The IDR online application is back up, though a demo revealed there are some big new restrictions on enrollments:
Credit reports and credit scores are used widely in this country. Practically every financial activity somehow involves your credit score. If it’s wrong or lower than it should be, you can be charged additional fees and/or thousands more in interest.
Right now, there are considerable disruptions in the financial world. We are seeing drastic changes involving student loans as you likely know. Duplication of accounts, erroneous reports of missed or late payments are frequent and can be very damaging.
Just yesterday, we heard from a potential client who had been making his payments on time, but due to an addressing error, his loan servicer had changed and he did not receive notice of the change. So his payments have been going to the old servicer. Meantime, the new servicer has dinged his credit for 90 days for missed payments. You can bet something like that can cause a score to decline precipitously. People are regularly denied a mortgage, car, apartment, or new credit for this. At the very least, existing costs will likely go up as other creditors perceive a risky borrower.
While the Income Driven Payment application process is shut down (paper applications were being processed, but now they too are reportedly on hold), to be first in line when it restarts, we suggest a paper application be sent to your loan servicer so it’s in the queue, and be sure to use the latest IDR application form. (Form #1845-0102 with an expiration date of 4/30/2027). Attached documentation of your income (latest tax return filed or a recent pay stub). You can try to upload it to your servicer, but with most of the online systems halted, it may be best to send via paper certified mail with a return receipt.
An Income Driven Payment is one way a borrower can remain current on their federal student loans who cannot afford their normal Standard payment. Please don’t ignore a student loan bill – it not only will incur late fees, but you will also have damage to your credit and the possibility of default which is not good for a federal student loan. Please read back through our blogs for some of the reasons why.
You may have some forbearance left. A couple days ago I blogged about forbearance options. This will not accrue credit toward forgiveness but it will keep your credit in good standing and avoid default.
So the Consumer Financial Protection Bureau is in the process of being shut down. I expect that private consumer claims will increase thereafter when consumers realize that the government will not be taking action to protect them through the CFPB, FTC or other entity.
Many collection attorneys send out communications to a consumer’s past attorney as required by the Florida Bar. We review them and send to our former client. Here in the 11th Circuit which includes Florida, collection letters that are made from a collection attorney to a consumer’s attorney are actionable under the Fair Debt Collection Practices Act (“FDCPA”) per Bishop v. Ross Earle & Bonan, P.A., 817 F.3d 1268 (11th Cir. 2016). To defeat a standing issue, it’s important that the consumer attorney relay the letter or communication to the client though. Sometimes charging a small fee to review the matter can also defeat a standing challenge.
So what is a communication? We use email a lot (who doesn’t right?) and there was just a case out under the Florida Consumer Collection Practices Act, Quinn-Davis v. TrueAccord Corp, No. 1:23-cv-23590-LEIBOWITZ/REID (S.D. Fla. Nov. 20, 2024) which held that merely sending an email does not constitute a “communication” unless it is actually opened and read. This will reduce the viability of class actions based solely on information sitting in someone’s inbox.
More and more signs are pointing toward bankruptcy being the best platform going forward to address student loans. Why?
So I’m hearing that President Trump is moving the federal student loan system over to the Small Business Administration (“SBA”). I’m also hearing today that they are cutting the SBA’s workforce by 40%. Interesting. I admit, I was expecting big changes, but I didn’t really have this on the bingo card.
I have always been an advocate of looking at the ROI, return on investment, when deciding how much to pay for what degree. I imagine this change will only emphasize this. I’d hate to get a degree that resulted in unemployment or underemployment and then default on an SBA loan. The SBA has a reputation of playing hardball when it comes to negotiation of past due balances.
At least the SBA has a system in place for loans and the collections of loans. How they would incorporate all the Income Driven Plans and the other oddities and complexities of the federal system I really don’t know. Maybe they won’t or they will do only that which was passed by Congress like IBR and PSLF. I do know there was a report out by the Inspector General’s office a few years back that 62% of the time the dozen or so federal student loan servicers would do whatever wrong. So the bar is pretty low to do it correctly. I used to say that if I cited the wrong law or something 62% of the time, the Florida Bar would probably ensure my disbarment.
President Trump signed an executive order titled Restoring Public Service Loan Forgiveness a couple days ago. While this should have to go through the normal channel of rulemaking which will take approximately one year, it appears that PSLF will be excluded for non-profits which engage in a “substantial illegal purpose” including:
(a) aiding or abetting violations of 8 U.S.C. 1325 or other Federal immigration laws;
(b) supporting terrorism, including by facilitating funding to, or the operations of, cartels designated as Foreign Terrorist Organizations consistent with 8 U.S.C. 1189, or by engaging in violence for the purpose of obstructing or influencing Federal Government policy;
As I blogged about a couple weeks ago, you can check the amount of IDR time you have been credited for on studentaid.gov now. If for any reason it is not there, a private company has released the VIN Foundation Download My IDR Progress browser extension for Chrome. It allows a borrower to grab a copy of their IDR payment history showing the qualifying vs. ineligible payments.
Yesterday the new Secretary of Education, Linda McMahon, was confirmed so perhaps we will learn of some concrete plans for the Department of Education shortly.
Today’s webinar went off without a hitch – link here. I tried to update our fellow attorneys on what we are seeing or hearing out there in our student loan world. Lots of changes, practically to everything in fact.
Student Loan Essentials: Updates, Strategies, and Advocacy for Legal Aid Practitioners. It’s one hour and free.
This is approved for Florida Bar 1.0 General CLE credit – see link for specifics.
I read today in the Pomp Letter that the average credit card balance is $21,000. And the average interest rate is 28.6%. Just wow. In 30 months, the debt would double. In our bankruptcy practice here in Tampa, Florida, we are regularly seeing people with 100k of credit card debt.
Many people are making only minimum payments of their bills – 10.75% according to a new report from the Philadelphia Federal Reserve (reviewing data for the third quarter of 2024.
I don’t know how you get out of that – unless you file bankruptcy. Or have some kind of windfall such as a much better paying new job, inheritance or something. Even with a much better paying new job, you would have to dedicate funds quickly to pay down that debt. Back during the foreclosure crisis we ran into a lot of people who thought that they could easily catch up once they started working again. Didn’t happen. Even a $20k increase in pay is not that much paycheck to paycheck. With interest so high, the balances got even larger or remained the same.
Reboot Your Life: Tampa Student Loan and Bankruptcy Attorney Blog