Do you know what it means to rehabilitate federal student loans and why it is necessary? First, once a federal student loan goes into default, several consequences can occur including:
On August 26, 2016, the U.S. Department of Education banned ITT Technical Institute from enrolling new students who use federal financial aid. This is the result of several investigations into their recruiting, marketing and job placement practices. The loss of these funds may ultimately be the demise of ITT likely in a matter of weeks. The Chicago Tribune did a story here with more details.
9/19/16 Update: Since ITT’s closure on September 7, 2016, we are now taking clients for representation to seek a discharge of their federal student loans (including Parent Plus federal loans taken by a parent for a student). New federal guidelines created following the closure of Corinthian go into effect on November 1, 2016 to allow for former students to potentially discharge debt due to fraudulent representations by the school in violation of state law.
It is too early to say whether former students of ITT will be able to assert a defense to repayment of their federal student loans. It’s possible because there are several open investigations into various ITT campuses and if they find evidence of fraud or illegal behavior, you may be eligible for relief. The DOE is expected to wrap up its final regulations regarding borrower defenses to repayment of federal student loans by the end of this year. We believe that the new regulations will expand the current environment which mostly only permit an administrative discharge when a school is closed within 120 days of your attendance and your credits are non-transferable.
I just watched yet another attorney’s video from 2013 about how student loans are hardly ever discharged in a bankruptcy unless you are extremely ill. The ending quote about student loans was “you’re stuck with them”.
And that was it. No discussion about options, possible outcomes, etc. Just you’re stuck with them. Unfortunately that is still the outlook of most attorneys. I guess that’s good news for my student loan practice, but we can only serve so many clients. What about all the ones we don’t reach?
We don’t accept that. At our law firm we are finding solutions. This week one of our private student loan clients accepted a settlement that was only 8% of his nearly 100k balance. 8 percent. Really. And he’s young, perfectly healthy, with no disability. He is borrowing $8,000 from his father to pay off in full this ridiculously huge student loan that he could never make a dent in otherwise. Then we are putting him into an income driven plan with debt forgiveness for his much smaller federal loans. I think his payment will be around $250. He came to me with $140,000 in debt with an income of less than $35,000. His student loan statement from Navient showed he was $69k past due. Most attorneys including the one from the video I watched today would say tough luck, you’re stuck with them. Needless to say it was quite depressing watching this video. I’m glad this client didn’t see that video, he probably would never have picked up the phone to call me. Instead he now owes around 40k instead of $140k and he has a reasonable payment of $250 with debt forgiveness for anything not paid after 25 years. And he feels good about himself and where his life is headed now.
Useful information can be obtained from the Consent Orders relating to improper debt collection activities obtained by the Consumer Financial Protection Bureau. Recent orders applicable to Fred Hanna, Encore Capital Group, Inc., Midland Funding, LLC, Midland Credit Management, Inc., Asset Acceptance Capital Corp., PRA, LLC, Porfolio Recovery Associates, Chase Bankcard Services, Santander Bank, N.A., Solomon & Solomon P.C., Westlake and Wilshire etc. can be found here on the CFPB site. (searchable filters).
Debt collectors are not permitted to provide false or deceptive information to you in their attempts to collect a debt. This may include the things they can do to you if you do not pay (such as take your home, sue you etc.). This may include who they are affiliated with. We are evaluating a case right now where the debt collector is private company. But they’ve told my client that they are the Department of Education. This is contrary to their website which we noted states no affiliation with the DOE. Basically, our marching orders are if what they say is not the whole truth and nothing but the truth, they run the risk of violating the law. This means if they try to explain your options, but leave perhaps the best one out – this would be a violation of the FDCPA, FCCPA and perhaps even unlicensed practice of law. All these consumer law violations give us excellent leverage to negotiate lower balances, better payment plans and sometimes even a write off of the entire debt.
This applies to all consumer debt. Auto finance, second mortgages, credit cards, signature loans and best of all student loan debt. When we are hired to settle any kind of debt we first take the time to educate our client on their consumer rights, what kinds of behavior can lead to violations and we have them document any phone calls they are receiving. Then we use all this to settle the debt.
