student loan debt, Student Loans

Entering Retirement with Student Loan Debt

An alarming number of Americans are entering retirement with student loan debt. Normally, student loan borrowers are between the ages of 18 to 39. However, a 2017 report issued by the Consumer Financial Protection Bureau, showed that people over the age of 60 are the fastest-growing sector of the U.S. population carrying student loan debt.

More than 2.8 million Americans over the age of 60 are carrying some type of student loan debt. This figure has skyrocketed from the 700,000 individuals reported in 2005. Between 2012 and 2017, the balance carried by people over the age of 60 nearly doubled from $12,100 in 2012 to $23,500 in 2017.

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.

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.

student loan debt

5 Tips to Keep in Mind Before Taking out a Direct PLUS Loan

Many parents will do anything possible to help their children get a higher education, and that desire to help often takes the form of financial aid. It is estimated that at least 3.4 million individuals have taken out a Direct PLUS Loan to help pay for their child’s college education.  Before considering these loans, it is important to be aware of the risks that come with this form of financial assistance.

Direct PLUS Loans allow parents of eligible college students to take out loans for their children’s education through a federal government program. The U.S. Department of Education is the lender, which is why many borrowers believe that these loans offer a safe and secure option to pay for their child’s education.

  1. Loan Eligibility, Amount Available and Fees. Not all parents are eligible to take out Direct PLUS Loans. First, they must be taken out on behalf of biological and adopted children, although some situations allow for stepparents of dependent students to take out these loans. Parents can take out enough money needed to have their child attend college; minus any amount of financial aid the student receives. Since the tuition and expenses vary from college to college, no maximum amount is set on how much a parent can take out through the PLUS program.Interest rates on PLUS loans are set by the federal government and are currently at 7.6 percent. Since these loans are unsubsidized, this means that interest on the loan begins accruing immediately. Payments on the loans can be deferred by the borrower until his or her child finishes college, but the balance will grow since the interest continues to accrue. If no deferment is requested, the parent will need to start paying right away. Borrowers also will have to pay a loan fee along with interest charges, which varies depending on the year. The fee comes out proportionately from each loan disbursement, but it does not increase the total amount of the loan.
  2. Limits on Repayment Programs. Parents have a handful of repayment options available for PLUS loan programs. The standard repayment plan involves equal payments made over the course of ten years. Borrowers can also request a graduated repayment plan, which allows the borrower to start off with lower payments, building up every two years over a ten-year period. Borrowers can also pay under an extended plan, which spreads the payments out over 25 years instead of 10. The monthly payments are lower, but the borrower ends up paying much more in interest in the long run. However, parent borrowers are limited on the types of repayment plans they may have in addition to these plans, while student borrowers have more options available to them.
  3. Repayment Responsibility May Not Be Transferred. Many parent borrowers take out PLUS loans on the assumption that they can eventually transfer the debt to their child upon graduation. However, this option is not available for a PLUS loan. Responsibility for repayment stays with the parent who is the legal borrower. This fact is important for the parent to realize if loan payments present a problem later as the parent approaches retirement age.
  4.  Impact on Credit Score. Any time a borrower takes out a loan, it should be expected that his or her credit score will take a hit, and that includes PLUS loans. If a parent takes out a PLUS loan, he or she should expect the loan, its balance, and payment history on the loan will appear on the parent’s credit score. So long as the borrower makes payments on time, this fact should not cause too much of a problem. However, if the parent is not able to keep up and misses a payment, the damage to the borrower’s credit score could be significant.
  5. Consequences of Defaulting on the Loan. It is extremely important that the parent borrower be able to handle the payments associated with the PLUS loan. Defaulting on a PLUS loan comes with serious financial consequences and can put the borrower at risk of wage garnishment, as well as offsets on his or her tax refunds or Social Security disbursements.

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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.

Bankruptcy Law, student loan debt, Student Loans

Senior Student Loan Debt a Growing Trend

We are all aware of the effects student loan debt has on the Millennial generation, but many are unaware of the effects it has had on the senior population. According to a recent CBS News Report, seniors account for a growing number of student loan borrowers.  For seniors who fall behind on their student loan payments, the government can garnish their social security.

According to Forbes data, senior student loan debt has increased 71.5% in the last five years. To date, seniors ages 60 to 69 owe a total of $85.4 billion in student debt.  The reasons behind the increase in debt:

  • Seniors who have taken out loans to go back to school to increase their job prospects;
  • Seniors who have taken out loans for their children or grandchildren to go to college or graduate school.  Parent PLUS loans come with a fixed interest rate of 7.6%

Seniors can see their Social Security benefits garnished at a rate of 15% to pay off student loans in default, according to recent report from AARP.  It also notes that in 2015 alone, almost 114,000 student debtors ages 50 and older had some of their Social Security benefits seized to repay overdue federal student loans, which are subject to garnishment. Many of these funds were seized from disability benefits, not Social Security benefits paid out beyond the age of 62.

Some options to consider for anyone struggling with student loan debt (including seniors) include: Income driven repayment plans, graduated payment plans, extended repayment plans or refinancing your student loan debt.

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For Florida seniors 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 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

Study Finds Parent PLUS Loans to African American Families Can Be Predatory

College is expensive and finding ways to pay for tuition and associated costs can be difficult for many students, as well as their family members. When options are limited, sometimes parents resort to taking out loans themselves to help their children pay for the costs of a higher education. Recently, one such loan has been criticized, the Parent PLUS loan for its terms and conditions, and also the effect it has on the parents who sign on the dotted line, not fully knowing what they are agreeing to.

