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Devil’s In The Details
Private Loans To Pay Off Student Loans
With approximately $1 trillion in student loan debt, and the average debt around $35,000, several banks/lenders are getting into this market. One of them is Sofi, which offers to pay-off your student loans with a new loan or as part of a mortgage refinance. With interest rates being relatively low compared to some of the older student loans, the offer may be enticing – particularly for private student loans. And even more enticing if you can eliminate a co-signor from the loan.
However, when it comes to federal student loans, a payoff and new loan eliminates the option to use one of several payment programs. These income based programs can be as low as $0 per month if unemployed, while also keeping the payment clock ticking! The other advantages of federal student loans that would be negated include: preventing a lawsuit for being in default of payments by entering into a rehabilitation plan, or consolidating loans. Lastly, those who work for non-profits or governmental agencies would no longer be able to participate in the 10-year Public Service Loan Forgiveness Program.
Therefore, these new loans may be advantageous for paying off high interest, private loans that are tied to Title IV school programs, but need to be throughly analyzed when applied to federal student loans!
For many people, the thought of filing bankruptcy is devastating because it feels as if they have waived the white flag — surrendering to the economic reality they face. Prior clients, young and old, who feel ashamed and embarrassed, found themselves between the proverbial rock and a hard place. The Founding Fathers understood that sometimes life can throw some unlucky curve balls, which can devastate not only the traditional breadwinner of the family, but also the spouse and helpless children.
These curve balls stem from serious medical issues that require expensive treatments not covered (or under-covered) by insurance; or a layoff by the company because the economy or that industry has plummeted; or the threat of a lawsuit over substantial private student loan debt. It’s important to remember that student loan debt from private banks (if tied to a Title IV school) is protected in bankruptcy nearly as much as federal student loan debt. Bankruptcy courts use what’s called the Brunner Test to determine whether someone can discharge their student loan debt in bankruptcy.
The Brunner test focus on: