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arkovich_law-narrowI read today in the Pomp Letter that the average credit card balance is $21,000.  And the average interest rate is 28.6%.  Just wow.  In 30 months, the debt would double.  In our bankruptcy practice here in Tampa, Florida, we are regularly seeing people with 100k of credit card debt.

Many people are making only minimum payments of their bills – 10.75% according to a new report from the Philadelphia Federal Reserve (reviewing data for the third quarter of 2024.

I don’t know how you get out of that – unless you file bankruptcy.  Or have some kind of windfall such as a much better paying new job, inheritance or something.  Even with a much better paying new job, you would have to dedicate funds quickly to pay down that debt.  Back during the foreclosure crisis we ran into a lot of people who thought that they could easily catch up once they started working again.  Didn’t happen.  Even a $20k increase in pay is not that much paycheck to paycheck.  With interest so high, the balances got even larger or remained the same.

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Christie_1So the big news in the world of student loans is that the online system has once again been shut down for consolidations and IDR applications – as of Friday, Feb 21.  This is likely due to the 8th Circuit expanding its stay to stop all forgiveness under PAYE and ICR.  For now, someone’s best bet for forgiveness is to get onto IBR – Income Based Repayment.  IBR was Congressionally passed in 2009 and does not appear to be going anywhere.  It’s a 25 year program that allows for full forgiveness of any remaining balance once 25 years of IBR credits is obtained.

The 8th Circuit also halted the IDR Recount. While we don’t believe that any loans previously forgiven will be reinstated, we really don’t know what will happen to those pending loans benefitting from the IDR Recount – but still have months or years to go.  The best we can say is to keep copies and screenshots of anything to do with the IDR Recount.  You may need this one day.

So why is the consolidation button greyed out?  Both FFEL loans and Direct Loans are eligible for IBR.  So a consolidation isn’t necessary for IBR.  If the government is discouraging Double Consolidation for Parent Plus loans, PAYE, ICR and the IDR Recount, there really isn’t a reason to consolidate older federal student loans under the FFEL system to the newer Direct loans.  Also the government has to pay the private originators of a FFEL loan upon its consolidation to a Direct loan.  It doesn’t want to do that.

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Christie_1A post on Theresa Sweet’s [Plaintiff in Sweet v. Cardona’s class action BDTR lawsuit] Facebook page says the majority of workers reviewing BDTR claims have been laid off and majority of Ombudsman staff have been fired.

For several months now, we have been of the opinion that while filing a Borrower Defense to Repayment application is free and available, we do not expect to see any discharges any time soon for new applications that are filed after the Cardona class action settlement.  You may expect to see a forbearance due to the filing, but use it more as a place marker to give you time to explore and take advantage of other ways to deal with your student loans.

Please see our last blog re: documents/downloads you should do now to keep track of your records.

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Christie_1While it is unlikely that the Trump administration will close the Department of Education anytime soon, it is clear that ED will be dismantled in some form over the next few months to years.  Many of its functions may discontinue or be passed to other federal or even state agencies.

It may be important to download information now while it is easily accessible to save time in the future.  You may need to prove loan balances, payments and the like to protect yourself in case of inaccuracies with a systemic change.  We would suggest that you download your StudentAid.gov records (NSLDS file, dashboard screenshot, PSLF and IDR tracking details), and your loan servicer records (payment histories, key notices/letters).

Keep this information just in case.

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arkovich_law-narrowDuring all the hoopla surrounding student loans last year, probably the best program (TPD) out there gets so little attention.  Right now, that’s probably a good thing right?

I’m talking about the ability for someone who is unable to work a full time job doing what they used to do actually getting a discharge of their student loans due to that inability to work.  The test doesn’t read like that exactly, but it’s far from the SSD questions of “Can you feed yourself?”  “Can you dress yourself?”  We’ve long obtained full discharges within a remarkably small time frame of as little as 60-90 days using the TPD program.  We focus on someone’s vocation, what they were trained to do, their experience and actual abilities.  Age matters as well, our best chances exist when we have someone who is 55 or older with cognitive issues.   My former experience as an employment attorney and the use of the ADA and FMLA I think helps to understand and process these claims.  Our streamlined process includes medical professionals who can see our clients via Zoom or in our office in Tampa.

As this program, which has been paused for a couple months, begins anew, we expect some changes.  It’s possible that the test will be more stringently applied.  That’s good and to be commended.  We don’t want people who aren’t deserving of this discharge to get it either.  However, our clients have had long term illnesses and/or injuries that have made it next to impossible to pay their student loans back.  The income simply isn’t there and often hasn’t been for a long time.  Getting a TPD discharge can be life changing now b/c it will get rid of that fear of the government coming after someone or their social security for students.  This includes even Parent Plus loans.  In fact, it may be the only solution for those with Parent Plus loans!

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Christie_1I’m sharing this here — it’s also being provided to our fellow attorneys signing up for our NACA webinar today at 2:00 p.m.

Helping your clients take their lives back from their student loans sometimes involve bankruptcy related solutions.  While filing bankruptcy has typically NOT been helpful for those with overwhelming student loan debt, there is good reason for re-evaluation of that view now.  Reducing student loan debt in bankruptcy has become much easier in 2024 due to two new programs rolled out by the Department of Education (“ED”).