A study recently issued by New America reports that a higher percentage of low-income African American parents rely on the use of Parent PLUS loans more than low-income whites. The study recommends making the use of Parent PLUS loans off limits to any family of limited financial means and offering additional, and affordable federal loan options for lower income families.

Families often resort to the parent PLUS loans after their children have maxed out other federal loan options. Many of the features of Parent PLUS loans have given them the reputation of being a loan of “last resort.” The limits tend to be fairly generous, the underwriting limited and the interest rates high.

The repayment options that parents are given on these loans are very limited, which only increases the risk that the borrower parents will default on the loan obligation. By having parents take these loans out, creates a level of “intergenerational debt” that can be crippling.

An additional problem with Parent PLUS loans have been the fact that lenders have issued these loans without evaluating the borrower’s ability to repay them. Without properly qualifying the borrower, issuing the loan simply puts them in a situation where he or she ends up falling behind on payments.

These loans were originally intended for families with more financial resources and in higher income tax brackets whose children may not qualify for need-based aid. In fact, most of the PLUS borrowers are from families earning more than $75,000 annually, many of them coming from upper class, Caucasian families with only 10 percent of Caucasian families earning less than $30,000 taking out these loans. However, for African American families, one-third of these individuals who have ended up taking out a PLUS loan earn less than $30,000, which is the opposite of what the study found with Caucasian families in the same tax bracket.

Because of the high fees associated with these loans, repaying the Parent PLUS loans can be difficult. If the parent is already struggling to make monthly payments, few options exist for that parent when it comes to repayment options. Currently the only income-based payment plan is an income-contingent repay (ICR) plan. To qualify, the parent must convert the loan into a federal Direct Consolidation Loan, and the minimum monthly payment in an ICR is normally 20 percent of that person’s disposable income. The monthly payment may be lower, but the interest rate does not decrease. At some point, it becomes nearly impossible for that parent to get caught up.

The study recommends making these loans off-limits to families in the lower-income categories and encourages the Department of Education to allow students from these brackets to borrow more from themselves rather than resort to having their parents take out these types of loans.

The study also recommends no longer allowing schools to characterize these loans as “aid” in financial aid award letters. They also recommend requiring parents who take these loans out to complete counseling that makes it abundantly clear to them that these loans are their sole obligation and not their children, as well as explain the terms of the loans so that they are clearly understood.

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

The Student Loan Crisis Facing Older Americans

When we think of those struggling with student loan debt, we typically think of millenials still living with their parents.  However, many boomer parents are struggling, too.  According to a report from the federal Consumer Financial Protection Bureau (CFPB), older Americans are carrying an “unprecedented amount of student loan debt into retirement.”

In 2015, older consumers owed an estimated $66.7 billion in student loan debt.  Nearly 867,000 borrowers 65 and older owed federal student loans in 2015, now the fastest growing segment of student loan borrowers.

With these new findings, it seems the education debt crisis and retirement are closely tied.  A growing number of older borrowers are struggling to make their loan payments, oftentimes due to reduced incomes in retirement.

A growing number of federal student loan borrowers age 65+ had their Social Security benefits reduced or offset because of unpaid student loans – 8,700 in 2005 and 40,000 in 2015.   The vast majority of the older borrowers, approximately 73%, took out student loans to finance their children’s or grandchildren’s education.  Many of these loans were taken out under the Parent PLUS Loan Program, with a current interest rate of 6.31%, the only federal program that allows parents to borrow for the undergraduate education of their children.

Here are some tips for older borrowers struggling with student loan debt:

If you have co-signed your child or grandchild’s student loan, request the servicer send you an account statement so you can learn the outstanding balance and pay off the loan.

If you are struggling to make federal student loan payments, you may qualify for a payment plan that can substantially cut your costs.  For example, if you retire and your income drops substantially, you can apply for an income-based repayment plan.  This could reduce your payments and even suspend them.

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, Timothy Kingcade Posts

Parents with poor credit: Beware of this Student Loan Rule Change

There has been much criticism that federal student loans are too easy to get and that borrowers can take on large amounts of debt with little verification that they can ever pay it back. The Department of Education has announced new regulations that are aimed at one type of federal loan that currently does not require a credit check- Parent PLUS Loans.

PLUS loans are available to parents to help provide financing for children who do not qualify for enough financial aid on their own. But there are no specific limits on the amount that can be borrowed under this program- other than that parents cannot borrow more than the total cost of their child’s education after other financial aid has been deducted.

In the final regulations issued by the Department of Education, which go into effect March 29, 2015 borrowers who have an “adverse credit history,” may find it harder to qualify for these type loans. The evaluation will take into account whether the borrower has:

• One or more debts that are 90 days or more delinquent with a total outstanding balance larger than $2,085;

• Accounts placed for collection or charged off in the two years before the credit report is pulled;

• Bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a federal student loan debt in the past five years.

PLUS loans can be dangerous and are often accompanied by higher interest rates than other federal loans and fewer flexible re-payment options. For example, one parent shared on Credit.com’s blog that he has $45,000 in outstanding parent loans, but only makes $28,000. His children are unable to help him repay the loan at this time.

These changes are likely going to make parents look harder at the true burden of student loan debt and the potential return they are getting with taking out these loans. Parents thinking about borrowing money to help their children pay for college would be wise to review their annual credit reports to identify any discrepancies and think twice about whether PLUS loans are the best option.

Click here to read more on this story.
http://www.foxbusiness.com/personal-finance/2015/02/02/student-loan-rule-change-that-could-hurt-parents-with-bad-credit/

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 of 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 http://www.miamibankruptcy.com.