A bankruptcy attorney colleague, Don Golden, has started a new Podcast, The Fresh Start for Life, and has graciously had me on as one of his first guests.
Tune in to listen to our chat where we talk about options to pay off student loan debt. Links for Itunes, Spotify, Google and Sticher at the end of this post.
I regularly ask for hardship letters from our clients in our student loan and other debt settlement cases.
One of our clients began his letter “Dear Student Loan Sharks”…. I took that part out, but if you read his letter, you would be very saddened by what has happened to him. Out of a family of nine siblings, he was the only one to go to college.
However, his bright future was cut short when he went to I.A.D.T., which was acquired by Sanford-Brown, both of which were shut down. His credits and degree are worthless. Employers don’t recognize these degrees and schooling. These schools told him he could make 90k in his field a few years after graduation. They showed him charts and graphs. Upon graduation, he made less than he did serving tables before college. Now with a mountain of debt. Federal and private loans.
Our last client of the day yesterday had this to say: “Navient misled me by having me place my loans on forbearance and deferment rather than on an income driven plan, and also kept me on non-qualifying loans for loan forgiveness for public service. Had they guided me through this process correctly rather than misled me, I would have had my loans already forgiven because I am on my 13th year with the federal government”.
Instead this client is having to start all over again. He only owed $20,486 upon graduation in 1994 in seven loans. He’s been paying what he could for many years. Now he owes $42,000 — in 2018. He’ll never see any forgiveness (administratively) because he now makes too much money and has a huge monthly student loan payment.
How is allowed to happen? This is nothing short of a national tragedy that so many of our public service workers are being denied the student loan relief that they were counting on!
Many folks who have filed applications for Borrower Defense to Repayment seeking to discharge their federal student loans due to fraud by the school, are running into problems with their servicers sending bills that payments are now due — even though the application is still pending and the loans should be in forbearance until the review is complete.
I believe this is due to the understaffing of the BDTR department by the Department of Education as they put the program on hold and are now in the process of re-writing it under Secretary DeVos. Regardless of how that all comes out, you can call the DOE BDTR hotline for help with your forbearance. They will call your servicer and push back the loan due to the forbearance. That hotline is (855) 279-6207.
For borrowers nearing retirement, that is 2-3 more years closer to retirement (where less income will allow for a much smaller Income Driven Payment).
It’s extremely important when consolidating federal loans that you do not add any Parent Plus loans to the consolidation of your own loans. It will taint the new loan and disallow many favorable options.
Here’s an excellent example from a current client (Cecelia) who came to see us before she did anything — just to make sure what she was doing was correct. Can’t express how valuable that decision turned out to be.
By keeping a very small Parent plus loan of $3,000 apart from all of her other loans totaling in the low six figures, this client is estimated to have an IBR payment of $191 starting in approximately 90 days. Had she not come to see us for advice first and consolidated all of her loans (as her servicer would have had her do), her loans would only be eligible for ICR and a payment of $1600.
Anyone with a federal HEAL student loan, should be aware that additional consequences can occur in the event of default. One of these consequences is exclusion from Medicare, Medicaid and all Federal health care programs pursuant to 42 U.S.C. Sec. 1320a-7(b)(14) for failure to pay your Health Education Assistance Loan(s) (“HEAL”).
It is possible to enter into consolidation or rehabilitation to cure a default. Then a payment plan can be set up based upon your income. If the matter has been referred to the Department of Justice, and a judgment has already been entered, then a Repayment Agreement is possible to avoid such an outcome.
In Florida, a default on federal HEAL loans may also cause the suspension of the practitioner’s license. Kinda hard to repay that student loan while unemployed. If you own your own practice, can you imagine the harm if your entire practice was shut down without warning?
On January 31, 2019, Judge Stong of the Eastern District of New York denied the Motion to Dismiss filed by SLM Corporation, Sallie Mae, Inc., Navient Solutions, LLC and Navient Credit Finance Corp. In this Memorandum Decision, the Court dealt a blow to the private student loan defendants when it permitted Plaintiff to proceed with its case (note a Motion to Dismiss is a preliminary motion and the case is far from over). In re Homaidan, Adv. Pro. No. 17-01085 (E.D. N.Y. 2019).
