Articles Posted in Student loans

Matt Taibbi with Rolling Stone, wrote a recent piece called “The Great College Loan Swindle” that outlines how we got here.  It started with sales pitches that colleges make to kids – comparisons of salaries of those with high school diplomas to those with 4 yr degrees.  The value of that degree over a lifetime of earnings.  Investing in yourself was a common phrase used by for-profit colleges.  It creates a vicious cycle, everyone feels obligated to go to college, most everyone who can go does, and then you have a glut of graduates which is where we are now.  And this isn’t limited to just the student.  Parents wanting to help their kids every way they can, co-sign on loans they cannot possibly repay, or sign their own loans called Parent Plus loans.  Parent Plus loans do not take into consideration the income and employability of the parent or grandparent who applies for the loan.  Not surprisingly, Parent Plus loans have been cited by the CFPB as having extremely high default rates.

So Step 1, convince everyone a college degree is necessary in life.

Step 2: make it easy to borrow the money.

The New York Times today in an article titled “Education Department Unwinds Unit Investigating Fraud at For-Profits” shows a department charged with investigations of schools such as DeVry, Corinthian, Everest, ITT, IADT etc., has only three employees now that it has all but been shut down. In addition, the unit’s members are now required to obtain special approval to contact any outside groups including the CFPB, state attorneys general, etc. who had been partners in identifying and prosecuting cases.  This alone has halted any investigative work by the three remaining employees.   So bottom line, for-profit schools are free to engage in predatory activities once again per the DOE.

We warned our clients a few months back when an Inspector General’s report came out in December 2017 that highlighted the reduction of staff of the new direction that that the DOE was taking.

We reiterate now while it is still possible to file Borrower Defense to Repayment applications for fraud by for-profit schools, a better approach may be to enroll in an income based plan with debt forgiveness – but there are several different programs and it is important to choose the right one for best results.  However, they have “staying power” and the current administration is in favor of Income Driven Plans.

If you are in default on a federal student loan, one option to cure the default is to enter into a 9 or 10 month rehab plan to cure the default.  This can be a paperwork nightmare, with the result ending in wage garnishment if you are not careful.  Once a garnishment starts, it cannot be stopped for five months.  That means that you have to pay a negotiated rehab payment for nine months during which you’ll have 10 paychecks garnished.  Most people’s finances cannot suffer that.

So it’s important to do this right.  Sometimes that doesn’t mean doing it yourself if this is a process you are unfamiliar with.  See what a rep for ACSI (Automated Collections Services, Inc.) said about working with our firm recently.  John advised: “he really appreciated how detailed the firm was with advising them of our client’s situation and how he appreciated that we submitted the supporting documentation straight away. He noted that if other firms implemented a system like ours, it would make his job that much easier. He’s been dealing with student loans and collections for 30 years now and has never come across a firm that has been as thorough with addressing a situation and helping to swiftly rectify it.”

Since this conversation, John has drafted and sent over the garnishment release notice to our client’s employer and had one of his associates follow up with us to get our client on an affordable repayment agreement.  This client approved for a $5.00 rehabilitation plan.