student loan debt, Student Loans

What Is Next for Student Loans in the Covid Era?

Student loans have been at the forefront of the COVID-19 relief offered through the federal government. The biggest source of relief came in the moratorium on federal student loan repayments issued by the Biden administration and was extended through the end of 2021. However, this moratorium is expected to end January 31, 2022, leaving many student loan borrowers left to wonder what is next.

It is estimated that $1.5 trillion in student loan debt is now owed collectively by U.S. student borrowers. Therefore, these measures have widespread effects for many American consumers.

student loan debt, Student Loans

Biden Administration Cancels Almost $10 Billion in Student Loan Debt. Who Got Relief?

In total, the Department of Education has approved discharging $8.7 billion in student loan debt for more than 450,000 borrowers.

Click here to see if you are eligible.

That amount has included:

  • $7.1 billion for borrowers who were eligible for relief because of “total and permanent disability.”
  • $55.6 million in loan discharges for students who attended three trade schools that officials said misrepresented themselves to students.
  • Another $1 billion for other students defrauded by their schools.

The Biden Administration has cancelled nearly $10 billion in student loan debt since January 2021, according to the U.S. Department of Education. The Department reported they have approved $9.5 billion in student loan discharges since January 2021, affecting approximately 563,000 borrowers.  This has given borrowers the ability to tackle other debts, invest and increase savings.

student loan debt, Student Loans

Biden Administration Cancels Additional $55.6 Million in Student Loan Debt

The Biden Administration canceled an additional $55.6 million in student loans for 1,800 students who were found to be victims of fraud. This additional amount brings the total amount of student loan debt cancelled by the Biden administration to $1.5 trillion. 

Since entering office, President Biden has made it his mission to stand up for the thousands of students who were taken advantage of by for-profit colleges. This most recent effort was focused on students who attended Westwood College, Marinello Schools of Beauty, and the Court Reporting Institute. Previously, the administration had approved loan forgiveness for students who attended ITT Technical Institute, the American Career Institute and Corinthian College. This is the first time the Department of Education has approved loan forgiveness for students attending for-profit schools not including these three.  

student loan debt, Student Loans

Beware of this Student Loan Debt Relief Scam in 2021

Student loan borrowers look for ways to save on their loan payments, including having their loans forgiven. However, for the 10 million student loan borrowers who were part of the recent Navient settlement, they now find themselves at risk of falling prey to a new scam.  

This recent Navient settlement came as part of a student loan forgiveness lawsuit. Navient is one of the country’s largest student loan providers, and while the settlement does not necessarily affect how much each borrower owes, scammers are targeting borrowers, by offering false claims of debt forgiveness.  

Debt Relief

How To Ensure Student Loan Debt Does Not Prevent You From Getting a Mortgage

With the cost of attending a university rising each year, more students are taking out student loans to pay for their education.  According to statistics from the Federal Reserve and New York Federal Reserve, more than 44 million American consumers owe a collective $1.6 trillion in student loan debt. Student borrowers oftentimes graduate with up to six figures in student loan debt. Certain steps can be taken to ensure that student loans do not prevent young adults from reaching important milestones, like homeownership.   

Income-to-Debt Ratio 

When being approved for a mortgage, the borrower’s income-to-debt ratio is an important figure considered by potential lenders. Two different ratios are used by potential lenders. One of them is called a front-end ratio, which looks at the loan applicant’s expected mortgage in comparison to his or her monthly income. The second ratio is called the back-end ratio. This figure reviews the applicant’s monthly expenses, including housing costs, car payments, student loan payments, and other monthly expenses, in comparison to the person’s monthly income. If the borrower’s debt far outweighs his or her income, it is unlikely that person will be approved for a mortgage. However, certain steps can be taken to help boost that ratio. If the potential borrower is carrying a high credit card balance, by paying that balance down, he or she can help boost chances of being approved for a mortgage. If the borrower can pay down the balance in full every month, then that debt will not even factor into his or her debt-to-income ratio.  

student loan debt, Student Loans

What Borrowers Need to Know About the New Executive Order- “Continued Student Loan Payment Relief During the COVID-19 Pandemic”

A new executive order signed by President Trump is expected to give additional relief to student loan borrowers during the coronavirus (COVID-19) pandemic. It is important that all student loan borrowers be aware of what these changes entail and how they can affect their outstanding student loan balances.

