student loan debt

Six-Figure Parent Loans and the True Cost of Parent PLUS Loans

Parents will often do anything they need to when it comes to their children, and for many parents, that means taking on student loans for them, on top of the ones they already have left over from their own college education. These loans are normally taken on in the form of Parent PLUS Loans, and can often end up being a struggle for the parent to pay off in the end.

The Parent PLUS program was introduced in the 1980s as a means of financial support for middle- and upper-income families to help pay for their children’s college expenses. Most of the time, parents in these income classes did not qualify for other financial assistance, but the Parent PLUS program allowed them to obtain financing while keeping their liquid assets. However, since that time, the program has also become more popular among lower-income families who may not be able to pay down the loans once they are taken so easily.

Bankruptcy Law

New Bankruptcy Laws Offer Relief for Veterans, Small Businesses and Farmers

President Trump signed legislation into law on August 23, 2019, that offers bankruptcy relief that will benefit veterans, small business owners and farmers. Now that these changes are being implemented, they will have long-lasting, positive effects when it comes to access to bankruptcy relief for these individuals.

The first piece of legislation is the Family Farmer Relief Act of 2019. It doubles the debt ceiling allowed under the Bankruptcy Code for a “family farmer.”  This relief increases the number of farmers eligible to receive relief under Chapter 12 reorganization bankruptcy, which is a special form of bankruptcy that is designed to meet the needs of farmers facing financial difficulty.

student loan debt, Student Loans

100,000 Borrowers Rejected for Public Service Student Loan Forgiveness

Statistics have come out showing just how many borrowers who have applied for public service loan forgiveness have ended up being denied loan forgiveness.  It is estimated that more than 100,000 applicants have been rejected since the program began, which has many scratching their heads asking why so many borrowers are being rejected?

According to the U.S. Department of Education, as of June 30, 2019, 90,962 student loan borrowers submitted 110,729 applications for public service student loan forgiveness. Of these applications, a total of 102,051 have been processed while 8,677 remain pending. Only 1,216 of the over 102,000 applications submitted have been approved, leaving a total of 100,835 applications being rejected. These numbers mean that less than one percent of all applications have been approved.

Digging deeper into these numbers, only 845 borrowers have received a collective $52 million in public service student loan forgiveness. The average debt discharged is $61,592. Another 726 applications have been approved under the Temporary Expanded Public Service Loan Forgiveness Program, which has given an additional 681 borrowers relief. However, a large number are still left without any recourse or assistance.

The reasons why so many applicants are being rejected vary. Fifty-five percent of them were because the borrowers failed to make all the required qualifying payments while 24 percent of them were due to missing information. Another 15 percent reportedly did not include “eligible” loans. Two percent were rejected due to employment date discrepancies, and another two percent were because the employer listed was not an eligible employer under the program.

If these issues are discovered early on, they can be remedied fairly easily. However, problems arise when the borrower does not discover this fact until years into the program.

The Public Service Loan Forgiveness Program forgives federal student loans for borrowers who are full-time employees, working more than 30 hours per week, in an eligible federal, state, or local public service job or 501(c)(3) nonprofit job. The borrower needs to make 120 eligible on-time payments, as well. Over half of borrowers who were rejected failed to meet this specific requirement.

One of the requirements under the program is the borrower must complete the Employment Certification Form and submit it to the U.S. Department of Education whenever the person begins a job in public service, when he or she switches employers, and annually to ensure that the borrower is on track. Not submitting this certification form can result in the person not remaining on the right track to qualify for the program.

Additionally, borrowers must be enrolled in an income-based federal student loan repayment plan to qualify and must make 120 required payments while enrolled in this federal student loan repayment plan.  As these kinks get worked out, it is possible that the number of applicants who are approved for loan forgiveness will increase. At this time, however, the small amount that are being approved is less than encouraging.

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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

Be on the Look-Out for These Student Loan Scams

More than 40 million borrowers are carrying an estimated $1.5 trillion in student loan debt. With that many individuals carrying student loan debt, it should come as no surprise that many scams are out there, hoping to take advantage of borrowers who are desperate to get out of debt quickly. Borrowers need to be aware of these debt relief scams in particular, which are now facing investigation by the Federal Trade Commission (FTC).

Student Loan Debt Elimination Scams

Many companies are out there offering the promise of eliminating student loan debt for borrowers who are desperate for a way out. However, if someone is offering a deal that sounds too good to be true, that is usually because it is, in fact, too good to be true. Many companies will promise to wipe away a person’s loans when they have no actual ability to do so. The fact of the matter is no one can promise student loan forgiveness or cancellation. Student loan borrowers can only ever receive forgiveness if they meet very specific conditions, and the fastest any borrower can receive loan forgiveness is five years. Even these forgiveness programs can be very difficult in terms of qualifications.

If the borrower has federal student loans, it should be noted that no student loan debt relief company can negotiate directly with the federal government to obtain lower rates on those loans. If a company promises the ability to negotiate a lower payment, this can normally only be done via an income-drive repayment plan, but most of these can be applied for directly by the borrower, not a third-party entity.

