Articles Posted in Student loans

Many folks who have filed applications for Borrower Defense to Repayment seeking to discharge their federal student loans due to fraud by the school, are running into problems with their servicers sending bills that payments are now due — even though the application is still pending and the loans should be in forbearance until the review is complete.

I believe this is due to the understaffing of the BDTR department by the Department of Education as they put the program on hold and are now in the process of re-writing it under Secretary DeVos.  Regardless of how that all comes out, you can call the DOE BDTR hotline for help with your forbearance.  They will call your servicer and push back the loan due to the forbearance.  That hotline is (855) 279-6207.

For borrowers nearing retirement, that is 2-3 more years closer to retirement (where less income will allow for a much smaller Income Driven Payment).

It’s extremely important when consolidating federal loans that you do not add any Parent Plus loans to the consolidation of your own loans.  It will taint the new loan and disallow many favorable options.

Here’s an excellent example from a current client (Cecelia) who came to see us before she did anything — just to make sure what she was doing was correct.  Can’t express how valuable that decision turned out to be.

By keeping a very small Parent plus loan of $3,000 apart from all of her other loans totaling in the low six figures, this client is estimated to have an IBR payment of $191 starting in approximately 90 days.  Had she not come to see us for advice first and consolidated all of her loans (as her servicer would have had her do), her loans would only be eligible for ICR and a payment of $1600.

One key difference in the foreclosure crisis versus the student loan bubble is that many believe there is no possibility of relief.  That is something that we seek to change every day for our clients via affirmative lawsuits for discharge of what is really consumer debt as it was debt issued beyond the true cost of education, settlements for pennies on the dollar for private student loans owned by NCSLT or other investment trusts, lawsuits for consumer law violations such as the FCRA, FCCPA, FDCPA and the TCPA, and making sure our clients obtain all forgiveness possible.

But for many others who are not aware of these options, it is a common mis-perception that there is no way out.  In examining “What a Student Loan Bubble Bursting Might Look Like,” Allie Conti quoted Persis Yu, a staff attorney at the National Consumer Law Center, in arguing that short of fleeing abroad, or going underground, you can’t ever walk away from student debt.

Studies show that nearly 40 percent of borrowers are expected to default on their student loan payments by 2023.  For those who do not believe that we are in a bubble, I ask how do you explain such a high default rate?  The cost of education is simply creating an absurdly high student loan balance for many.  Student loan servicers push forbearance like a drug – which continues to increase the balance.  Interest is capitalizing at every turn  – whenever someone comes off forbearance or is late in renewing an income driven plan.  Whether we are in a bubble or not, it’s clear that the current system cannot continue unchecked — trapping a generation of students in servitude, straining taxpayers and the solvency of our own government.

This week, Adam Walser of ABC Action News reports on the problem where licensed health care workers who are in default on their federal student loans are at risk of losing that license here in the State of Florida “Florida Board of Health Suspends Health Care Licenses Over Student Loan Defaults”.  We were interviewed by Adam:

“We’re not saying that people shouldn’t repay their loan,” said Arkovich. “We’re just saying that getting them fired probably isn’t the best way to go about that.”

By suspending healthcare workers’ licenses, which by the way only Florida has chosen to pursue this draconian measure, economists fear that many will be put out of work.  At a time when we are told there is a shortage of health care workers.  And in the State of Florida which likely has a greater than average number of health care workers caring for our elderly in nursing homes, assisted living facilities and rehabilitation centers.

You still need to pay your student loans when you are furloughed or else you risk a default.

But if you are a federal employee, take this opportunity to ask your servicer to recalculate your IDR plan while you’ve got zero income!!  Even if the shutdown ends next week, your zero payment would continue for the remainder of your 12 month plan.