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COVID-19 & Student Loans


Unfortunately, the COVID-19 pandemic has left many people jobless, with a decreased salary, and a grim outlook on their financial future. Unfortunately, in addition to this financial stress, many people are still paying off their student loans. While bankrupcy does not extinguish such debts, there are ways to suspend or reduce student loans that are still due and owing. 

The Cares Act has put a pause on all student loans through September 30, 2020 with interest rates set to zero. However, you should confirm whether your loan qualifies for this forgiveness. For example, FFELP and Perkins Loans are not covered under the Cares Act, as the US Education Department does not own those loans. In contrast, all collections and garnishments on Federal student loans are  suspended. If you have a private loan, the options are different; you should reach out to the servicer to seek available forbearance options. 

Moreover, your employer may be a resource in obtaining relief, as employers may contribute up to $5,250 toward their employees' student loans through January 1, 2021. Another option available is to refinance the loan, as  interest rates have dropped dramatically. If you can secure another loan at a better rate, then that option might be attractive. All these relief options apply to parent student loans as well. 

More importantly, even if payments are suspended, you can still make progress towards public service loan forgiveness and other federal forgiveness programs. See Forbes Article. See Student Loan Hero Article.

In addition, while student debt is typically not forgiven in bankruptcy, there are a few exceptions. In particular, you must have a disability and be unable to work; and you must have an undue hardship. This determination is fact-based and requires some creativity by your lawyer. However, declaring bankruptcy does wreak havoc with your credit and your ability to obtain another job and future loans.Therefore, we suggest speaking with your accountant and a bankruptcy lawyer to discuss the best options for your particular case. Our bankruptcy team is available to guide you through this process.