Articles Posted in Student loans

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This is a pretty cool map that shows the southeastern U.S. as ground zero for the student loan crisis.  Most all of Florida shows this to be a High, Very High or Extremely High debt level according to this map.

I’m glad our bankruptcy court for the Middle District of Florida is taking this very important step to implement a new Student Loan Management Program for all debtors in Tampa, Orlando, Jacksonville and Ocala – and surrounding areas in between.  The program goes live on October 1 — and anyone who is a debtor in a pending case is eligible for this relief, as well as all future debtors!

Please reach out to us if you want to know more about the student loan program now being offered by our bankruptcy court.  We are also available to co-counsel on any cases with bankruptcy counsel who may be unfamiliar with the options available under this program.

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https://www.tampabankruptcylawyerblog.com/wp-content/uploads/sites/10/2015/07/christie_d._arkovich_p.a_1_small.jpgIf someone were to ask me what could be done legislatively to help student loan borrowers manage or reduce their student loan debt, I’d suggest and have suggested:

  • 1) simplification of the IDR programs- President Trump has included this in the two most recent budget proposals – one plan that fits all paying 12.5% of discretionary income for 15 yrs – but it should based upon the borrower’s income, not including their spouse;
  • 2) decrease interest rate for existing borrowers – many new federal loans are 3-4%, but many older ones are 6.8% which is high in today’s market, those with higher degrees range from 8-8.5%; and private loans are all over the place – 10-16% is not unheard of;
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https://www.tampabankruptcylawyerblog.com/wp-content/uploads/sites/10/2015/07/christie_d._arkovich_p.a_1_small.jpgStudent debt is no longer just a young persons’ issue. As of December 2018, approximately 8.4 million Americans aged 50 and older owe $289.5 billion in student loans, approximately 20% of total student loan debt.  This represents a 512% increase from the $47.3 billion owed by that cohort in 2004, making the growth of student loan debt among older borrowers the greatest among any age group.

A 2017 analysis by the Consumer Financial Protection Bureau reveals that from 2012 to 2017, total student loan debt for borrowers aged 60 and above increased by 72% in New Jersey, 107% in Pennsylvania, and 146% in Delaware. Many of the growing number of older borrowers face challenges that make them more reliant on their loan servicers for assistance and more vulnerable to misrepresentations by those servicers.

The data also shows that record numbers of older student loan borrowers are struggling with repayment.  Delinquency rates for student loan borrowers over 60 has jumped by 80-106% in the Northeast United States.  Typically, student loans are often a bigger problem here in the Southeast, so I would guess Florida’s delinquency rate has increased at least 100% from five years ago.  AARP reports that federal student loan borrower defaults increase with age.  In 2015, approximately 29% of federal student loan borrowers between 50 and 64 were in default; for borrowers aged 65 and above, the default rate rate rose to 37%  The default rates for those below 50 is 17% – still high unfortunately.

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https://www.tampabankruptcylawyerblog.com/wp-content/uploads/sites/10/2015/07/christie_d._arkovich_p.a_1_small.jpgIn an effort to ensure debtors receive a “fresh start” and not a “false start”, the Bankruptcy Court for the Middle District of Florida has implemented a Student Loan Management Program which utilizes a transparent portal to obtain relief from federal and private student loans.  The SLMP is an attempt to tackle the $1.5 trillion student loan debt that is currently owed by 44 million Americans.  The goals of SLMP are threefold: 1) increase communication which is presently lacking between both federal and private student loan borrowers and their servicers; 2) raise awareness among borrowers and their counsel of available options; and 3) end unnecessary and costly forbearance during bankruptcy.  The SLMP will start October 1, 2019.

Rather than simply leaving these loans on hold to accrue capitalizing interest in a Chapter 13, the SLMP is designed to enhance communication and availability of available options and end needless forbearance which causes larger loan balances.  For instance, a Debtor who owes $100,000.00 in student loans with an interest rate of 8% ends up owing over $148,000.00 after a five-year plan if the loan is simply put on hold.  The Portal is also designed to accommodate settlements of private student loans via a mediation.  The automatic stay will be lifted as to matters addressed via the portal.

In a similar vein, in 2010, the MDFL implemented a Mortgage Modification Program to assist debtors in seeking mortgage modification. The MMM program uses a portal to exchange documentation and communicate with mortgage servicers. It has been a great success, has reduced litigation and is recommended by mortgage creditors as a “model” for bankruptcy loss mitigation programs. It has been duplicated in many bankruptcy courts across the country and has saved thousands of borrowers from homelessness.

