Student Loans Archives - FREE CONSULTATION

What Borrowers Should Know as the Government Begins Collections on Student Loans in Default

Posted on May 19, 2025by Admin

The Trump Administration has announced it will begin collection efforts on defaulted student loans for the first time in five years. The Department of Education announced that its office of Federal Student Aid will resume collections on May 5, meaning it can start taking funds out of borrowers’ tax refunds, Social Security benefits, and even their wages.

This has raised questions and anxieties for millions of borrowers across the country. The change will affect 5.3 million borrowers who went into default before the pandemic, according to the Education Department. A borrower is considered in default when they fail to make a loan payment for at least 270 days.

According to data provided to NPR, 2.9 million borrowers are 61-90 days late with their loan payments. Another 4 million are in “late-stage delinquency,” and have been reported to the credit bureaus, according to the Department.

With the economy going the way, it is, and tariffs making the cost of goods more expensive, the number of delinquent borrowers is expected to grow.

How can I tell if I am impacted?

The Department of Education says it will reach out to all borrowers that are in default by May 5, 2025. People can also check their status by going to StudentAid.gov, the Department of Education’s website.

The online dashboard shows how much debt is owed and to whom, the monthly payment amount and — if they are in default — a warning message that says so. It is also where they can ensure all their contact information is up to date.

What are my options if I am in default?

There are ways people can get out of default. The quickest, but oftentimes the hardest is to pay off the loan in full. Another method is consolidation, which involves paying off your defaulted loans with new repayment terms. Student loan consolidation combines multiple federal student loans into a single, new federal loan. This simplifies payments, potentially reduces monthly payments, and allows for a longer repayment term. Loan rehabilitation requires a borrower to make multiple — typically nine — consecutive on-time payments of an amount that is usually based on their income. Once those are paid, the loan is taken out of default and the default line is removed from the person’s credit report.

Click here to read more.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. There are ways to file for bankruptcy with student loan debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Student Loans in Default Will Be Referred to Collection, Says Department of Education

Posted on April 24, 2025by Admin

Beginning May 5, 2025, the Education Department will begin collection efforts on federal student loans that are in default. The action will impact borrowers who have not made payments on their federal loans for more than nine months.

Roughly 5.3 million borrowers are in default on their federal student loans. The announcement marks an end to a grace period that began during the COVID-19 pandemic. No federal student loans have been referred for collection since March 2020, including those in default. Under President Biden, the Education Department tried multiple times to grant forgiveness of student loans, only to be stopped by courts.

Beginning May 5, the department will begin involuntary collection through the Treasury Department’s offset program, which withholds government payments — including tax refunds, federal salaries and other benefits — from people with past-due debts to the government (i.e. – federal student loan debt). Those borrowers who are in default on their federal student loans could be at risk of having their wages garnished.

Click here to read more.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. There are ways to file for bankruptcy with student loan debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm; we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

student loan debt, Student Loans

Lawsuit Filed Against the Trump Administration for Shutting Down Access to Income-Driven Repayment Plans Used by Millions

Posted on April 1, 2025by Admin

A teacher’s union has filed a lawsuit accusing the Trump administration of unlawfully shutting down access to income-driven repayment plans used by millions of student loan borrowers.

The American Federation of Teachers filed the lawsuit in federal court and took aim at the Education Department’s decision to suspend borrowers’ ability to enroll in affordable repayment plans.

The department made the change after a federal appeals court ruled that Democratic President Joe Biden’s administration lacked authority to pursue a student debt relief program designed to lower monthly payments for borrowers and expedite loan forgiveness for some.

In the days that followed the 8th Circuit’s decision, the Education Department directed student loan servicers to stop accepting and processing income-driven repayment applications and removed the application form from the department’s website.

In the lawsuit, the American Federation of Teachers, argued that the Education Department did so even though the 8th Circuit’s decision did not bar the department from offering several other types of income-driven repayment plans that were not the subject of the litigation.

Click here to read more on this story.

student loan debt, Student Loans

Judge Blocks Biden’s New Student Loan Forgiveness Plan

Posted on September 20, 2024by Admin

U.S. District Judge Randal Hall in Augusta, Georgia, has issued a temporary restraining order against President Joe Biden’s second effort to cancel student loan debt for millions of Americans. Earlier this summer, millions of federal student loan borrowers received an email from the Biden administration informing them that debt forgiveness was on the way, and they may be eligible.