First, many full or partial discharges of federal student loans are being awarded due to a new attestation process that went into effect in November, 2022 (the “Guidance”).  The rollout of this program was initially slow, but it is quickly picking up speed.  The process allows for the Department of Justice (“DOJ”) to work with ED to review and approve circumstances allowing for discharge in a process that is more transparent and consistent, with less burdens placed upon debtors by simplification of the fact gathering process.  Instead of traditional discovery such at requests to produce, interrogatories and depositions, the intent is to have the debtor fill out a questionnaire and attest to the hardship and other impositions that repayment of the student loans would create.  In this manner, the goal is to be much less expensive and far quicker than a traditional adversary proceeding.  Using the Guidance, certain presumptions for discharge now exist that did not exist previously.  Assessment of the debtors’ future circumstances and whether ED considers the debtors to have made good faith efforts to repay their student loans still occurs.  Once ED reaches a recommendation in accordance with the Guidance, the Court would still need to approve of the outcome.  In most circumstances, the Court would likely approve of the parties’ decision to discharge any student loan debt.

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Much like the NASA moon landing, I have two very different powerpoints ready for a student loan presentation today at 2:00 p.m. for the National Association of Consumer Advocates (NACA)  And I might be checking X on my phone every few minutes to see if there is any new Executive Orders out about dismantling the Department of Education!

Really though, there are some things working and working really well re: student debt.  But it’s gonna look different.  A lot different.  If you’re an attorney, tune in!  I bet NACA records these things also.

Webinar_sizedb_107508

 

Bankrupty May Be the Best Choice for Student Loan Relief Post-Election

February 5, 2:00 p.m. ET–3:30 p.m. ET
Pricing
Members: Free

Nonmembers: $90

If you have not yet been approved to attend NACA webinars, please email training@consumeradvocates.org to be vetted to attend. Join NACA today to get this webinar and so many more benefits at no additional cost!
Have you been wondering how the new ED guidelines for discharging federal student loan debt in bankruptcy may help in your practice?  This webinar will explore potential relief for student loan debt in the next administration.

Please note that there will be a 30-minute online conversation following the webinar for those who want to stay on and chat about students loans and bankruptcy.
What You Will Learn
  • What is the new Attestation Process in bankruptcy?’
  • What do you need to do in advance of filing?
  • What can you expect after the election?
Speaker
Christie Arkovich has been an AV rated Florida licensed attorney for more than 25 years since graduation from Stetson College of Law in 1992 with honors. In addition to Law Review, Ms. Arkovich gained practical experience by an internship with the Hillsborough County State Attorney’s Office and a clerkship with the Florida Bar. Thereafter, she worked in commercial litigation for three years for private law firms until starting her own consumer practice in 1995. Whenever possible, Ms. Arkovich takes the opportunity to share her knowledge about student loans gained from prior work as trial counsel for Sallie Mae, ECMC and other student loan servicers or guarantors, and from her practice now on the consumer side of things. She recently served on the Student Loan Committee for the new Student Loan Management Program in the Bankruptcy Court for the Middle District of Florida.

 

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Christie_1Well, we are now midway into the second week of President Trump’s administration.  What can we expect and how can you deal with your federal student loan payments?

Importantly, there were no first day Executive Orders, and none so far other than the appointment of a new Secretary of Education.  I view that as good news.  That tells us that the new administration is not focused on student loans – at least not to the extent that it could have been.  We’ve seen orders withdrawing our country from WHO, and the Paris climate whatever, but nothing about PSLF, the IDR plans, or even the elimination of the Department of Education.

However, it’s coming.  There will be a week where student loans will be all the talk.  Do you wait until then to make decisions?  I don’t think that’s a good idea now.

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Christie_1We’re hearing that the results of the IDR recount is being posted as of last night on borrowers’ studentaid.gov site.  Not all loans are processed yet, but most of the processing work for the adjustment is done.  We’ll see this roll out to everyone over the next few weeks.  This recount is very important for those with Direct loans or with former FFEL loans who consolidated before June 30, 2024 — now you will receive IDR credit for months or even years of forbearance and most deferments.  We’ve blogged extensively about this Recount — and the last batch was scheduled for this January.

Here’s a sample:

student-aid-IDR-count
Check your studentaid.gov site and good luck!!

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arkovich_law-narrowWhile we’re waiting on some clarity on the student loan mess, I’ve been wandering around some facts and figures surrounding the housing market here in Florida.  Our law firm was front and center during the 2008 financial crisis, handling thousands of short sales, loan modifications, deeds in lieu of foreclosure, foreclosure defense and finally bankruptcy if helpful for our clients so it’s only natural that we’ll pick that back up if that’s the direction we’re headed.

Bankruptcies have been picking up of course – particularly for those who are unable to pay the bills or worried about getting further in debt.

But what about the housing market and what we can expect going forward?  Sales are way down, partially due to high prices, affordability concerns, high interest rates etc.  We are entering the Spring seasonal timeframe where new listings increase until a peak around May.

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