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https://www.tampabankruptcylawyerblog.com/wp-content/uploads/sites/10/2015/07/christie_d._arkovich_p.a_1_small.jpgWhile I don’t generally post our client reviews, there are times where I simply can’t help myself.  This one in particular shows the difference between having an advocate on your side versus getting your information from the student loan servicer — who by the way represents the creditor only.  They do NOT represent the borrower.

Nothing short of FANTASTIC!!

5.0 stars
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Judges-District-Tampa-Student-Loan-Portal-Presentation
Who are all these people?  People who want to put an end to the student loan crisis.  Most are Bankruptcy Judges from the Middle, Southern and Northern Districts.  The rest are us committee members who helped to put in place a new Student Loan Modification Program which goes into effect September 1, 2019 for the Middle District of Florida.

As I like to put it, the idea behind the Student Loan Modification program is to: 1) increase communication between bankruptcy debtors and student loan servicers; 2) increase awareness of various options available to reduce student loan debt; and 3) end the needless forbearance and accrual of yet more debt in bankruptcy by providing easier access and instructions for federal programs as well as mediation opportunities for private student loans.

I have a few trainings scheduled in the near future for other bankruptcy attorneys who have requested this:

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A 529 account and/or a Florida Pre-paid account is a no brainer.  A 529 account is NEVER taxed.  As long as you use the money for educational expenses, the gains from bond interest, stock dividends and stock appreciation is never taxed.  You can easily set up an account through Vanguard or Fidelity.  The 2019 changes for maximum contributions are located at the Vanguard link.

The definition of educational purposes is fairly broad and includes room and board, fees, books, supplies, equipment, computer hardware and software, and internet access and related services.

Also, parents can now use a 529 for private K-12.

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For anyone who has an interest in Public Service Loan Forgiveness, or other forgiveness programs for federal student loans, we were interviewed by attorney Kenneth Landau on his radio show that will be broadcast at 3:00 p.m. today and available as a podcast thereafter at www.NCCradio.org.

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divorce-debtsRogers v. Rogers, 12 So.3d 288 stands for the general proposition that student loan debt incurred during the marriage is a marital liability.  See, e.g. Smith, 934 So.2d 636, at 641; Adams v. Cook, 969 So.2d 1185, 1187 (Fla. 5th DCA 2007); Banton v. Parker-Banton, 756 So.2d 155, 156 (Fla. 4th DCA 2000); see also Section 61.075(5)(a)(1).  Thus, in the absence of specific findings supporting the unequal distribution of a student loan debt, such debt must be equitably distributed between the parties.  See Smith, 934 So.2d at 641; Adams, 969 So.2d at 1187.

The fact that one party will not receive any benefit from the other party’s education because of the dissolution is NOT a factor to be considered when allocating a marital debt for student loans.  See Smith, 934 So.2d at 641; Adams, 969 So.2d at 1187.  Thus, absent some other justification for an unequal distribution, controlling case law forbids a trial court from awarding student loan debt incurred during the marriage solely to one party or the other.

If the loans were taken out before the marriage, then they would be non-marital debt.

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In the Seventh Circuit, which includes Illinois, Indiana and Wisconsin – the answer is “YES” in a ground breaking ruling against Great Lakes this week.    Servicers must tell the truth when a student loan borrower asks questions about their options to repay student loans.  Servicers who steer borrowers into plans that benefit lenders,forcing borrowers struggling to keep up with their loans, can be held liable.  Halleluja!! (yes, I had to look up how to spell that 🙂

In Florida, we still don’t know.  We have a pending class action on appeal with our co-counsel against the very same defendant, Great Lakes, making the same arguments in the context of the Public Service Loan Forgiveness program.

This borrower, Nicole Nelson, says she was never informed about income-based repayment plans, which federal law requires loan servicers to offer. Income-based plans set monthly loan payments as a percentage of a borrower’s discretionary income, but, according to Nelson, these plans are less lucrative for lenders and the enrollment process is time-consuming for the loan servicer.  Instead, the servicer pushed forbearance.  We tell clients that forbearances are the drug of choice for servicers because it is easy to grant, and runs the loan balance up.  Forbearances do have their place, but they should be considered as a bandaid for a temporary reprieve, not a long-term solution.

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