student loan debt Archives - Page 11 of 27

How Student Loan Debt is Different From Other Debt

Posted on January 4, 2019by Admin

Debt plagues so many Americans today, but the type of debt varies from person to person. When it comes to debt collections or even bankruptcy, how the debt is treated depends on the type of debt. Student loan debt is one category that is treated differently than other common debt categories involved in bankruptcy.

Student loan debt has doubled since the most recent recession, which presents a major problem for many borrowers who are struggling to repay their loans, so it is extremely important to understand how student loan debt is treated in bankruptcy and collection matters.

Debts normally fall into two different categories: secured and unsecured. Secured debt is “secured” by either another person or an asset purchased, meaning if the consumer defaults on the debt, the lender has recourse to seize the asset.

Unsecured debt is not connected to another person or asset and commonly includes credit cards, personal loans, and medical debt. Student loan debt is also another form of unsecured debt, although it is not treated the same way as other unsecured debt. One major difference is the fact that student loan debt does not go away so easily.

If the borrower fails to pay on a student loan, the lender will likely initiate a collection action, which will result in a judgment against the consumer and likely a garnishment of that person’s wages. The same situation occurs with any other unsecured debt, but the difference is student loan debt is not easily discharged through bankruptcy.

It is possible, but the legal standard that needs to be met for this to be done is quite strict. The borrower will need to prove to the court that a good faith effort has been made to repay the loan, as well as proving undue hardship that is likely to continue if the debt is not discharged. It is not an easy burden of proof, and if the court does not discharge the debt, it will remain with the individual once the bankruptcy is over.

Student loans include both federal and private loans. Those loans that are federal are backed by the federal government and are disbursed by the U.S. Department of Education. On the other hand, private loans are backed by private lending institutions. The difference is critical in that federal student loans are not restricted by a statute of limitation when it comes to collecting on the debt.

In addition, federal loans have certain protections that private loans do not and offer different types of repayment plans in the event the borrower’s life circumstances change. For the most part, federal loan repayment terms are around ten years, but they can be extended or graduated or even income-based in terms of repayment. Additionally, some federal loans offer forgiveness programs.

Private student loans are oftentimes a last resort when it comes to financing education. However, many students max out their federal lending and have no choice but to supplement with private options given the cost of education.

It is currently estimated that somewhere around 40 percent of all student loan borrowers will default at some point on their student loans. Many different mistakes can be made when it comes to student loan repayment. If you believe you qualify for student loan debt relief, speak with an experienced bankruptcy attorney about your options.

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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.

Debt Relief, Student Loans, Timothy Kingcade Posts

Student Loan Debt Doubles Since the Great Recession

Posted on December 20, 2018by Admin

Student loan debt is at a record high, according to a recent Bloomberg study. It is reported that U.S. student loan debt is at a total $1.465 trillion, and financial analysts believe that this debt figure is so high that it is now raising significant fiscal risks.

Student loan debt was at $675 billion in June 2009 at the end of the recession, which means the total has doubled since that time. One problem that economists are pointing to involves the fact that more than 90 percent of all student loans are guaranteed by the U.S. Department of Education. In the event another recession hits, resulting in mass unemployment as well as defaults on student loans, the government budget could face a major loss.

Interestingly enough, Bloomberg’s study reported that student loans that were issued to students embarking on college in 2012 have defaulted on their student loans at a faster rate than any other group since the last recession. According to Bloomberg’s analysis, these loans have the highest cumulative loss percentage when compared to other loans, which means that these particular students have had a harder time keeping up with their monthly payments with their current incomes. This group of students could arguably be hit harder than others in the event another financial crisis occurs.

The individuals in this group are between the ages of 24 and 33 and are at a point in their lives when they are just starting out and beginning to establish their careers. They may have struggled with finding a job since unemployment was twice as high when they graduated as it is today. According to Bureau of Labor numbers, graduates in this group took three times longer than graduates today in finding a job following graduation.

Another cause for concern is the rising student loan interest rates. Currently, the interest rate for a direct student loan that was issued on or about July 1, 2018 and before July 1, 2019, has a basis point that is higher than those that were issued before 2012. Average federal student loan interest rates were: 4.81% for undergraduates. 6.38% for graduate students. 7.44% for parents and graduate students taking out PLUS loans.

