Bankruptcy and Student Loan – How to Survive the pressure?

Author: Sally Croft

Many graduates of colleges and universities are affected by their inability to repay their student loans. Some may want to take the route of declaring bankruptcy with the hope of the student loan debt going away. However, because the loan was disbursed under a government initiative, applicants will be unable to relieve themselves of this loan as easily as when gained from private institutions.

Bankruptcy Code

Under section 523(a) (8) of the bankruptcy code, “an exception to discharge” (meaning a cancelation of the debt) will not be afforded to beneficiaries of loans made, insured or guaranteed by government agencies or paid in part by non-profit institutions for funds received as educational benefit, scholarship or stipend unless this payment will impose undue hardship on the debtor and their dependents. What this is basically saying is that student loan debtors can only relieve themselves of privately contracted student loans if they declare bankruptcy.

Undue Hardship

Proof of undue hardship is like pulling a camel through the eye of a needle. Standards vary from one state to another but generally, everyday excuses will not convince a judge to cancel your student loan debt. In addition, just the idea of you being able to afford an attorney is the first sign of your ability to service your student loan. No lawyer will take on your defense without charges as the profession is not government funded and legal aid attorneys are already overwhelmed with other court cases. Most attorneys will advise their clients that unless they have some form of disability that restricts their income generating capacity, they should forget about the route of declaring bankruptcy with the hope of getting their student loans canceled.

Declaring Bankruptcy

Declaring bankruptcy is a good mechanism for relieving yourself on some of your financial obligations. However, you first have to convince a bankruptcy court of your inability to meet your financial obligations and the steps you will adapt to in order to correct them while under bankruptcy protection. This is a good opportunity to focus on your student loan repayments as it will help to build your credit rating once your emerge from bankruptcy.

What to do after Declaring Bankruptcy

After declaring bankruptcy, your focus should be on recovery. There are several ways to reduce their student loan debt while under bankruptcy protection. One of the easiest mechanisms is to enroll in the National Guard. The National Guard has an incentive scheme that offers up to $10,000 in student loan cancelations. Training in the National Guard is only for a few weekends per year and your service is only required in times of war or natural disasters. Another mechanism is to offer voluntary service thorough one of the many social groups and organizations that receive government sponsorship. These organizations will pay a stipend and offer cancelation of some of your student loan debt. Another easy method of emerging from bankruptcy and repaying your student loan is by teaching in public schools for underprivileged, mentally and physically challenged students. Employment is this sector will realize 15% debt forgiveness for the first year of service and an additional 20% and 30% in the third and fourth years.

Consolidation Programs

Once you have emerged from bankruptcy and have gotten some of your debt relieved by social work, it is time for the next step. By this time your credit rating will have been repaired which qualifies you for student consolidation loans. By consolidating your loan, it relieves you of the student loan and gives you a longer period at lower monthly payments to service this new loan.

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Tags: Bankruptcy, student loan
Posted in ALL About Students, Student Loan | 7 Comments »

Feb

Student Loan Interest Deductions – How to benefit from them?

Author: Sally Croft

On average, students of a four-year degree undergraduate program will end up with a $60-70,000 loan tab at the end of their degree program. Students of higher education levels will even have loans up to $100,000. This is a huge burden on the shoulders of students who must begin their repayment of their loan once their grace period has expired. Those who had accesses PLUS loans would have already begun as they are required to start repayment once the PLUS loan has been disbursed. As a result, students must find innovative ways or gaining student loan interest deductions to reduce the financial burden they bear. One of these mechanisms is through student loan deductions.

Student Loan Deductions

As a part of the financial assistance offered to graduates, they are allowed to deduct interest paid on their student loan from their yearly tax filing with the IRS. Graduate taxpayers must complete a 1040 form to the IRS to find out if their expenses qualify as educational expenses.