Judge Hall, responded to a lawsuit against the relief package brought by seven Republican-led states. The states — Alabama, Arkansas, Florida, Georgia, Missouri, North Dakota, and Ohio — said the U.S. Department of Education’s new debt cancellation effort, like its previous attempts, ‘is illegal.’

Hall said the states had made a convincing case that the department was overstepping its authority and blocked the Biden administration from moving forward with its attempt to cancel federal student loan debt.

In June of 2023, the Supreme Court ruled Biden’s first attempt to cancel around $400 billion in federal student loan debt unconstitutional.

Biden’s first attempt to forgive student loan debt was through an executive action. This latest time, his administration has pursued the regulatory process, a lengthier route that it hoped would make its relief package more immune to legal challenges.

Click here to read more.

student loan debt, Student Loans

Can Your Student Loan Forgiveness Be Taxed?

Posted on July 9, 2024by Admin

According to recent data from the Federal Student Aid Data Center, 43.6 million people have outstanding federal student loan debt. In February 2024, the Biden Administration canceled $1.2 billion for 153,000 borrowers enrolled in the Saving on a Valuable Education (SAVE) repayment plan. And in March, 78,000 borrowers were granted student loan forgiveness through the public service loan forgiveness (PSLF) program, which included many teachers, nurses, firefighters, social workers, and other public servants, including the military.

For those struggling to afford their monthly payments, forgiveness on their student loans may seem like a dream come true. However, it is not always a clean break, and certain forms of student loan forgiveness are taxable.

Thanks to the American Rescue Plan Act of 2021 any student loan debt forgiveness that passes between December 31, 2020, and January 1, 2026, is considered tax-free. Previously, any forgiveness on student loan debt was treated as taxable income.

From Jan. 1, 2026, onward, how student loan forgiveness and discharge programs are taxed depends on the program.

Public Service Loan Forgiveness (PSLF)

Those who work for nonprofit organizations, government agencies, or public service groups may qualify for PSLF if they work for a qualifying employer full-time for 10 years and make 120 qualifying monthly payments. After reaching those milestones, borrowers can apply for debt forgiveness. Once approved, the government forgives the remainder of the balance. PSLF is one of the few programs that is excluded from federal income taxes; none of the forgiven loan amount is taxable as income.

Income-Driven Repayment (IDR) Discharge

IDR plans are for federal loan borrowers and extend the loan terms and base the borrower’s monthly payments on a percentage of their discretionary income.

The government will discharge the remainder if the borrower still has a balance at the end of their loan term. However, the forgiven loans are taxable as income at the federal and state levels.

Borrower Defense to Repayment Discharge

Borrower Defense to Repayment Discharge is a program that eliminates federal student loans belonging to borrowers who their college misled, or if their schools engaged in misconduct and violated state laws.

The IRS and the U.S. Department of the Treasury have issued notices that clarify that loans discharged through Borrower Defense to Repayment are not taxable as income.

Total and Permanent Disability Discharge (TPDD)

TPDD applies to borrowers who become totally and permanently disabled. The government will discharge the remaining loan balance for eligible federal loan borrowers. How and if these are taxed depends on when the loans were discharged. If you received discharge before January 1, 2018, the discharged loan amount is subject to federal income taxes.

Tax on student loan forgiveness for private student loans.

Private student loans are not eligible for federal loan programs like PSLF or TPDD. However, borrowers with private student loans may qualify for other loan forgiveness or discharge programs. For example, some private lenders will discharge the loans of borrowers who become totally and permanently disabled.

The American Rescue Plan specifies that forgiven private student loans are also exempt from federal income taxes through the end of 2025. However, they may be subject to state income taxes. According to the IRS, student loan amounts forgiven under PSLF are not considered income for tax purposes. You will not be taxed by the federal government, but your state may tax you. Any debt forgiven because of PSLF will not create a federal tax liability for you.

Click here to read more.

SOURCES:

Reasons You Can or Can’t Be Taxed on Student Loan Forgiveness (aol.com)

Will I be taxed on student loan forgiveness? (yahoo.com)

student loan debt, Student Loans

SECURE 2.0 Helps Lighten the Burden of Student Loans

Posted on April 10, 2024by Admin

A recently enacted piece of legislations allows employers to “match” any payments their employees make towards their student loan debt, with tax-advantaged contributions to their retirement accounts. This includes retirement savings plans like 401(k), 403(b), IRA, and Roth accounts.