Student loan debt is a widespread problem in the U.S. More than 2.7 million student loan borrowers have debt amounts in the six figures. Approximately 700,000 borrowers owe more than $200,000. Within this group, borrowers who were between the ages of 25 and 34 owed $489 billion as of the third quarter reported, while those who were between the ages of 35 and 49 years old owed $530 billion total.

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Debt Relief, Student Loans, Timothy Kingcade Posts

Disabled Veterans Eligible for Student Loan Forgiveness Still Paying

Posted on November 19, 2018by Admin

Many disabled veterans who are eligible for student loan forgiveness are still paying on their debt, according to a recent Freedom of Information Act (FOIA) request filed by the Veterans Education Success. The nonprofit group filed this FOIA request on behalf of veterans in June 2018.

According to the FOIA information, the U.S. Department of Education is still seeking repayment on over $1 billion in federal student loan debt from tens of thousands of veterans who are severely disabled and have been determined to be unable to work, thus making them eligible for student loan forgiveness. Borrowers were reportedly notified of their potential eligibility in the mail and received a Total and Permanent Disability Discharge application.

Specifically, the Department of Education has identified approximately 40,000 veterans who could have their student loan debt cancelled due to a total and permanent disability discharge. Out of that number, 25,000 of these veterans are already in default on their student loans.

Some critics of the administration believe it is because the current leadership in the Department of Education is more interested in protecting the for-profit institutions out there than students, veterans and other individuals who arguably need the protection more.

Going through a default on your student loans is an extremely stressful process, and when the person defaulting on the obligation is unable to work, already living in poverty and likely suffering from physical and emotional conditions that are debilitating, the stress is compounded even more. A default can seriously hurt that person’s credit score and can also result in the government garnishing that person’s tax refunds and a portion of their Social Security benefits. If the person is already on a limited income, this can be devastating.

The Veterans Education Success and Vietnam Veterans of American are both asking that the Department of Education automatically discharge the debt for these veterans. The current requirement is that the disabled veteran must apply to have the debt cancelled. If he or she is not aware of this program, the Department will not identify that person as someone who is eligible, which is a likely reason for the high number of defaults.

A new tax code includes a provision that waives federal income taxes on any debt that includes forgiven student loan debt for disabled taxpayers. Disabled veterans would fall under this category. If you are a disabled veteran who is interested in learning more about student loan forgiveness, you are encouraged to visit disabilitydischarge.com. If you receive any information on student loan forgiveness for a fee, do not follow this information as it is likely a scam. This service is free and is provided by organizations, such as Veterans Education Success. To learn more email help@veteranseducationsuccess.org.

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Uncategorized

Avoid these Student Loan Repayment Mistakes

Posted on November 12, 2018by Admin

Repaying student loan debt can be a daunting process. It can seem like the end is never in sight. Student loan borrowers and those who co-signed these loans are not alone in the struggle. The amount of student loan debt has increased by $110 billion in the last 16 months to a total of $1.41 trillion nationwide. With the higher balances’ students are graduating with every year, that feeling of discouragement is understandable. Here are some of the biggest student loan repayment mistakes to avoid.

Know how much you owe.

It is important that you know what this amount is so that you can plan repayment accordingly. You should know what the interest rate is, as well as how much the monthly payment will be so that you can prepare a budget to keep up with payments. It is also equally as important to keep an eye on that balance as you pay it off.

Structure your repayment plan upon graduation, if not before.

Once you know how much you owe, the next step is to develop a strategy to repay the loans. Financial experts even recommend students work on a repayment strategy while they are still in school. It can be tempting to avoid the inevitable, especially with the grace period most student borrowers get after they graduate. However, the best plan of action is to get ready for the payment plan and make sure your budget accounts for these monthly payments. This way when the borrower begins payments upon the expiration of the grace period, he or she is ready.

Know all your repayment options.

It is also important to know what repayment options are available. One mistake many borrowers make is to not properly research their options for paying back their loans. If you have federal student loans, several different repayment plans may be available for you, and you can pick which plan works best for your life situation.

Change the due date to accommodate YOU.

