Articles Posted in Student loans

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Christie_1Those with federal student loans have had a five year reprieve for collections on federal student debt.  We are seeing more delinquencies as people do not not realize they were due to make a payment and for those borrowers who cannot afford to make a payment now.

There may be relief (talk to us about your specific circumstances) but settlement is likely not an option for most.  The Department of Education has very strict limits on settlement of federal student loans:

  1. 100% of current principal and interest (better credit reporting)
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Christie_1The IDR payment tracker was removed from many if not all borrower’s studentaid.gov sites today.

You can still find your payment count however.  Write your servicer directly for it or use this direct  link after you’ve logged onto StudentAid.gov:  https://studentaid.gov/app/api/nslds/payment-counter/summary​.

This link shows in a computer code format called JSON which you can’t read.  But if you copy it into an AI tool such as ChatGPT, Claude or any of the others, it can be translated into regular English.

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We are hearing from multiple sources that federal student loan borrowers IDR progress will be removed from the government site next week.  It’s imperative that you screenshot your IDR progress in case you need it down the road.  This is on studentaid.gov and looks like this:

student-aid-IDR-count

Go ahead and view your IDR progress and screenshot every screen with info.  Don’t wait – do it now please!

Screenshot Your IDR Progress Today

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Christie_1We’re hearing a lot of people are finding out their student loans are delinquent – another today that received a 90 day late and had no idea they were out of deferment.

The dings to your credit are not small — we had a client recently who had four student loan accounts (not unusual at all) and the hit to his credit was 200 points.

You can imagine what a 200 point hit will do especially when it’s unexpected!

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Christie_1The IDR online application is back up, though a demo revealed there are some big new restrictions on enrollments:

  • No enrollment in SAVE
  • No opportunity to request enrollment in the plan with the lowest monthly payment
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Christie_1While the Income Driven Payment application process is shut down  (paper applications were being processed, but now they too are reportedly on hold), to be first in line when it restarts, we suggest a paper application be sent to your loan servicer so it’s in the queue, and be sure to use the latest IDR application form.  (Form #1845-0102 with an expiration date of 4/30/2027).  Attached documentation of your income (latest tax return filed or a recent pay stub).  You can try to upload it to your servicer, but with most of the online systems halted, it may be best to send via paper certified mail with a return receipt.

An Income Driven Payment is one way a borrower can remain current on their federal student loans who cannot afford their normal Standard payment.  Please don’t ignore a student loan bill – it not only will incur late fees, but you will also have damage to your credit and the possibility of default which is not good for a federal student loan.  Please read back through our blogs for some of the reasons why.

You may have some forbearance left.  A couple days ago I blogged about forbearance options.  This will not accrue credit toward forgiveness but it will keep your credit in good standing and avoid default.

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arkovich_law-narrowMore and more signs are pointing toward bankruptcy being the best platform going forward to address student loans.  Why?

  • We can often discharge private and even federal student loans (if either an undue hardship exists or it’s an unqualified education loan);
  • We can cure a default of a federal student loan (where consolidation or rehab opportunities no longer available);
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Christie_1So I’m hearing that President Trump is moving the federal student loan system over to the Small Business Administration (“SBA”).  I’m also hearing today that they are cutting the SBA’s workforce by 40%.  Interesting.  I admit, I was expecting big changes, but I didn’t really have this on the bingo card.

I have always been an advocate of looking at the ROI, return on investment, when deciding how much to pay for what degree.  I imagine this change will only emphasize this.  I’d hate to get a degree that resulted in unemployment or underemployment and then default on an SBA loan.  The SBA has a reputation of playing hardball when it comes to negotiation of past due balances.

At least the SBA has a system in place for loans and the collections of loans.  How they would incorporate all the Income Driven Plans and the other oddities and complexities of the federal system I really don’t know.  Maybe they won’t or they will do only that which was passed by Congress like IBR and PSLF.  I do know there was a report out by the Inspector General’s office a few years back that 62% of the time the dozen or so federal student loan servicers would do whatever wrong.  So the bar is pretty low to do it correctly.  I used to say that if I cited the wrong law or something 62% of the time, the Florida Bar would probably ensure my disbarment.

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Christie_1President Trump signed an executive order titled Restoring Public Service Loan Forgiveness a couple days ago.  While this should have to go through the normal channel of rulemaking which will take approximately one year, it appears that PSLF will be excluded for non-profits which engage in a “substantial illegal purpose” including:

(a)  aiding or abetting violations of 8 U.S.C. 1325 or other Federal immigration laws;

(b)  supporting terrorism, including by facilitating funding to, or the operations of, cartels designated as Foreign Terrorist Organizations consistent with 8 U.S.C. 1189, or by engaging in violence for the purpose of obstructing or influencing Federal Government policy;

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Today’s webinar went off without a hitch – link here.  I tried to update our fellow attorneys on what we are seeing or hearing out there in our student loan world.  Lots of changes, practically to everything in fact.

Student Loan Essentials:  Updates, Strategies, and Advocacy for Legal Aid Practitioners.  It’s one hour and free.

This is approved for Florida Bar 1.0 General CLE credit – see link for specifics.

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