Tag: Department of Education

student loan debt, Student Loans

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

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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 loan debt, Student Loans

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

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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. 

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

Federal Appeals Court Issues Ruling, Allowing Remaining Student Loan Forgiveness to Move Forward after Pause

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Borrowers waiting to see if they could receive student loan forgiveness through the stalled Borrower Defense to Repayment settlement recently received a victory. A federal court of appeals has issued a ruling saying that student loan forgiveness and other debt relief under this program could proceed while the appeal is pending. This ruling affects over 200,000 borrowers.

The case in question is Sweet vs. Carolina. A federal district court ruled in February that the settlement relief involved in this case could proceed. The case involves a class action lawsuit led by thousands of student loan borrowers who were seeking relief from the Education Department. In the lawsuit, the borrowers alleged that the Department had illegally delayed or arbitrarily rejected hundreds of thousands of Borrower Defense to Repayment applications, unfairly blocking borrowers from receiving relief.

student loan debt, Student Loans

Biden Administration to Make Process Easier to Have Debt Discharged in Bankruptcy

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The road to having student loans forgiven in a bankruptcy case is certainly not an easy one, which is why so many borrowers forgo pursuing bankruptcy for fear that they will never be able to receive relief from their largest source of stress: their student loan debt. However, all of this could change very soon due to new guidelines issued by the Biden Administration.

In January 2023, the Justice Department updated the required attestation form that borrowers pursuing bankruptcy must complete before being able to seek a bankruptcy discharge of their federal student loan debt. The changes to the form include several modifications, including small changes as to how monthly household income is reported, instructions clarifying when a borrower needs to provide the court with additional information, and new questions looking for information on whether a school closure impacted the borrower’s ability to pay his or her student loans. The changes to guidelines also include more detailed information regarding the borrower’s student loan repayment history, including any consolidations made, deferments, or forbearances.

student loan debt, Student Loans

The Supreme Court Prepares to Hear Legal Challenges to Biden’s Student Loan Forgiveness Program

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For many people with federal student loan debt, it has been approximately three years since they were obligated to make a payment on their loans. The pause on these payments started at the beginning of the COVID-19 pandemic and has continued since then, eight separate times. 

Another extension has been issued for this pause on payments after legal challenges were made regarding President Biden’s widespread student loan forgiveness program originally announced in August. To help borrowers who were anticipating help from this forgiveness, the government announced student loan debt bills from the federal government will not be collected formally for months. 

student loan debt

Federal Government Seeks Alternatives after Biden Student Loan Forgiveness Program Blocked

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With President Biden’s student loan forgiveness at an indefinite pause, the federal government is looking for other ways to help student loan borrowers receive relief from their debt. However, many of these changes hinge on the decision of the executive branch.

One reason student loan debt is so difficult to pay down has to do with the interest charged on the balance every month. According to the Education Department, $22 billion in interest was charged in the fiscal year 2019 alone. Keep in mind that no interest has been charged on federal student loans since the pause was issued on interest on these types of loans after the start of the COVID-19 pandemic.

Bankruptcy Law, Debt Relief, Student Loans, Timothy Kingcade Posts

Changes on the Horizon for Bankruptcy and Student Loan Debt

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In the past it has been nearly impossible to discharge student loans in bankruptcy. This issue has kept many individuals from filing for bankruptcy as they have seen it as not helping relieve them of the biggest debt they carry: student loan debt. That all could change after the U.S. Department of Education announced this year that it will be reviewing its policies and potentially changing the way student loan debt is treated in bankruptcy.

It is estimated that student loan borrowers in the U.S. owe a total of $1.5 trillion in student loan debt. According to the Brookings Institute, around 40 percent of these individuals will end up defaulting on their loans by the year 2023.

The current test for showing that student loan debt should be discharged bankruptcy is the undue hardship test. However, this standard is very subjective, and does not leave a definitive standard across the board of what amounts to undue hardship. Even Florida bankruptcy courts vary in their determination on what defines undue hardship.

The most commonly-used test is the “Brunner Test,” which requires the borrower to show that he or she cannot maintain a basic standard of living while making student loan payments. The borrower has to show that this undue hardship would last throughout the entire repayment period in a Chapter 13 bankruptcy, and he or she will need to show that efforts have been made to try to repay federal loans.

The Department of Education is looking for ways to clearly define the undue hardship standard. According to Clare McCann, a deputy director of higher education policy at New America, it is likely the Department will broaden the definition.

The Chair of the Federal Reserve, Jerome Powell, recently testified before Congress that the student debt crisis has the possibility of seriously hurting the economy if changes are not made.

A date has not been given for when the determination will happen, but it is one step closer to a change that will make a difference in the current student loan debt crisis in the country.

Click here to read more on this story.

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.

 

Bankruptcy Law, Debt Relief, Student Loans, Timothy Kingcade Posts

Trump Administration Delays Student Loan Forgiveness Program

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The federal student loan forgiveness program established to refund borrowers who were defrauded by their schools has been put on hold until further notice, according to the Department of Education.  This applies to Corinthian College students who were defrauded by the school’s deceptive advertising and false job placement rates.  Approximately 15,000 student loan forgiveness claims from Corinthian students had been approved as of October 2016.

Here are the requirements for qualifying for a borrower defense federal loan discharge:

  • If your school misled you in any way about your loans or education program;
  • If your school violated certain state laws, such as consumer protection statutes or laws related to your loan or educational services.

Secretary of Education Betsy DeVos said on June 14 that last year’s expansion of the forgiveness rules “missed an opportunity to get it right.” Several Democratic senators are demanding answers and asking the Dept. of Education to provide detailed information regarding loan forgiveness applications and approvals for past students of Corinthian Colleges, along with two other failed for-profit college chains: ITT Technical Institute and American Career Institute.

Click here to read more on this story.

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. 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, P.A. 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 website at www.miamibankruptcy.com.

Bankruptcy Law, Credit, Debt Relief, Student Loans, Timothy Kingcade Posts

What Actually Happens When You Default on Your Student Loans

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According to the Department of Education, eight million Americans defaulted on their federal student loans last year. Approximately 1.1 million of those former students did so for the first time which is a U.S. high.

The former student loan ombudsman at the Consumer Financial Protection Bureau, Rohit Chopra, told Time Magaizine, “In spite of a booming stock market and falling unemployment, there is obviously a significant block of the labor force that is really struggling.” He went on to say, “New college graduates and new entrants to the workforce are facing a double whammy of flat or declining wages and higher debt.”

Defaulting on student loans is a growing problem for millions of borrowers. As a result, it is important to understand the consequences of doing so. Here are three things you need to know about defaulting on a student loan:

  1. It is more serious than a late payment. In most cases, default occurs when a borrower has not made a payment in 270 days, which is roughly nine months. However, loans that are offered by the Federal Family Education Loan Program (FFEL) are considered to be in default after 330 days or 11 months. When this happens, the entire balance of the loan and interest is due immediately and you lose any eligibility for deferment or forbearance, or any additional financial aid.
  2. Your credit score will drop. The federal government will report your student loan delinquency to credit agencies. If this happens, it will be a long and difficult process to rebuild.
  3. The federal government may garnish your wages. If you default on a federal student loan, the government may take money out of your paycheck before you even see it. Your tax refund can also be held to collect some of your debt. If the debt persists for long enough, the government can also take money out of your social security check. Fortune reported that more than $1 billion has been taken from social security checks since 2001.

 

Click here to read more on this story.

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. 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, P.A. 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 website at www.miamibankruptcy.com.