Set me straight about student loans during a CH 13 plan..

[welovedis]

We are in the process of filing to convert from a CH 7 to a CH 13. I have approximately 7-8K in student loans which are currently deferred because I'm still in school. My 6 month grace period will run out in May 2010. I read a thread here about not repaying student loans until after a CH 13 was completed.

Is that true that I won't start repaying my student loans until after out repayment period is over? We are hoping to have them paid off in 1 - 1 1/2 years after I'm done with school but if we can't under the plan what happens to them, interest-wise?

[atolar]

we filed with loans that were in deferment and our understanding was that while we are in 13, we don't have to pay and they can't add interest nor come after us for for it.

[liz417]

We were told that we couldn't include our student loan payments while in a ch 13 plan. They will be put on "hold" (with interest) until we complete our 5 year plan. We were told by the Student Loan company that we could send payments and they would deduct them off the loans while in the ch 13 plan. So, it just depends, I would call the loan company. I've read on these boards that some Trustees allow payments as an expense while in a ch 13 and I've also read that some Student Loan companies will take those "extra payments" and will NOT apply them to the loans until you are out of your plan! So call.

[DUMBAGAIN]

hum, my loans are not being deferred right now, as I'm not in school, however my attry told us we would pay them outside the plan, never mentioned that maybe they would be deferred the entire time. Very interesting.

[welovedis]

Ok, thanks for the replies. I guess the best thing to do is to ask the attorney and CH 13 trustee at our meeting and also check with Direct Loans to see what they say, hopefully get something in writing from them. Since the amt I owe them is not a lot (compared to some loans) I am hoping to just pay it off during the plan since my income will increase after graduation.

Thanks again!
Karen

[HHM]

The last people you want to ask about this is the actual loan company, they don't know anything.

Student loans in Chap 13.
1. They go into automatic deferment for the length of the chapter 13 plan
2. Interest "continues" to accrue.
3. You generally cannot claim your student loan payments in your chapter 13 budget.
Caveat: There is an argument that you can claim at least the interest as a budget item on Schedule J.

[welovedis]

The last people you want to ask about his is the actual loan company, they don't know anything.

Student loans in Chap 13.
1. The go into automatic deferment for the length of the chapter 13 plan
2. Interest "continues" to accrue.
3. You generally cannot claim your student loan payments in your chapter 13 budget.
Caveat: There is an argument that you can claim at least the interest as a budget item on Schedule J.

So, even if they are in deferment, can I make payments on them while I'm in the plan? I mean, I know that under a regular deferment I can, I just wondered if the CH 13 BKT will say I can't or something. It would be nice to get a completely fresh start after the 60 months instead of thinking about paying off the loans then.

[HHM]

Yes, you can continue to make voluntary payments and I generally recommend that you at least find a way to make a payment equal to the amount of interest each month. However, these payments are NOT part of your chapter 13 budget or plan. Thus, making these payments assume you have padded your budget enough to allow for it.

[welovedis]

Yes, you can continue to make voluntary payments and I generally recommend that you at least find a way to make a payment equal to the amount of interest each month. However, these payments are NOT part of your chapter 13 budget or plan. Thus, making these payments assume you have padded your budget enough to allow for it.

Ok, good to know I can make voluntary payments. We didn't pad our budget, however, when I graduate in December my income will increase with my nursing degree/licensure. At that point we will have more income and will (hopefully) be able to save a bit.

While I do understand that the trustee can & may ask for updated financials at that point we are hoping that we might be able to live frugally and set aside money here and there when we "underspend" on things like groceries, entertainment, etc.. Since we filed we have been living under budget for some budgeted areas and have spent little to nothing on entertainment, eating at home all the time, taking lunches, etc.. We've seen how perseverance has allowed us to save a little each month since filing and we have about $500 saved in our emergency fund.

[woeisme]

My trustee allowed my payments to be part of my CH 13 plan. It's in the budget as an allowed expense. So it really depends on your trustee, it's not a rule that you can't have the student loans as part of your plan.

[liz417]

Ok, good to know I can make voluntary payments. We didn't pad our budget, however, when I graduate in December my income will increase with my nursing degree/licensure. At that point we will have more income and will (hopefully) be able to save a bit.

While I do understand that the trustee can & may ask for updated financials at that point we are hoping that we might be able to live frugally and set aside money here and there when we "underspend" on things like groceries, entertainment, etc.. Since we filed we have been living under budget for some budgeted areas and have spent little to nothing on entertainment, eating at home all the time, taking lunches, etc.. We've seen how perseverance has allowed us to save a little each month since filing and we have about $500 saved in our emergency fund.

Yes, you can make voluntary payments, but make sure that these extra "payments" are going to be APPLIED to the loans during your ch 13. I've read on this board that some loan companies "sit on the payments" until your ch 13 is over THEN applies them to your loans (so they can collect interest that whole time). I would still call the loan companies and verify this. I have loans through Direct Loans too, so I will update you guys once I'm filed and confirmed!

[woeisme]

I have the exact issue that liz417 is talking about. My trustee allowed student loan payments to be made during my plan, but the student loan company said they can't apply any payments to the loan until after I am out of CH 13, and that the loan would accrue interest throughout the life of my CH 13 (although the payments would not, so I'd be loaning them $ for free!). I called my attorney when this happened, to see if the loan company could do this, she had never heard of it before but then said after investigating it that there was no law against it, that the student loan co's make up their own rules as far as payments during CH 13 was concerned! Very frustrating, because we'll come out of CH 13 with very little taken off of our student loans despite making payments on them for 5 years.

[filingin08]

I have the exact issue that liz417 is talking about. My trustee allowed student loan payments to be made during my plan, but the student loan company said they can't apply any payments to the loan until after I am out of CH 13, and that the loan would accrue interest throughout the life of my CH 13 (although the payments would not, so I'd be loaning them $ for free!). I called my attorney when this happened, to see if the loan company could do this, she had never heard of it before but then said after investigating it that there was no law against it, that the student loan co's make up their own rules as far as payments during CH 13 was concerned! Very frustrating, because we'll come out of CH 13 with very little taken off of our student loans despite making payments on them for 5 years.

Wouldn't it be better to put those payments into some sort of savings device, which possible earns interest and then at the end of the 13 cash the savings out and make a huge payment to the student loan co?

[njguy1972]

As I prepare my Ch 13 this is what scares me.

I have a 29k student loan that was originally 35k. If I am forced to defer by the trustee and the loan company applies interest, my loan will be back to 35k 5 years from now. That just seems to be unfair to the debtor who is trying to straighten out their debts. You are actually being punished for trying to seek help.

It is just very frustrating.

The lawyer is going to argue that I pay the loan outside of my plan (which will enable us to lower the monthly payment to the trustee. His argument is that if we defer I will be close to 60 by the time the loan is paid off.