Debt Relief, Medical Debt

Medical Debt Cited as a Leading Factor in U.S. Mortgage Denial

Approximately a quarter of homebuyers and renters carrying personal debt were denied approval for either a mortgage or lease, according to Zillow’s recent report on Consumer Housing Trends. It was reported that medical debt had the most impact on homebuyer’s budgets and whether they would qualify for a mortgage.

While student loan debt has been reported as being a major factor keeping many younger people from purchasing a home, it turns out medical debt is an even bigger factor.

According to Zillow, medical debts are more likely than any other type of debt to keep American consumers from either purchasing or renting a new home. They conducted a survey which showed that 38 percent of people who owe money for medical or healthcare expenses say they were turned down for renting a home or taking out a mortgage due to those debts. According to Zillow, this group represented the largest rate of rejection- more than any other kind of debt, including credit cards and student loans.

Debt Relief, student loan debt

Seniors Carrying as Much Student Loan Debt as Borrowers in Their 30s

The student loan debt crisis is at an all-time high, but it appears that when it comes to the age of the borrower, this type of debt does not discriminate. According to Experian, a review of student loan balances across different age categories showed that borrowers who were in their 30s and borrowers who were in their 60s carried around the same amount of student loan debt.

According to Experian, the average 30-year-old borrower owes $36,406 in student loan debt while the average 60-year-old borrower owes $35,637.

Bankruptcy Law, Debt Relief

How Long Does Bankruptcy Stay on Your Credit Report?

One of the biggest concerns consumers have when it comes to filing for bankruptcy is how long will the bankruptcy remain on their credit report. While a bankruptcy does hurt a person’s credit score, the effect it has depends on several different factors. Ultimately, it depends on the type of bankruptcy being filed and the financial habits exercised by the consumer after the case is over.

Chapter 7

A Chapter 7 bankruptcy case will stay on a consumer’s credit report for ten years from the date of filing. A Chapter 7 bankruptcy case is also known has a liquidation bankruptcy. This form of bankruptcy is normally used by people who have defaulted on their financial obligations and fall below a certain income threshold.

In a Chapter 7 bankruptcy case, the bankruptcy trustee has the authority to liquidate the borrower’s nonexempt assets and use them to pay down qualifying debts. The remaining debts, which are mostly unsecured ones, are discharged. Chapter 7 forgives debts including credit card debts, medical bills and unsecured personal loans. Certain debts, including taxes, criminal fines, child support, spousal support, and student loans, are not discharged usually in a Chapter 7 case. Not all consumers can pursue a Chapter 7 case, however. They must first pass a means test to ensure that their income and asset-to-debt ratios satisfy the requirement to file for Chapter 7 bankruptcy.

A consumer’s credit score can drop by as much as 200 points after filing for Chapter 7 bankruptcy. However, the alternative can be much worse if bankruptcy is not filed and the consumers ends up with multiple defaults and collections on his or her record. By exercising good financial habits over time, a person’s credit score can certainly be rebuilt.

Bankruptcy Law

What are the Credit Counseling Requirements in Bankruptcy?

Whenever a person files for Chapter 7 or Chapter 13 bankruptcy, he or she must submit proof that a credit counseling course from a nonprofit credit counseling agency was successfully completed. The purpose of this course is to help the filer determine whether he or she can pay his or her debt outside of bankruptcy and provide proper financial guidance to prevent an additional bankruptcy filing in the future.

What Is Required?

According to the Federal Trade Commission (FTC), all bankruptcy filers must take an approved credit counseling course prior to filing. The U.S. Department of Justice’s U.S. Trustee Program keeps a list of approved programs if filers are not sure where to go. Proof of completing a program must be submitted before the bankruptcy case can proceed further. In fact, this proof must be submitted within 180 days prior to filing for bankruptcy. The filer will normally walk away from the credit counseling program with a repayment plan, if a plan is realistic, although nothing in the FTC rules requires the filer to follow that specific plan.

Credit Card Debt, Debt Relief, Medical Debt

How to Handle Debt in Retirement

For many Americans, including those entering retirement, being in debt is a way of life. According to numbers published by the Transamerica Center for Retirement Studies, four in every 10 retirees report getting out of debt as a top priority. Many of them are struggling to the point where bankruptcy is their only way out. In fact, the Consumer Bankruptcy Project reports that one in every seven bankruptcy filers is over the age of 65.

One of the reasons why seniors are struggling financially has to do with living on a fixed income. All it takes is for one medical crisis to strike to set them back significantly in their financial goals. The hopes of entering retirement debt free can be difficult for those carrying large amounts of credit card debt and student loan debt. It also does not help that larger companies cut back or even took away pensions for American workers who pinned their hopes of retirement on these plans.

Bankruptcy Law, student loan debt

How to Handle Zombie Student Loan Debt

Student loan debt has been known to haunt borrowers for years, if not decades, after that first loan is issued. Many borrowers find themselves on payment plans that can least up to 25 years. To them, a student loan is like a mortgage without the benefit of having the house to live in. Once the debt is paid in full, the last thing that person wants to think about again is that loan. However, for many borrowers, that debt never seems to go away and often comes back in the form of zombie debt.

Most forms of debt are limited by a statute of limitations, which governs how long a creditor can sue the borrower for the debt. Federal student loans were once governed by a six-year statute of limitations until 1991 when that statute of limitations was lifted. Now they are technically collectible indefinitely. Private student loans, however, are still limited by statute.