Debt Relief, student loan debt, Student Loans

Student Loan Changes on the Horizon in 2021

Changes are on the horizon for student loans in 2021. Student loan reform has been an issue discussed for years, if not decades, but several events that occurred in 2020 have pushed the issue to the forefront. The presidential election, the coronavirus (COVID-19) outbreak, and the current economic climate have all pushed lawmakers to realize that student loan reform is a very real issue, and one that requires immediate action. The following possible changes could be coming in the new year.  

Student Loan Cancellation 

A number of recent legislative proposals have brought up the idea of student loan forgiveness. One proposal was included in the Heroes Act stimulus package proposed by House Democrats. In the legislation, lawmakers proposed to cancel up to $10,000 in student loan debt for borrowers who could demonstrate that they were struggling financially. Unfortunately, even though the legislation moved forward to the Senate, this portion of the original bill was removed. Senators Elizabeth Warren (D-MA) and Chuck Schumer (D-MA) have proposed legislation that would cancel $50,000 in student loan debt for borrowers who earn less than $125,000 in annual income. Lawmakers have pushed on President Elect Joe Biden to make a statement as to whether he supports or does not support student loan cancellation. Biden has stated that he would not likely pursue an executive order to cancel student loans, but rather, he encouraged Congress to consider immediate cancellation of $10,000 of student loans across the board. However, the fate of this proposal hinges on whether Republicans will retain control over the Senate. If they do, it is unlikely that student loan cancellation will move forward. 

Deferment for Student Loan Payments 

COVID-19 legislation, namely the CARES Act, brought about a pause for all outstanding federal student loan payments. In March 2020, this legislation paused payments on federal student loans, stayed student loan debt collection on defaulted loans, and stopped interest from accruing on all federal student loans. The legislation was created to help borrowers who were struggling financially during the pandemic. This “pause” is expected to expire as of January 31, 2021 unless Congress introduces legislation to extend this measure.  Discussions have occurred regarding extending the forbearance period past January 31, but no decision has been made to date. How this proceeds could depend a great deal on COVID-19 numbers, the current unemployment rate, and the economy.   

Student Loans and Bankruptcy  

One major change that could be occurring in 2021 has to do with how student loans are handled in a consumer bankruptcy case. For the most part, student loans have been all but impossible to discharge in both Chapter 7 and Chapter 13 bankruptcy cases. Borrowers must file a separate case within the bankruptcy matter, naming the lender, and providing evidence of undue hardship on behalf of the borrower. Courts across the country have been inconsistent in how they have applied this test, leaving disparity across the board in how they are treated. However, a number of recent legal decisions have indicated that change could be come as to how loans are handled in bankruptcy cases. President Elect Biden has made statements indicating he would like to see student loans discharged in bankruptcy, and Congress also has bipartisan support for similar measures. If student loan cancellation does not occur, this may be the next viable path for student loan reform.    

Employer Paid Student Loans 

The idea of employer paid student loans has gained a lot of support. The CARES Act includes provisions that provide tax incentives for employers to assist their employees with repayment of their loans. Under the CARES Act, employers can make a maximum of $5,250 in tax-free payments towards student loans per employee. The legislation makes both private and federal student loans eligible for this benefit, so long as the payments go towards principal or interest on what is defined as a “qualified education loan.” Employers have the option of choosing either tuition assistance or student loan repayment, but they cannot choose both options. This legislation was set to expire at the end of 2020, but the new stimulus package passed by Congress shortly around Christmas extended the benefit through the end of 2025. 

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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 Loan Bankruptcy: A Solution to the Student Loan Debt Crisis

With an estimated $1.6 trillion owed in student loan debt nationwide, it comes as no surprise that solving the student loan crisis has been at the forefront of most political campaigns in 2020. However, many argue that the solution to the problem is much simpler than just forgiving student loan debt. In fact, the answer to solving the student loan crisis could lie in the United States Bankruptcy Code.  

Traditionally, student loans have been all but impossible to discharge in either a Chapter 7 or Chapter 13 bankruptcy case. Since the creation of the Higher Education Act in 1965, Congress has continued to add rules that make discharging federal student loan debt more and more difficult in bankruptcy. In 2005, private student loans were added to the list of debts that were difficult to discharge in bankruptcy, regardless of how much the filer was struggling financially. 

student loan debt, Student Loans

Former For-Profit College Operator Settles Bankruptcy Case with Department of Education

A settlement was reached between former for-profit college operator, FCC Holdings Inc., and the U.S. Department of EducationThe $8 million settlement is part of the company’s bankruptcy case and signifies the end of years of legal battles 

FCC Holdings formerly operated 41 for-profit colleges under various names. Before filing for bankruptcy, FCC Holdings sold 14 of their for-profit colleges to another company, International Education Corporation (IEC). IEC still operates 11 of these campuses in Florida and Texas under the name of Florida Career Colleges.

student loan debt, Student Loans

Facing a Broken Student Loan System Borrowers Set Hopes on New Reform Bill

The student loan system has been considered broken for quite some time, and while many reform efforts have been made to help improve the process, nothing has been successful thus far. However, a new student loan reform bill could signal meaningful change is on the way.