The student loan deduction system has been beneficial to many taxpaying graduates. However, some limitations apply to the process:

Graduates must first prove that all money derived from federal funded students loans were used for the sole purpose of funding their higher education.
Graduates are allowed a maximum deduction of $2,500 per tax paying period.
Couples are treated as one taxpaying entity and are thus limited to the same $2,500 deduction limitation.
Full deduction is only available for single taxpaying graduates with salaries under $55,000 and married graduate with combine salaries of under $115,000 per year.
The deduction is gradually reduced the higher up you go in income levels and is eliminated once your income exceeds $70,000 if you are single or $145,000 if applying as a couple.
No one else can make a claim for you on their personal tax deductions.

How to Get your Claim

Student loan tax deduction formulas are quite complicated. It takes the expertise of a trained tax accountant to calculate the amount of deductions available from student loans. Most advisors recommend you invest in one of the better tax accounting software programs that are available online. You need to find one that is capable of digging into your expenses and find out deductions that you may have overlooked by asking all sorts of questions about your income and expense pattern. This software may be an expensive investment initially but will save you thousands of dollars in the long run.

If your income level is above that which qualifies for student loan interest deductions, there is no need to report them on your tax returns, as you will not derive any benefit by reporting them.

Prior to 2002 tax deduction were only allowed for the first 60 months of the loan contract. This has since been repealed and now student loan deductions can occur for the entire life span of the loan contract.

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Tags: Student Loan Deductions
Posted in Student Loan Articles | No Comments »

Feb

Learning to Write Detailed Grant Proposal

Author: Sally Croft

For many people, writing a grant proposal is a difficult process. You may have the feeling that those who receive grants are either super smart or have some inside connections. But grant writing does not have to be difficult, anyone can do it. “Where there is a will – there is a way!”

Putting it all together!

A successful proposal involves the coordination of several key points including research and data collecting, planning, writing and putting together a detailed grant proposal package, submitting the proposal to a funder and follow-up. So before you begin to write your grant proposal here are a few tips to get you started.

Preparation – Gather necessary details and make clear the purpose of your project by writing a clear and concise mission statement.
Criteria – Many grants have specific criteria, which are normally stated in the ‘request for proposal’ (RFP). Make sure that you design your proposal to match the criteria set out by the funding agency. The request for proposal usually gives detailed instructions about what you need to submit, so it is very important that you submit everything that is required. You do not want your proposal to be in the stack of “incomplete proposal” or “do not consider pile”, that’s not a good place to be after all your hard work.
A good match – When applying for grant money you are basically asking the funding agency for money. These agencies provide grants that will serve their interest and are important to them, so your grant proposal should address those issues that are important to the agency identifying how you will contribute, solving a problem or improving a situation.
Define you goal – Determine what your goals are and make sure your goals are consistent with the goals of the funding agency, but don’t sacrifice your goals and objectives just to fit the goals of the agency. If you are not a good fit for the grant, look elsewhere for a better fit.
Feedback – Show your proposal to family and friends, get their feedback and suggestions but only choose the ones that you think are a benefit to your proposal. Getting the assistance of an editor who has the expertise in proposal writing may also be a good idea.
Putting it all together – As with any type of writing, your first draft will not be the finished product and ready to submit. You may have to rewrite your proposal several times before you have a top quality proposal that will get you selected for funding.
Extras – There are some things you can do to make your proposal easier for the reviewer to read such as, making good use of the heading and sub-headings, use a consistent format, make your message easily understood, obtain up-to-date information and use facts and figures (identifying their sources).
Timely submission – In most cases, due dates for grant proposal are final. Even if you have a top-notch grant proposal, if it is late, there is a good change that it will be rejected. Make sure you plan ahead and submit your proposal on time.

What Reviewers Look for in your Grant Proposal?

Reviewers look for a well written proposal that is free from spelling and typographical errors, easy to read and understand text, logical and consistent message, convincing message that is believable, the best fit that matches their criteria and a solid goal and objective.

Applying for a grant can seem difficult a task at first, but if you are willing to put in the time and work, you can write a winning grant proposal that will get you selected for funding. You can do it!

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