Reboot Your Life: Tampa Student Loan and Bankruptcy Attorney Blog
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PSLF Guide by Federal Student Aid
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New Yorker Article “The Aging Student Debtors of America”
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.
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Servicers are Asked NOT to send Bills – a Sign of Another Possible Extension – BUT Important Steps Must Be Taken this Fall
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.
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Should defaulted borrowers do the fast-tracked rehab or wait for “fresh start”?
I expect many of you are wondering: Should defaulted borrowers do the fast-tracked rehab or wait for “fresh start”?
Here is what we are hearing:
- The Fresh Start process is intended to be easier and more accessible than the rehab process, and hopefully will be, so many borrowers/advocates will reasonably wait for that. Additionally, at least some aspects of default removal will be automatic, though temporary, such as the recent removal of all defaults from CAIVRS for mortgage underwriting, so borrowers should get some temporary relief from default consequences without doing anything.
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BDTR Confusion on Hearing Date for Final Approval of Class Settlement
We are hearing from folks that they believe there is a 7/28 deadline to file a BDTR application for auto approval.
The case Preliminary Settlement Approval hearing in Sweet v Cardona is 7/28/22. It is NOT a deadline, but we should know more after that hearing. Hopefully, they will set FINAL Settlement Approval hearing date for this fall sometime.
However, any new applications submitted after June 22, 2022 will be evaluated on their merits — not the same as auto approval. If you ran into the same sorts of issues that have been investigated in the past for a particular school, I believe that ED has telegraphed its intention to include that within its guidelines for approval. The timeframe for forgiveness may not be all that different either as it will take up to a year for the auto approvals and any new application will have to be reviewed within 36 months. It’s highly unlikely that the Biden administration will leave any undecided strays after the 2024 election – so you’re likely looking at up to 2.5 yrs of waiting during which the payments would remain on forbearance. It’s likely most of the new applications would be reviewed within 18 months to allow adequate time for the actual forgiveness to occur before the 2024 election. All this is a guess of course.
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We’re Approaching the Payment Restart Date — and Buy a House while you Wait.
We’re 40 some days away from the 8/31/22 federal student loan re-start date. We’re all waiting for the details of the Fresh Start announcement for borrowers in default to reenter payment in good standing when the pause expires. This would theoretically eliminate the need for a rehab or consolidation to cure a default. We have learned from ED that if a borrower rehabs now, ED is waiving the nine months of payments and automatically restoring borrowers to good standing once the Rehab Agreement has been signed and returned.
The National Consumer Law Center is still trying to get information from ED about the timeline and details of Fresh Start to help everyone with advising borrowers/clients and to ensure it works they way it should.
One student loan attorney, Stanley Tate, out of Kansas City MO spoke with Default Resolution Group this week, and learned that as of last Monday, all ED borrowers have been cleared from CAIVRS.
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Questions about the Navient/AG Settlement and Whether Your Private Loans are Discharged?
Are you unsure whether your private student loans are covered by the Navient/AG settlement?
Navient has sent or is still sending out correspondence to all qualifying private loans under the Navient/AG settlement – give that until the end of July per the settlement – if your address is current with your loan servicer, you will receive information if your loans are eligible. There are many factors that preclude someone from qualifying unfortunately including credit scores for some provisions. There is no court mechanism for us to bring up a borrower’s loan that we think should be eligible. I don’t believe the class action attorneys themselves have any remedy for that in their case.
The most we’ve been able to do is force a bankruptcy stay based upon likely inclusion in the AG settlement.
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PSLF Waiver Fixes Lesser Known Issues as well: Deadline to Apply is October 31, 2022.
Normally, a teacher who qualifies for Teacher forgiveness after five years of service at a low income Title I school, cannot also obtain Public Service Loan Forgiveness using that time. That won’t matter for someone who has less than $17,000 of federal student loan debt which is the cap for the Teacher forgiveness, but most borrowers that we talk to, have much more debt than that. To be an educator, often one or even two masters degrees, are encouraged. That comes at a pretty steep cost.
I’ve just learned that the PSLF Waiver now allows this time to count for PSLF as well as Teacher Forgiveness. Under the normal rules, it does not.
- If you got Teacher Loan Forgiveness, the period of service that led to your eligibility can count toward PSLF if you certify PSLF employment for that period
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Our Very First Disability Student Loan Discharge Case
I fondly recall our very first Total and Permanent (“TPD”) case a few years back. An older borrower, as I remember, who was probably in her late 60s, reached out to us after she basically gave up trying to get her federal student loans forgiven even though she had qualified for Social Security Disability. She had sent her SSD approval letter to the Department of Education and its debt collector, but apparently both letters had been lost.
As a result, her Social Security continued to be offset and she received frequent and rude calls from debt collectors who persisted despite her telling them that she was disabled. No one cared. She was fairly distraught and at the end of her rope, with no one to turn to. Her servicer wasn’t helping. The SSA and the Department of Education weren’t able to help her. The debt collectors were even calling a friend of hers who had nothing to do with the loans. These calls persisted even after she had sent in a TPD application, and after she retained our services.
Once she retained our services, we filed a consumer collections case under Florida and Federal law for these violations. We also sent in a TPD application for her and obtained full forgiveness of her federal loans. Rather than her paying us for obtaining this result, we were able to put money in her pocket from the wrongful debt collection that had occurred, plus we were finally able to put her student loan debt to bed. The other side ending up paying our fees due to the collection violation case.