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Behind the Scenes Student Loan Reform: It’s Happening Right Now! everyone was talking about CyberPunks and NFTs on Twitter this weekend, as well as the impact of various amendments to the infrastructure bill and how they may affect cryptocurrencies and development in blockchain tech, there was significant movement on the student loan front.

    1. Late Friday afternoon, the Biden administration announced that it was extending the federal student loan restart from Oct 1 to Feb 1, 2022.  Where might that money go for the next few months?
    2. Also on Friday, the Department of Education announced that it was creating a rulemaking committee to rewrite regs for PSLF, income-contingent repayment plans, borrower defense to repayment, closed school discharges, false certification discharges, interest capitalization, arbitration and class action bans, and even disability discharges.  Many of these programs while good in intentions, have been virtually shut down or misrepresented in past years.
    3. This weekend, the Department of Education announced it was reversing its policy regarding preemption of state consumer laws.

That last one is a doozy and a change that student loan debt relief advocates like myself has been hoping for from this new administration.  What it means is a giant step forward toward preventing unfair or deceptive practices by student loan servicers.

Several years ago we worked with class counsel to file a couple class actions against large servicers for misrepresenting public service programs. Several of our clients were told by their servicers that they were in the program with actual target dates for discharge — when in fact, they were NOT eligible for any PSLF because they simply had the wrong type of federal loans.  It was astounding to me that servicers could get away with that.  They knew what they were doing.  It takes me less than 30 seconds to tell a client what they need to do to qualify for PSLF — but yet, servicers managed to screw this up massively.

Mistakes like this, whether accidental or intentional, cost borrowers hundreds of thousands of dollars, made them restart the 10 year clock and showed the hopelessness of the system as a whole.  One of our client’s cases, Lawson-Ross v. Great Lakes Educ. Corp., 955  F.3d 908, 921 n. 13 (11th Cir. 2020) was cited by ED as support for its decision to reverse this policy!  We haven’t seen a dime for our efforts in this case, and maybe we never will, but I am proud of our clients, our firm, our colleagues at Shrader Law, PLLC, Kynes, Markman & Felman, P.A. and most of all, Student Loan Defense Vice President and Chief Counsel Dan Zibel, for their time and efforts to hold servicers accountable for their conduct to prevent public service loan forgiveness as promised to the most deserving of borrowers.

So going forward, loans servicers of federal loans, once deemed safe from those pesky consumer laws, will be held accountable.  Things like correcting misapplied payments, communication of wrong information, suggesting forbearance for no other reason than to get borrowers off the phone quicker to save precious servicing time, all of this misbehavior has an expiration date.  There is a 30 day comment period, but I don’t expect much to damper the enthusiasm for the new administration to end the egregious misdeeds committed by federal student loan servicers in the name of saving a buck.  I’ve long been a believer of our student loan system, actually having worked for the other side back in the mid 1990s to early 2000s, but recognize that it has been hijacked for quite some time and needs a complete overhaul.  This overhaul is happening now!

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