A nearly identical ruling was made the same day in In re Tashanna Golden, Adv. Pro. No. 17-01995 by the same Judge.
These cases dealt with Tuition Answer loans which the Plaintiff alleges are not “qualified education loan[s]” under the Bankruptcy Code Section 523(a)(8)(B), and for that reason, they were discharged in his Chapter 7 bankruptcy case. The Plaintiff argues that loans of this nature are excluded from the scope of his bankruptcy discharge and therefore any attempt to collect the debt after the bankruptcy discharge amount were impermissible and a violation of the discharge order.
Discharge by disability is something that I don’t see enough borrowers take advantage of to eliminate student loan debt. Today, there was a story in the Wall Street Journal, “Over 60, and Crushed by Student Loan Debt” focusing on the large increase of borrowers over age 60 who have student loan debt and are facing garnishment by social security.
For many who are faced with this dilemma, there can be easy solutions. First, there are up to eight different income driven plans which for someone on social security, may result in a zero payment to close to it. The key is making sure you pick the correct plan, and ignore a servicer who tells you that your loans are ineligible for IDR. There is always a way. Remember the servicer represents the creditor and not you. You are not their customer. Their legal position in pending lawsuits is they don’t have to explain all of your options. Reach out to a qualified student loan attorney to learn what you need to know.
Second, and perhaps even better, many people in this situation will qualify for a Total and Permanent Disability (“TPD”) Discharge for federal student loans. Some are afraid of doing this feeling they still need to work part-time to pay their other bills. No problem, the Department of Education allows some income from employment – up to the poverty guidelines for a family of two which in Florida for 2019 is $16,910. I thought it was higher, but it’s still likely high enough for most. Also, even if you are a family of one, they use a family of two. Why I don’t know, but they do. There is a three year monitoring period where you are required to annually certify that you have not exceeded that in employment earnings. Note, this does not include income from passive investments. And perhaps the best news of all, a TPD discharge is tax free through 2025 per certain budget laws passed in early 2018.
One key difference in the foreclosure crisis versus the student loan bubble is that many believe there is no possibility of relief. That is something that we seek to change every day for our clients via affirmative lawsuits for discharge of what is really consumer debt as it was debt issued beyond the true cost of education, settlements for pennies on the dollar for private student loans owned by NCSLT or other investment trusts, lawsuits for consumer law violations such as the FCRA, FCCPA, FDCPA and the TCPA, and making sure our clients obtain all forgiveness possible.
But for many others who are not aware of these options, it is a common mis-perception that there is no way out. In examining “What a Student Loan Bubble Bursting Might Look Like,” Allie Conti quoted Persis Yu, a staff attorney at the National Consumer Law Center, in arguing that short of fleeing abroad, or going underground, you can’t ever walk away from student debt.
Studies show that nearly 40 percent of borrowers are expected to default on their student loan payments by 2023. For those who do not believe that we are in a bubble, I ask how do you explain such a high default rate? The cost of education is simply creating an absurdly high student loan balance for many. Student loan servicers push forbearance like a drug – which continues to increase the balance. Interest is capitalizing at every turn – whenever someone comes off forbearance or is late in renewing an income driven plan. Whether we are in a bubble or not, it’s clear that the current system cannot continue unchecked — trapping a generation of students in servitude, straining taxpayers and the solvency of our own government.
This week, Adam Walser of ABC Action News reports on the problem where licensed health care workers who are in default on their federal student loans are at risk of losing that license here in the State of Florida “Florida Board of Health Suspends Health Care Licenses Over Student Loan Defaults”. We were interviewed by Adam:
“We’re not saying that people shouldn’t repay their loan,” said Arkovich. “We’re just saying that getting them fired probably isn’t the best way to go about that.”
By suspending healthcare workers’ licenses, which by the way only Florida has chosen to pursue this draconian measure, economists fear that many will be put out of work. At a time when we are told there is a shortage of health care workers. And in the State of Florida which likely has a greater than average number of health care workers caring for our elderly in nursing homes, assisted living facilities and rehabilitation centers.
Reboot Your Life: Tampa Student Loan and Bankruptcy Attorney Blog