The Federal Law known as the Higher Education Opportunity Act, passed in 2008, has made the Truth in Lending Act applicable to some student loans. What does this mean for you? That your loans might be DISCHARGED (read: FORGIVEN) if the lender failed to comply with certain procedures. We are experienced student loan attorneys who can advise you if you qualify for this type of discharge. Call us today to learn more.
Get your situation under control before it’s too late.
I often get clients who come to me when they go to the bank or try to withdraw money and their accounts are frozen due to old credit card debt that they did not even know existed. Luckily, there is one simple step you can take to get the funds released: filling out the exemption claim form. According to the New York State Exempt Income Protection Act (EIPA), any creditors who attempt to freeze your account must take steps to ensure you promptly receive the exemption claim form in the mail. Since $2500 is automatically exempt from being frozen under New York Law, your funds can be released if you fill out the exemption claim form the proper way. You need to consult an attorney to make sure you include the right legal authorities on your form. Call me today if you have this problem.
1. Myth #1 — My loan balance is frozen while I’m enrolled in school.
Wrong! Many college financial aid offices encourage students to take out the maximum in loans for tuition and living expenses, and reassure them that interest doesn’t accrue while you are in school. This is not usually true. Most borrowers have a mixture of Subsidized and Unsubsidized Direct Federal Loans, interest does in fact still accrue, and will be tacked on to the principal at the end of the school deferment period, adding potentially tens of thousands of dollars to your loan balance and greatly extending your repayment period.
2. Myth #2 — I can keep extending my forbearance periods while I get financially stabilized.
Wrong! During the forbearance period, interest continues to accrue on the loans, and will be capitalized at the end of the forbearance period. This will cause your loan balance to balloon to a potentially disastrous level, increasing your monthly payments to the point where your payments will not cover the accruing interest making it impossible to ever pay off your loans. You could just keep paying and paying and get no where. Which brings us to myth # 3.
3. Myth #3 — If things get too bad I can declare bankruptcy and get the loans wiped out.
Wrong! Because federal law prohibits bankruptcy discharge of student loans in most situations, this will very rarely work. In fact, in a recent case in New York, the federal court ruled that a single mother, on welfare, unemployed, and living in Section 8 public housing did not show enough hardship to entitle her to forgiveness of her student loans (even where she showed years of unsuccessful efforts to find a job!). Horribly, if you try to declare bankruptcy and the court refuses to discharge the loan, all the unpaid interest and penalties from when the case is pending will be tacked onto your principal, leaving you much worse off than when you started!
But, you may ask…Are there any options for people in trouble?
THANKFULLY, YES!! Beginning in 2009 new payment plans and forgiveness options were enacted that, when used correctly, could lead to you saving tens or even hundreds of thousands of dollars on your loan balance and monthly payments, and put you on a path to paying off the loan or having it forgiven. However the process requires a great deal of paperwork, investigation of loan documents, and deep knowledge of the law and regulations and tax consequences. A qualified attorney can help you navigate this web of options and forge the best path forward.