Many borrowers are unaware of the fact that they can adjust a payment due date if it does not work with their income flow. For instance, if you only get paid once a month at the end of every month, it may be wise to change the payment date to mid-month to allow for income to come in to make the payment on time.

Keep all balance and payment information up to date.

One common mistake that many borrowers also make is to not keep their contact information updated with the lender. This information includes your email address, telephone number and mailing address. Most lenders send bills electronically, but even if the lender sends the bill in paper form to the borrower’s home, it is up to the borrower to make sure the lender has his or her current information. Not receiving the bill is not a valid excuse for missing a payment, as it is the borrower’s responsibility to update his or her information with the lender if anything changes.

Do not be fooled by student loan forbearance.

Another mistake many borrowers make is utilizing the forbearance option too frequently during repayment. It is oftentimes something student loan lenders push, as it can add thousands of dollars to the loan balance, due to the interest continuing to accrue. Forbearance allows the borrower to temporarily suspend their payments during times of financial difficulty. While the option can be helpful if the borrower loses his or her job, it is only meant to be a short-term solution and should only be used if absolutely necessary.

Beware of student loan debt relief scams.

Unfortunately, many borrowers fall prey to scams that are out there, preying on individuals who are looking for the quick fix to help them with their student loan debt. These fraudulent offers often come in the form of an unsolicited phone call, email or letter, where a company tries to offer student loan forgiveness or a way to reduce the borrower’s total debt. Do your research and do not take an offer at face value. These companies are not out to help you. If something sounds too good to be true, it likely is.

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Student Loans, Timothy Kingcade Posts

40% of Borrowers Could Default on their Student Loans

Posted on November 7, 2018by Admin

If you are struggling with student loan debt, you are not alone. Today, 70 percent of college students graduate with a significant amount of debt. More than 44 million Americans collectively hold nearly $1.5 trillion in student debt. That means that roughly one in four American adults are paying off student loans.

As the amount of debt has increased, so have the amount of defaults. In fact, it is estimated that around 40 percent of student loan borrowers will default on their student loan obligations by the year 2023. Student loans now make up the second largest consumer debt next to mortgage debt.

It is estimated that college graduates of the Class of 2017 walked away with nearly $40,000 in student loan debt. This figure is $3,000 more than the previous class in 2016.

Thirty-two percent of borrowers who held a balance of $5,000 or less in student loan debt defaulted at least once within four years as compared to 15 percent of borrowers defaulting who owed $35,000 in student loan debt.

The thought of paying back student loan debt can be daunting. How can you stay on top of your student loan debt to avoid falling into default? One tip is to utilize student loan consolidation, which helps you manage your student loan debt into one Direct Consolidation Loan. Another recommendation if your interest rates on your student loans are particularly high is to look into refinancing to adjust the rate to a lower amount.

When it comes to bankruptcy and student loan debt, there are some misconceptions. One being, that student loans are never dischargeable in bankruptcy. In fact, there are ways to file for bankruptcy with student loan debt.

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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. 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

Financial Options for Students to Discharge Private Student Loans in Bankruptcy

Posted on October 22, 2018by Admin

Many students take out a combination of federal and private student loans to cover the costs of a higher education. Discharging federal student loan debt has been difficult for borrowers struggling to make payments- but there are ways to file for bankruptcy with student loan debt. Private student loans are not handled in the same manner as federal loans when it comes to bankruptcy.

Student borrowers who were not able to repay their loans or did not qualify for public service loan forgiveness or flexible student loan repayment plans, often considered bankruptcy as a back-up plan. After July 1, 2019, this concern will be even more pressing as Congress is hoping to end certain repayment programs, including public service loan forgiveness. For these students, the good news is they will be able to have their private student loans forgiven in bankruptcy, unlike their federal loans.

If the loan is a federal loan, it will only be discharged in the event the borrower is able to claim undue hardship, meaning he or she will need to file a petition for determination of undue hardship with the bankruptcy court. This hurdle can be a tough one for the borrower to clear and often results in the borrower not being able to clear the debt through discharge.