SECURE 2.0 Act has brought about substantial changes to the retirement account rules in the United States. Its primary objective is to encourage more workers to save for retirement.

Student loan debt remains a burden for many people in America. The nation’s collective student loan debt is roughly $1.73 trillion, according to the Federal Reserve. Borrowers pay between $200 and $299 monthly toward student loans, on average.

A recent survey found that more than nine in ten young adults who continued with education after high school faced stress over money and finances that affected their physical and mental wellness. Of that group, 86% said student loans were a contributor to that stress. Nearly half said this debt impacted the amount of money they were able to contribute to retirement.

Putting off saving for retirement can have long-term consequences. Just $10,000 contributed at age 25 grows into more than $100,000 by age 65, assuming a 6% annual return. Waiting until age 35 to set aside that money drives the total return at age 65 to just $57,000.

Click here to learn more.

student loan debt, Student Loans

MOHELA Accused of Deflecting Calls and Mismanagement of Student Loan Relief Applications

Posted on April 3, 2024by Admin

The student loan company, MOHELA, is in hot water for allegedly profiting from a backlog of Public Service Loan Forgiveness (PSLF) applications.

With nearly a million unprocessed forms, it is alleged that MOHELA incorrectly told some borrowers they didn’t qualify for the program, and inaccurately counted the payments borrowers made to be eligible for full relief.

Public Service Loan Forgiveness allows student loan borrowers who work in public service-oriented jobs; for example, teachers or government employees, to have their loans fully canceled if they have made payments for 10 years.

The American Federation of Teachers and the Student Borrower Protection Center are also accusing MOHELA of engaging in a “call deflection scheme” by strategically avoiding borrowers who needed help.

The Education Department said the Biden administration has made clear it will not let borrowers pay for the actions of student loan companies. In October, the feds issued a $7.2 million penalty to MOHELA for failing to send millions of borrowers their bills on time when payments resumed, which in turn made borrowers delinquent.

In a statement this week, Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Mass., chastised MOHELA over the conduct described in the report.

“Our nation’s public servants, members of the military, and first responders deserve far, far better,” they wrote.

“What has happened here is a pattern and practice of greed,” said Randi Weingarten, the president of the American Federation of Teachers.

Click here to learn more.

student loan debt, Student Loans

Student Loan Payments Resume for the First Time Since 2020

Posted on October 11, 2023by Admin

Federal student loan payments are due for the first time since 2020. Approximately 28 million borrowers are now having to pay on loans they have not touched since before the COVID-19 pandemic. Many borrowers have not made a single payment on their loans and are not sure what to expect with this change.

Federal student loan payments have been on hold since the enacted forbearance on payments and interest at the start of the COVID-19 pandemic. Interest began accruing on these loans on September 1, but payments did not begin until October 1.

student loan debt, Student Loans

What the Debt Ceiling Deal Could Mean for Student Loan Borrowers

Posted on June 6, 2023by Admin

The Biden administration and Congressional leaders reached a deal last week regarding the debt ceiling, one that will now have significant consequences for student loan borrowers. Once the agreement is signed into law, payments on all federal student loans that have been on pause since the start of the COVID-19 pandemic will be reinstated as of August 2023.

This deal affects approximately 43 million student loan borrowers who must now figure out how to make these payments after receiving relief for years since 2020.

student loan debt, Student Loans

Where You Can Get Student Loan Debt Forgiveness if Biden’s Debt Plan Fails

Posted on May 18, 2023by Admin

If President Biden’s student loan debt cancellation plan is struck down by the U.S. Supreme Court, borrowers still have options available to them through individual state forgiveness plans.

In fact, 47 states and Washington, D.C., have their own programs, while many of them offer more than one loan forgiveness program. Every program is different with its own unique set of requirements, many of which are tailored to one profession or one specific industry. Additionally, like the Public Student Loan Forgiveness Program, many of them require the borrower to work in a specific industry for a set period of time. However, if the Supreme Court does end up striking down Biden’s proposed program, these state programs may be the only option available to borrowers.