Are you a slave to your private student loans? We have client after client coming to see us with huge private student loans that are not going away, despite years of throwing money at them. In fact, in most cases, the balances are larger, sometimes double what they used to be. Let us help you get these loan balances and monthly payments to something sustainable, affordable and with an end in sight.
While as an attorney it is difficult to tell your clients that perhaps their best option is not to pay, I just ran across this article titled “Top Ten Reasons You Should Stop Paying Your Private Student Loan” from the Huffington Post which agrees with taking such a strategic default. I have to say I agree with every one of their top ten reasons. Please take a moment and review the article. And we have taken this view for a while now, taking action on behalf of our clients to bring these unaffordable private student loans under control.
As HP points out, yes it will hurt your credit and that of any co-borrower. Private student loans won’t negotiate with you for the most part when you are current. They may start calling you demanding payment once you start missing payments. This is where the consumer laws come into play. Know your rights. Review our website for actions you can take now to preserve your claims. We file lawsuit for FDCPA, FCCPA and TCPA violations all the time. This can lead to substantial reduction in the amount owed on your private student loans.
Have you just learned you’re being sued by one of these companies?
ABC Action News ran a story about a Tampa student loan borrower tonight for whom we just filed an adversary lawsuit in bankruptcy court seeking an undue hardship. Unfortunately he was duped into what is now $164,000 worth of student loans for a worthless degree from IADT. Worst decision of his life. In our interviews we got the news journalist to understand and communicate what a fraud the accreditation process is. The differences between national and regional accreditation was a main focus of the story. We’ve been trying to get the word out on this for awhile now. Accreditation is not all equal. Our client’s degree is in IT – not basket weaving. But since it is from a nationally accredited school, this IT degree is essentially the same as a degree in basket weaving. Most employers and educators do not recognize it as a valid degree. If he wants to advance in his career he has to “do it all over again”. This means late nights studying, time out of the workforce, more student loans…
If you’d like to know more about why your nationally accredited school may not be what you think it is, see our earlier blog post Student Loan Nightmares at For-Profit Schools: Have accreditation agencies dropped the ball? For more info, please contact Arkovich Law
Highlighting a case where we obtained full student loan forgiveness of nearly $70,000 for an elderly client who had helped her son through school, ABC Action News interviewed our client and me today. The debt collectors wanted $700 a month in payments and were harassing her to make her payments. Now her payment is ZERO! The important thing to draw from this is to do your research. There are options for 9 out of 10 people who step into my office and don’t give up!
In my continued efforts to help student loan borrowers understand why hiring a student loan attorney is a good idea, I’d like to post some of the cases we are working on this week. Some of these are a little out of the ordinary and I’m hoping that other potential clients who have similar difficulties will contact us to help after they read this.
Tax Relief for Certain Students Whose Education Loans Were Discharged: The IRS has announced that taxpayers, who took out Federal student loans to finance attendance at schools owned by Corinthian Colleges, Inc., and whose loans were discharged under the Department of Education’s Defense to Repayment or Closed School discharge processes, will not have to recognize gross income as a result of the debt discharge. Furthermore, these taxpayers will not be required to increase their taxes or income if they claimed Section 25A education credits or took Section 221 interest deductions or Section 222 higher education expense deductions in a prior year for payments made with proceeds of these discharged loans. This tax treatment is effective for tax years beginning in 2015. Rev. Proc. 2015-57, 2015-51 IRB .
This is great news for our Tampa Bay clients who had the back luck to go to one of these schools. Similar to letting an underwater home go, the tax forgiveness is potentially huge for student loans, principal reductions on mortgage modifications, short sales and foreclosures. Normally, a person would have to file bankruptcy to discharge the potential tax debt for written off or forgiven debt. For more information, please contact Arkovich Law
Reboot Your Life: Tampa Student Loan and Bankruptcy Attorney Blog