Additionally, if you have private loans that were for a school that is not accredited, the loans can likely be discharged in a bankruptcy. For these loans to be protected and not discharged, the school must be considered an “eligible educational institution” or the private loans must be for a “qualified higher education expense.” To qualify as a private student loan, an accredited school must have also offered Title IV federal loans.

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

What Happens to Student Loan Debt When You Die?

Posted on October 19, 2018by Admin

One of the more common questions asked by student loan borrowers has to do with what happens to the obligation if the borrower dies before the loan is paid in full. Does the loan die with that person, or will their loved ones be held responsible for paying it off after the borrower’s death?

According to the U.S. Department of Education, if the borrower of a federal student loan dies, the loan is automatically canceled, and the debt is discharged by the government. Unfortunately, private student loans do not offer the same liability protections. Whether or not your private student loans will be discharged when you die depends upon your student loan contract. It is important to check the terms regarding death and disability discharge in your student loan contract.

Some private loans, including Sallie Mae’s Smart Option Student Loan or New York HESC’s NYHELPs loans, do offer death and disability forgiveness in the event the borrower dies or becomes permanently disabled. However, not all lenders are so generous.

If the student loan borrower is married, many believe that the spouse of the deceased remains liable for the debt. With traditional student loans, if the spouse is not listed as a joint account holder or a co-signer, the spouse is not legally liable for the debt. If the spouse did co-sign for the loan, he or she may still be liable for the student loan just as he or she would with any other co-signor obligation.

If the borrower lives in a community property state with his or her spouse, and the borrower dies, the spouse will be considered liable for the debt, regardless of whether the spouse’s name was ever on the original student loan unless the state has exceptions in its own laws. The states that are community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

The state of Alaska is unique in that married couples can choose to opt into a community property situation, but it is not required. For the other states that are not community property states, so long as the debt was never co-signed or jointly in the name of the deceased borrower, the surviving spouse will not be held responsible for the debt.

One important issue that should be addressed involves the tax implications of the student loan debt of the deceased being forgiven. Even if a student loan is cancelled or discharged due to a death or disability, the deceased’s estate may owe taxes on the amount that is forgiven before the estate can be closed. Therefore, while the surviving spouse or loved ones of the deceased may be in the clear when it comes to the actual debt itself, they may still owe something when it comes to taxes on the amount that was forgiven.

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

What Student Loan Borrowers Need to Know about the Navient Lawsuits

Posted on October 4, 2018by Admin

Several important legal cases are pending in federal courts, many of them naming student loan service provider, Navient, as a party to the case. In fact, the number of lawsuits made against federal student loan servicers has increased rapidly over the past few years.

Navient, along with federal student loan provider, Nelnet, have been named as parties in these lawsuits. Currently, the state attorneys general for the states of California, Illinois, Washington and Illinois have filed lawsuits against Navient. These lawsuits follow an earlier lawsuit filed by the Consumer Financial Protection Bureau (CFPB) in January 2017, which alleged that Navient had incorrectly processed student loan payments, which, in turn, kept borrowers who were struggling to meet their monthly payments from being able to make lower repayments.

These lawsuits have come at a time when faith is being lost in the current administration and its motivation to protect borrowers from lenders, like Navient, who they say take advantage of borrowers and their inability to make payments. The CFPB created the Office of Students and Young Consumers during the Obama administration as a way to protect the rights of borrowers, but recent moves by the Trump administration have taken this office and moved it into the larger Office of Financial Education. As a result of these controversial changes, the prior CFPB student loan ombudsman, Seth Frotman, resigned in protest. In his resignation letter, he accused the administration of changing the mission of the CFPB and failing to protect borrowers from predatory lending practices.

Now the state attorneys general offices feel that it is their responsibility to protect their constituents if the federal government refuses to do so, which has led to these recent lawsuits. These states have alleged similar grounds as were alleged in the CFPB suit against Navient by saying that the company put borrowers into temporary forbearances on their loans when they should have worked with them on signing them up for income-based repayment plans.

Forbearance suspends borrowers’ monthly payments but keeps the interest accruing in the interim. Even taking off just a few months from making payments on the loan, can add hundreds even thousands of dollars to the balance due to interest. Therefore, once the forbearance period ends, which is meant to be a temporary period of time, the borrower will owe substantially more than he or she did at the start due to the interest rates running during the forbearance.

