Damages AND Loans?? How To Handle Student Loans While Handling Damages From An Accident
Currently, more than half of college students in this country have to go into debt to pay for their college education, with the average student loan debt is over $37,100 per person for undergraduate education alone. In total, people in this country owe approximately $1.6 trillion in student loans, with those pursuing higher education after undergraduate drowning in over $150,000. You might be able to comfortably manage your student loan payments on your regular salary, but a serious injury, such as one sustained from a car accident, can throw your financial life into jeopardy. If a disability prevents you from working, you could quickly fall behind on your payments, causing you to become delinquent on your loans or enter default. Missing payments can wreck your credit, hurting your chances of buying a home or getting approved for other loans later on. However, there are options to help you through a serious injury or illness while staying current on your loans.
Deferment or Forbearance
Loan payments can be deferred for up to three years. Depending on what type of student loan you have taken out, you may not be held responsible for any interest that may accrue. Qualification is dependent on whether an individual is unemployed or facing an economic hardship, such as recovering from a significant injury caused in a car accident.
Alternatively, you can also use forbearance to postpone payments for up to twelve months if you can prove significant financial difficulties and need a way to pay high medical bills. In this instance, as opposed to a deferment, you are responsible for any interest that accrues while you postpone payments.
IDR Plans
If your income has decreased due to the injuries you sustained during a car accident, you may be eligible for an income-driven repayment plan (IDR). The four different types of plans are: (1) an income-based repayment; (2) an income-contingent repayment; (3) a pay as you earn; and (4) a revised pay as you earn. The main idea behind this structured plan is that the government extends the repayment term and cap monthly payments at a percentage of your current income. Although it is a long and arduous process, after twenty to twenty-five years of repayment, your remaining debt s automatically forgiven.
IDR plans are ideal because it allows individuals to continually manage paying off student loans by offering to accept considerably less payment each month. However, by extending these terms, you will be responsible to pay more interest over time.
Interest-Only Payments
In instances of private student loans, IDR is not an option; an alternative interest-only payment program allows you to make payments on the accrued interest each month, drastically reducing monthly payments. Consult your Student Financial Aid center or appropriate lender to discuss this option; be sure to inform them of your injury and your difficulty making payments in a timely fashion.
Total Disability Discharge
In instances of federal student loans, if you are permanently disabled due to an injury sustained in a car accident or are suffering from a life-altering disease, you may be eligible for Total Disability Discharge. This program is designed to forgive the balance of your loans so you may never have to make payments on them again. To be eligible, you must apply online and submit a certification from your physician, outlining that you are totally and permanently disabled. Your physician must also state that you are unable to work due to this disability and therefore have no means to make proper payments in time.
The caveat to this beneficial program is that you are expected to pay taxes on the forgiven amount. Alternatively, if you are a Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) recipient, you can submit documentation of your Social Security benefits to aid in the payment of the taxed forgiven amount.
NOTE: Although you are automatically ineligible to submit for the federal Total Disability Discharge if you receive private student loans, some private companies offer loan forgiveness if you can prove disability. To find out more, contact your lender’s customer service department to discuss your options.
Next Steps
If you have been seriously injured, it is important to be proactive and take action by consulting with the appropriate lender service to discuss your options. If you have been injured and are expecting a personal injury settlement—which are usually not taxable—that reward will usually not be taken by the federal government as a means to pay off student loans. However, it is important to consult with an attorney for clarification and, depending on what loan program you subscribe to, discuss what options you have to make sure your settlement remains safe and your loans are not affected drastically.
*ATTORNEY ADVERTISING*
*PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME*
This information is the most up to date news available as of the date posted. Please be advised that any information posted on the KI Legal Blog or Social Channels is being supplied for informational purposes only and is subject to change at any time. For more information, and clarity surrounding your individual organization or current situation, contact a member of the KI Legal team.
KI Legal Personal Injury fights for victims of a wide array of personal injury claims, from Motor Vehicle Accidents to Scaffolding and Ladder Falls to Slip/Trip & Falls, amongst others. By leveraging its multidisciplinary foundation and, with the help of its experienced litigators, KI Legal Personal Injury can fight for the results and compensation that victims deserve without pushing for premature settlements due to financial reasons. This financial paradigm shift swings the pendulum in our favor when it comes to negotiating with insurance carriers, inherently leading to better results for clients. For the latest updates.