it comes to student loans. Some common scenarios come up for instance, when a school is closed or the loan is a solely a private loan. In the event that a school closes while you’re enrolled or soon after you withdraw, you may have the right to wipe out your student loan debt.
Some other situations in which you may have a right to wipe out the debt are through public service programs, including the Public Service Loan Forgiveness Program. There are other programs as well, such as the Teacher Loan Forgiveness and Teacher Cancellation Loan Programs. Also, there are other States sponsored loan forgiveness programs. There is a searchable database at the American Federation of Teachers, where you can look to see about forgiveness options. It is located here. https://www.aft.org/funding-database.
Some other common reasons that you may not have to repay your student loan is that you become disabled and are unable to make your payments or if the school has misled you or engage in any other misconduct or violation of certain laws. For instance, recently two student loan debt servicers and their executives were ordered to pay $5.5 million to resolve claims that they misled borrowers into paying for loans which should have been free.
According to the lawsuit brought by the New York attorney general, the defendants misled students by claiming that they falsely promising loan forgiveness they could not deliver and that they were affiliated with the government so that the loan cannot be discharged in bankruptcy. These representations were untrue.
Typically, loans that are provided and backed by the federal government are not able to be discharged automatically in bankruptcy unless you can prove that you are disabled and unable to pay. However, if the student loan is private, then it may be treated as an ordinary creditor and could be discharged like other debts, including credit card or other debts.
If you believe that you have been misled by your school, your school has closed or you have otherwise been misled regarding the terms or repayment of your loan, contact a Law Zebra Network attorney who can help you evaluate your options.