These states argue that the borrowers would have qualified for income-based repayment plans which would offer a lower monthly payment that they could arguably meet. These plans would have allowed them to stay up on their payments and not fall behind. In addition, making the monthly payments lower would make it easier for these borrowers to eventually be considered for loan discharge.

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Bankruptcy Law, Student Loans, Timothy Kingcade Posts

Public Service Student Loan Forgiveness Program Rejects 99% of Applicants

Posted on September 28, 2018by Admin

A simple promise was made to student loan borrowers by the government: Work in public service for 10 years, make your student loan payments on time for 10 years, and the Dept. of Education will forgive the remaining balance on the loan. Borrowers have complained for years that the program has not worked as advertised, and new data reveals they’re right.

The U.S. Department of Education released the latest statistics for public service loan forgiveness:

As of June 30, 2018, 28,000 student loan borrowers submitted 33,000 applications for public service student loan forgiveness program. Of that total, approximately 29,000 applications have been processed. Of that total, more than 70% of applications have been denied due to student loan borrowers ‘not meeting the program requirements.’ Another 28% of applications for public service loan forgiveness were denied due to missing or incomplete information on the employment certification form.

The Public Service Loan Forgiveness Program is a federal program that forgives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in an eligible federal, state or local public service job or 501(c)(3) non-profit job who make 120 eligible on-time payments.

So, who has been approved?

Approximately 300 applications have been approved, but only 96 borrowers have collectively received $5.52 million in public service loan forgiveness.

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Bankruptcy Law, Debt Relief, Student Loans

Trump’s New Budget Puts an End to Student Loan Debt Forgiveness Program

Posted on September 21, 2018by Admin

The President’s new budget proposal seeks to make major cuts to important student loan forgiveness programs and affordable repayment plans. The proposal, officially announced this week, seeks to cut income-based loan repayment programs and eliminate the Public Service Loan Forgiveness Program.

President Trump’s budget will also eliminate subsidized student loans. It is estimated that in the 2016-2017 school year, approximately 5.7 million students have subsidized loans. The budget will also reduce the number of income-based repayment plans offered to students. These plans allow the borrowers to pay back their loans at a rate that is proportionate to their income. The budget sets to drop these student loan assistance programs from four to one. The one program that is left caps students’ monthly payments at 12.5 percent. Under most current income-based repayment programs, student borrowers pay 10 percent of their discretionary income.

Also, under this program, undergraduate student borrowers would end up having their loans forgiven sooner, dropping the timeline down from 20 years to 15 years. They would end up paying more per month under this program, but for a smaller length of time. On the other end of the spectrum, however, graduate students will not have their loans forgiven for 30 years.

The Public Service Loan Forgiveness (PSLF) program was created under the College Cost Reduction and Access Act of 2007 to encourage graduates to work in public service while offering them a benefit of eliminating their federal student loan burden. These public service positions include public school teachers, social workers for the state or health researchers. If the student borrowers work in these positions and continue making payments on-time for 10 years, they can have their loans eliminated. It is estimated that two-thirds of student loan borrowers have expressed an interest in the PSLF program. These students are reported as making less than $50,000 annually. Trump’s budget plans to eliminate this student loan forgiveness program entirely.

If this program is eliminated, many are worried that college graduates will be less likely to apply for and take public service jobs. This elimination will end with fewer public defenders, public school teachers, state social workers, legal aid providers, even law enforcement. With their pay being lower than what it would be in the private sector, these borrowers are not going to be able to meet their monthly obligations, especially if the government makes it more difficult for the student to apply for an income-based payment program.

In addition, the budget cuts funding for approximately 30 other higher education programs, including the Supporting Effective Instruction State Grants, the Federal Supplemental Educational Opportunity Grant, and 21^st Century Community Learning Centers.

These changes would begin for students who borrow after July 1, 2019. The President’s proposal has been submitted to Congress and is subject to their approval. It is predicted that the budget will be modified; however, it remains to be seen what these modifications could entail. Student loan advocates hope that these modifications will restore some of the programs eliminated through this budget proposal. The alternative could mean very tough times ahead for student loan borrowers.

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