This reform bill focuses on how student loan debt is handled in bankruptcy. Traditionally, student loans are non-dischargeable in a personal bankruptcy case, unless a specific set of criteria are met. The “Consumer Bankruptcy Reform Act of 2020,” proposed by House Judiciary Committee Chairman Jerry Nadler (D-NY) and Senator Elizabeth Warren (D-MA) proposes a way to make this process easier, allowing more student loans to be discharged through personal bankruptcy. The bill addresses both Chapter 7 and Chapter 13 bankruptcy cases and proposes changing the current systems under each chapter by one system, entitled Chapter 10.  

student loan debt, Student Loans

Baby Boomers and Higher-Income Earners Carry Largest Amount of Student Loan Debt

Student loan debt affects more than 44 million Americans, a collective $1.67 trillion in outstanding student loans.  Members of the Baby Boomer generation owe the largest portion of student loan debt, as well as borrowers who earn higher incomes. 

According to a recent study by Fidelity, that surveyed 250,000 outstanding student loans, Baby Boomers owed 33 percent (33%) more debt in 2020 than they did in 2019. The biggest reason for this increase has to do with the number of Baby Boomers who took out Parent Plus loans to help their children and grandchildren attend college.  

student loan debt, Student Loans

A New Loophole for Certain Kinds of Private Student Loans

Student loan debt has traditionally been extremely difficult to discharge in consumer bankruptcy cases. For those consumers struggling with insurmountable student loan debt, the ability to seek a fresh start through a bankruptcy case has been impossible for this reason. Even if they are able to successfully discharge most of their debts, they still walk away with a significant amount of  student loan debt, including both federal and private student loans. A new loophole could change this fact for borrowers who are struggling to pay their private student loan debts.  

A staggering 45 million American consumers owe a collective $1.5 trillion in student loan debt. Over one million borrowers defaulted on their student loan debt annually. The only method available to these borrowers to discharge their loans in bankruptcy is to meet the “undue hardship” test. Unfortunately, courts view this exception very narrowly and not all courts apply the test uniformly.

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

Half a Million Borrowers Petition President Trump to Have Their Student Loan Debt Cancelled

More than half a million student loan borrowers have signed a petition posted on Change.org, asking that President Trump sign an executive order that would effectively cancel all federally held student loans. This request makes up around 85 percent of all outstanding student loan debt.

The creator of the petition and founder of student loan advocacy group, StudentLoanJustice.org, Alan Collinge, stated he created this petition as he believes this would be the least expensive way, as well as the most effective way, to bring in trillions of dollars into the national economy. During a time of global pandemic, where the economy has taken a hit, he believes this would be the best way to give the economy a boost.

student loan debt, Student Loans

Bankruptcy Court Discharges $200,000 in Private Student Loan Debt for Colorado Couple

A major victory was scored for student loan borrowers after a U.S. Court of Appeals for the Tenth Circuit issued a ruling stating that a Colorado couple’s private student loan debt could be discharged in their personal bankruptcy case. The ruling allowed $200,000 of private student loan debt to be wiped out, breaking the long-standing stigma that student loan debt, particularly private student loan debt, is near impossible to discharge in a bankruptcy case.

The Colorado couple had taken out $200,000 in private student loans from Navient, one of the nation’s largest student loan issuers. The ruling comes after a similar bankruptcy case, where the borrower also had their student loan debt discharged. In that case, the loan servicer appealed the ruling.

Credit Card Debt, Debt Relief, Medical Debt, student loan debt

Tips for Managing Student Loans, Medical Debt, Credit Cards and More

DMP - Debt Management Plan acronym, business concept background

Consumer debt encompasses several different categories. However, many people often struggle with the same few categories, mainly student loans, medical debt, and credit card debt. It helps to know how to attack the debt individually in each category if a consumer is looking to pay down their various debts.

Student Loan Debt

If you are struggling with student loan debt, you’re not alone. In fact, it has been reported that Americans carry over $1.5 trillion in student loan debt. This figure amounts to an average individual load of $32,731 per student. If the consumer proceeds towards a master’s degree or professional degree following graduation from undergraduate studies, that amount can get into six figures. Paying down that debt can be a struggle for many, especially during recent times. Currently, the federal government has issued a forbearance on all federal student loan debt during the COVID-19 crisis, which has been extended past September 30.