At the start of the COVID-19 pandemic, Congress passed the CARES Act, a $2.2 trillion stimulus bill, that included relief effort for numerous aspects of the economy. The CARES Act paused all federal student loan payments and stopped interest from being incurred on federal student loans. Additionally, the stimulus bill put a stop to all federal student loan collection efforts. However, this bill was passed at the beginning of the pandemic with the thought that relief would no longer be needed through the end of 2020 with the hopes that the COVID-19 crisis would eventually be subsiding. Given the fact that numbers of positive cases are growing, and states are struggling to manage the crisis, it has quickly become clear that additional relief was needed. The original relief offered through the CARES Act was set to expire on September 30, 2020.

student loan debt

Tax Consequences That Come With Student Loan Forgiveness

Receiving student loan forgiveness can be difficult to accomplish, which is why so many loan forgiveness applicants are rejected. It is also why many student loan borrowers choose to take the route of income-driven repayment plans to pay off their debt over the course of 10 to 25 years before having the remainder forgiven. However, what many of these borrowers do not realize are the tax consequences that come along with these income-based payment programs.

Under Section 61(a)(12) of the Internal Revenue Code, gross income includes revenue from the discharge of debt amounting to $600 or more in any calendar year, which means any debt that is forgiven at the end of the repayment period is considered taxable income. Depending on how high the outstanding balance is on the borrower’s debt, this taxable amount could be significant.

Debt Relief, student loan debt, Student Loans

FTC Takes Legal Action Against Corrupt Student Loan Debt Relief Companies

The case comes as a warning to student loan borrowers struggling with their debt and company’s looking to profit from it. The Federal Trade Commission is cracking down on two student loan debt relief operations and the financing company that assisted them. The complaint is alleging the companies charged illegal upfront fees, led consumers to believe the fees would go towards reducing their loan balances, and falsely promised to permanently lower and even eliminate their balances.

The FTC has also charged the companies with locking its customers into high-interest loans and paying their fees without making required disclosures. This caused their customers to sink further into debt.

Debt Relief, student loan debt, Student Loans, Timothy Kingcade Posts

Student Loan Debt Relief Scams to Watch Out For

Student loan debt is an issue for many Americans, and for a great number of them, the situation has become a desperate one. This fact could be why so many borrowers are falling prey to student loan debt relief scams.

It is estimated that the national total student loan debt is well over $1.5 trillion. The average student loan borrower in 2018 is carrying just shy of $30,000 in loan debt, according to Student Loan Hero. This figure only represents what the average undergraduate student owes. For a graduate or professional degree, the borrower may end up with student loan debt well into six figures. With this much debt, borrowers can be paying on their loans for decades, which is why many of them jump at the opportunity, when presented, to get some sort of relief on their debt.  The problem is these “relief opportunities” end up being more trouble than they are worth.

Bankruptcy Law, Debt Relief, student loan debt, Student Loans

How to Discharge Student Loan Debt in Bankruptcy

When it comes to discharging debts in a bankruptcy case, student loan debt has traditionally been one of the most difficult debts to discharge. The fact that this debt can be so difficult to get rid of in a bankruptcy case has kept some consumers from filing for bankruptcy. The problem is it can be very difficult for a person who is in a financially tight situation to keep paying on this debt outside of bankruptcy.  Student loan debt is oftentimes the largest debt a consumer carries, outside of their mortgage.  If someone goes through bankruptcy only to continue being stuck with his or her student loan debt, that person may end up in the same financial situation, again.

Here is how to  discharge student loan debt in bankruptcy.

Undue Hardship

Student loan debt can be discharged if the borrower can demonstrate that he or she would suffer an undue hardship if forced to pay back his or her student loans. However, bankruptcy courts do not have one set standard to guide them in determining what exactly qualifies as an undue hardship. The U.S. Bankruptcy Code does not give a clear definition for what undue hardship is, which could be why so many inconsistencies exist among bankruptcy courts. Some courts will only use the undue hardship test to grant full discharge of the loans while others will allow for partial discharge. Others view the test as an extremely difficult standard to meet while others may be more lenient. At the end of the day, if the borrower has a very low income or took the student loan out to attend a for-profit trade school, he or she may have a better chance to get the obligation discharged, although other factors will be considered, as well.