Tag: U.S. Department of Education

Credit Score

Credit Scores Drop at Rates Not Seen Since the Great Recession

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As Americans struggle to keep up with the cost of living and the return of student debt payments, their credit scores are taking a hit. The national average FICO score dropped by two points this year, the highest since 2009, according to recent data.  These numbers are down for the second year in a row.  FICO also found that delinquency rates on auto loans, credit cards and personal loans are at or near their highest levels since 2009.

Younger Americans are facing even more financial pressure with high student loan debt and low entry-level hiring. Gen Z borrowers experienced an average credit score drop of three points — the biggest decline of any age group since 2020 during the pandemic, according to FICO.

FICO found that 14% of Gen Zers have had a large credit score decline of 50 points or more in the past year — more than any other year and double the decline of 2021.

The US Department of Education’s COVID-19 relief for student loans has ended. The 0% interest rate ended Sept. 1, 2023, and payments restarted in October 2023. The Department of Education restarted collecting federal student loans in default in May. Student loan delinquencies were not reported on credit files until February.

Between February and April, 6.1 million consumers had a student loan delinquency added to their credit file, according to FICO. That means the student loan delinquency rate has climbed to a record high of 29% among the 21 million borrowers with a student debt payment due.

The impact of these late student debt payments and the fact that Gen Z doesn’t have a long track record of making credit payments, which builds their credit scores. This makes their credit scores vulnerable to more volatility, both up and down.

FICO found that 64% of Gen Z and 61% of Millennials with student loans rely on credit cards, buy-now-pay-later loans or personal loans to bridge financial gaps.

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If you have any questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced 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.

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.

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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 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

What the Debt Ceiling Deal Could Mean for Student Loan Borrowers

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The Biden administration and Congressional leaders reached a deal last week regarding the debt ceiling, one that will now have significant consequences for student loan borrowers. Once the agreement is signed into law, payments on all federal student loans that have been on pause since the start of the COVID-19 pandemic will be reinstated as of August 2023.

This deal affects approximately 43 million student loan borrowers who must now figure out how to make these payments after receiving relief for years since 2020.

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

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, Timothy Kingcade Posts

Teachers Sue U.S. Over Student Loans that Were Not Forgiven

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The American Federation of Teachers has filed a lawsuit against the U.S. Department of Education on behalf of educators who argue that they have been wrongfully denied loan forgiveness under the federal public service loan forgiveness program.

The Public Service Loan Forgiveness program was created more than a decade ago to encourage young graduates to seek employment in a government job or in public service industries. While the pay in these types of jobs tends to be lower, the promise of having their federal student loans forgiven at the end of a ten-year period was created to entice them to apply for these positions.

Under the program, borrowers who work in certain public service professions, including law enforcement, nursing, and teaching, and who make payments consistently for ten years, can have their federal loans forgiven. It is estimated that more than one million borrowers have filed official paperwork to participate in the program. However, many of these borrowers are finding out that they suddenly do not qualify for forgiveness for one reason or another, including not carrying the correct type of loan.

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

Student Loan Borrowers Diagnosed with Cancer Still Waiting for Promised Relief

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In September 2018, President Donald Trump signed a bill into law, allowing student loan borrowers who have been diagnosed with cancer to delay their federal student loan payments. This new law was created to allow these individuals to focus on their treatment and not their student loan obligations through the course of their medical treatment and six months afterward. However, just nine months after the law took effect, borrowers who have requested this deferment are still waiting for approval.

The delay seems to be due to the U.S. Department of Education not yet providing student loan providers that administer its federal student loan programs an official application through which qualifying borrowers can apply. While the law may be in effect, service providers have no way to implement it.

The Department of Education insists that they are taking steps towards resolving this problem and creating an application for the cancer deferment. However, many borrowers are questioning why this was not done previously. As of January 2019, the Department of Education asked that the Office of Management and Budget conduct an emergency review and approval of the cancer deferment form created.

The Department of Education is also requiring a 60-day comment period on the proposed form, which is delaying the process even further. With cancer patients, time is of the essence. Many consumer advocates question why the comment period was not shorted to 30 or even 15-days.

Student loan servicers are offering temporary forbearances for borrowers who are seeking the cancer deferment. However, forbearance does not stop interest from accruing on the debt while payments are paused. Deferment, on the other hand, puts payments on hold while pausing interest from accruing, as well.

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, Student Loans, Timothy Kingcade Posts

Trump Administration Making It More Difficult for Defrauded Students to Erase Debt

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The Trump Administration has taken steps to make it harder for student loan borrowers who were defrauded by for-profit colleges or universities to erase their debt. United States Department of Education Secretary, Betsy DeVos, moved to make the process more difficult for students and roll back regulations set by the Obama administration.

The Obama administration took a particularly tough stance on for-profit colleges, creating rules that allowed similar claims against for-profit universities to be processed as a group. The Obama administration also created rules that prevented colleges from requiring students to sign an agreement that required them to arbitrate disputes with the colleges.

DeVos’s statement this week made it clear that student loan borrowers will now have to prove their claims on an individual basis and will be held personally accountable for their student loan debt – even if their decision to take out the loans was based on fraudulent information.

The U.S. Department of Education is seeking comments regarding what standard should be set for students to prove their case. The previous administration had used the “preponderance of the evidence standard” to win a case regarding their obligations. However, the Trump administration is considering going to the higher burden of proof of “clear and convincing evidence.”

The Department is hoping to publish a final rule by November 1, 2018. Any loans originating after July 1, 2019, will be affected by the new rule.

Consumer advocates have argued for a more aggressive stance against for-profit colleges. These advocates worry that this proposed rule will have a chilling effect on borrowers who seek relief from student loan debt. Borrowers would need to show that the college intended to mislead or defraud them. Proving intent on the part of the for-profit college can be nearly impossible. On top of this, a higher burden of proof would make winning their cases that much harder.

The proposed rules may also give borrowers less time to apply for relief. Students have six years from the date they discover a breach of contract to file a claim. The new rule limits that length of time to three years from when the borrower leaves school. Oddly enough, this time period coincides with the time period schools have to report how many students are not making payments on their federal student loans.

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.