We were able to help Michelle get rid of $160,000 in federal student loan debt and she posted this Google review today. Note that the Biden forgiveness of 10k would have only been small drop in a very large bucket. There are lots of things going on out there – and if you have student loan debt, this year is the very best year for you to finally do something about it!
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Much like the chaos of a Targaryen family dinner, the Joint Consolidation Loan Separation Act was signed into law today by President Biden – which creates an enormous timing problem.
While this is awesome news for borrowers of federal student loans who are trapped in this “One Way In, No Way Out” Spousal consolidation program where none of the newest and best ways to obtain forgiveness applies — there is one very large problem and that is timing.
You only have two weeks to take advantage of this change for public service work!!! Why isn’t this being talked about?
A podcast I did for Wealthy Woman Lawyer about student loan debt relief just dropped here: https://www.wealthywomanlawyer.com/episode-164/
The key to increasing wealth is often thought of as increasing multiple revenue streams etc. While reducing expenses may not be the most important thing to increasing wealth, sometimes you just can’t get past the day to day without making moves to reduce your expenses.
In this podcast, Davina Frederick and I, discuss how a business owner can intentionally reduce their student loan debt by taking advantage of various programs and tax relief now. Not next year, but now. Many of the fixes to the broken federal student loan system expire at the end of this year so it’s important to review where you are and what your plan is to get rid of this debt now! Tune in for some ideas here.
As a student loan advocate for many years, and a practicing attorney in Tampa Bay, I fear that many people may interpret this advice in a way that will hurt their chances for forgiveness. The PSLF application is only one-half of the equation. A very important part is to make sure that you consolidate your federal loans before 10/31 to get this relief. A consolidation will allow the required ten years to run from the date of the first loan, as well as make sure that older loans and Perkins loans are included for PSFL forgiveness.
If you simply send in the PSFL application by itself, by the time you realize you have the wrong loan type, it will be too late to correct this. Also, you won’t have the benefit of the ten years running from the date of first loan, which could add years of unnecessary payments.
A key requirement to take advantage of the new PSLF Waiver is to make sure you have Direct federal loans. Prior to 2010, an estimated 80% of federal loans were under a different and now out-dated program called Federal Family Education Loans (“FFEL”). An easy way to check, is to go onto studentaid.gov and view details of your loans. You have until October 31, to consolidate any of these older FFEL loans, or even Perkins loans, to a newer Direct loan. Only Direct loans are eligible for the PSLF Waiver which is intended to ensure that past payments actually count toward forgiveness, as well as the IDR Waiver which allows past lengthy forbearances also to count. Even the recent $10,000 – $20,000 forgiveness will only apply to those loans held by the government. While some FFEL loans are held by the government, most remain with private firms and are excluded from all of this.
As the deadline to consolidate FFEL loans to Direct loans in order to receive PSLF forgiveness (OCT 31, 2022), we recommend that borrowers use Nelnet to consolidate rather than Aidvantage or Mohela as Nelnet is currently processing these quicker. The account would then be transferred to Mohela, as the PSLF servicer, once the PSLF certification is filed.
It’s also quicker to do so online if possible.
The language used by the Department of Education makes it appear as though you must have a Direct loan to be considered for the limited PSLF waiver, not that an application has been filed.
While the current pause for federal student loan repayments is expected to end August 31, 2022, it is widely thought that this date may actually be extended again until the end of the year (which is past the mid-term elections).
The Department of Education furthered this thought process by telling its servicers NOT to send bills saying student loans are coming due in September.
It’s now August 19. Less than two weeks left to the end of the month. In the past, decisions to extend the payment pause were made approximately 40 days before the expiration of the deadline.
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I just finished reading Eleni Schirmer’s article in the New Yorker today about aging student loan debtors. This is something I regularly see as well in our law practice. Folks with crazy high balances nearing or actually in retirement, with absolutely no way to even think of paying the off the student loans. Loans that were once $20k – $30k which have ballooned to sometimes hundreds of thousands of dollars.
I was a bit disappointed that the article didn’t allude to some of the recent efforts by the Department of Education to fix some of the long standing problems facing student loan borrowers. We have been using these enhancements to existing programs to obtain much needed relief for our clients. Things like the PSLF Waiver and the IDR Waiver are much bigger than many thought, and can be used to circumvent one of the largest problems plaguing our federal system where the faulty relief methods mentioned in Ms. Schirmer’s article previously didn’t work.
No mention was made of the Total and Permanent Disability program also. I have just written about this process in a chapter to be included in a book Eldercare 101 that will be out in a few months. We love this program and our prior work with the ADA and employment law, as well as our retention of physicians with an occupational medicine specialty, have helped us to obtain tax free 100% discharges of student loan debt in a matter of months.
Providing a sign that the federal student loan repayment pause will be extended once again – perhaps from August 31, 2022 to December 31, 2022, the Wall Street Journal reported today that servicers are being requested NOT to send bills to borrowers.
Even if the pause is extended, there can be repercussions in that the PSLF Waiver deadline is Oct. 31 and the IDR Waiver is 12/31. If the pause is extended until the end of the year, I imagine there will still be folks who are blindsided by those deadlines and will be devastated to learn that they are no longer eligible for the waiver programs when they finally look into their student loan situation.
The moral of the story: tell your friends!! Now. Please.
Reboot Your Life: Tampa Student Loan and Bankruptcy Attorney Blog