Are you a teacher? A police officer? A fire-fighter? Work in any capacity for local, state or federal government or a non-profit?
Having doubts about whether your federal student loans are going to be forgiven after ten years of public service? Join the club. Here are five things you should know to make sure your loans are indeed forgiven after 10 years:
Garin Flowers of Channel 10 ran this story this week with a married couple we have represented with Parent Plus loans. These loans had doubled before they came and consulted with us for repayment options. When the financial crisis hit in 2008, they were forced to go on forbearance for a number of years and the loan went from 47k to 84k. When Parent Plus loans are taken out, the parents’ income and number of income producing years before retirement are not even taken into account. Unlike a student with a lifetime of earnings ahead of him or her, parents may have only ten years to retirement – even if there wasn’t a financial crisis causing massive job losses during that time period.
Older Americans have nearly 70 billion of Parent Plus loans as of 2015 according to a January CFPB Report: Snapshot of Older Consumers and Student Loan Debt. The CFPB receives a large number of servicing and debt collection complaints by older Americans.
Nearly 40% of federal student loan borrowers over the age of 65 are in default according to the CFPB Report. Default brings a whole set of nasty outcomes including wage garnishment, social security offsets and tax refund interception, as well as negative credit ratings. Often a student loan attorney can help to prevent a default or cure a default that has already occurred. We have found there are solutions, and often the servicers do not discuss all of the available options with borrowers. They tend to emphasize forbearance – which is a temporary bandaid at best. The loan balance just continues to increase – and capitalized interest adds up quickly.
We’ve been spending quite of bit of time lately researching all the ins and outs of Public Service Loan Forgiveness (“PSLF”). One of the issues that has caught our attention is the failure to communicate to FFEL borrowers the need to consolidate their loans to the newer Direct loans and THEREAFTER make 120 timely monthly payments. Many people have never been informed of this requirement to consolidate to Direct Loans, and have wasted many years of their life making payments that do not count toward PSLF. Many are finding this out now. After they’ve already worked in public service for years.
I’d like to hear from student loan borrowers about how they heard of the need to consolidate to Direct for PSLF eligibility, and when they learned of this. There appears to be a gap – the FINAL RULE implemented by the DOE on July 1, 2009 lays out a counseling requirement where this is to be discussed with students during an exit interview with the school. But what about the ones who already graduated? It wasn’t added to the Master FFEL Promissory Note until late 2009/early 2010. So any borrower who graduated prior to mid 2009 would not have known of this requirement from the school, nor from the note they signed. The PSLF was passed into law by the College Cost Reduction and Access Act of 2007 by President Bush to provide indebted professionals a way out of their federal student loans by working full-time in public service. In 2007, many banks loaned money to borrowers under the FFEL program which provided for a federal guarantee in the event of default. Three quarters of schools provided access to FFEL loans, while Direct loans were offered in only one-quarter of schools. So in 2007, these banks began to inform their borrowers of this new legal path toward forgiveness. Three quarters of these borrowers had FFEL loans which did not qualify. At that time there were no forms to fill out, no applications to submit. Borrowers were given a payment amount and told to make timely payments for 120 months and then apply. The DOE doesn’t even have a final application ready yet – it is expected in September 2017.
In November 2011, FedLoan Servicing was awarded the contract to service borrowers eligible for PSLF. But unless a borrower had somehow heard of the certification process to inquire about potential eligibility that began in January 2012, their loans would not have been serviced by FedLoan. Loan servicing could have been provided by any of the originating banks or their servicers such as Navient, Sallie Mae, Nelnet or Great Lakes. What steps did any of these parties take to educate their borrowers about the PSLF requirements? What steps did the DOE take to ensure FFEL borrowers were aware of this limitation other than publication on its website for borrowers prior to the new Master Promissory Note in late 2009/2010? Did the lenders have a financial incentive not to notify borrowers and thereby reduce their profitable loan portfolio?
Unfortunately, some people feel they have no way out when it comes to their student loans. These are usually folks who have tried their best to pay for 10 or more years and are no further along than when they started. Most feel the debt will haunt them for their entire lives, until they die. Some have contemplated moving out of the United States or even thought about suicide. If this is you, please reach out to us. Our consultation is free and we can help 9 out of 10 people with their student loan debt. Those that we cannot help are usually ones that make too much money and can likely repay their loans anyway.
In this series of Real Life Examples, I would like to highlight a potential client who came to us after ten years of wage garnishment at $400 a month. They were upset that the loan balance had not gone down at all, but rather actually went up. To top if off this client works for the local school system and would be eligible for Public Service Loan Forgiveness (PSLF) had they not been in garnishment.
We put together a plan to cure the default, put them on the best income based plan for their family with an estimated payment of $167-$324 depending upon how they file their taxes and how many children the borrower claims on his tax return as dependents. And they will be enrolled in the PSLF program which will allow for a full discharge of any loan balance including unpaid and accruing interest after ten years.
The Wall Street Journal reported today that the current administration intends to roll back some of the protections put into place by the Obama administration such as the gainful employment rule. This will enable hundreds of for-profit schools to remain open that were at risk of closing. Not sure if that is such a good thing. If the employment rate is so low following graduation from some of these schools, perhaps these schools should be put down – rather than allowing their marketing machines to pull in more vulnerable students to waste years of their lives obtaining a worthless degree. But I digress.
The important thing is Ms. DeVos indicated that the Department of Education fully intends on discharging applications pursuant to the Borrower Defense to Repayment under the rules established by former President Obama. The Obama administration used the borrower defense regulation to cancel the debt burdens of former students at schools found to have committed fraud. In early 2017, the DOE had approved claims from thousands of borrowers to erase $655 million owed by former ITT and Corinthian students.
It is unknown whether Mrs. DeVos will set too high a threshold for students to prove they were defrauded and get reimbursed. However, it is good news that the current rule will be followed rather than dismantled. “Promises made to students under the current rule will be promises kept,” Mrs. DeVos.
In this example, someone who consulted with me had recently submitted their Public Service Loan Forgiveness (PSLF) Discharge Application and it was denied. He had worked ten years for the federal government in public safety. He then came to me. I wish he had come to me earlier. After I researched the matter, it turned out that while he had consolidated his loans, the consolidation was done too early in 2005 and well before the Direct loan program even existed. Only Direct loans, and not FFEL loans, are eligible for PSLF. So in order the obtain a discharge of his federal loans, he has to consolidate to the newer loan type, and then wait another ten years (while working full time for the government entity) to apply again. This gentleman is turning 60 this year. It’s extremely unlikely he will still be working in the same position when he is 70.
One of our most successful cases this month was the discharge of private student loans for our client who attended a Caribbean medical school. The key was that the foreign medical school was not listed on the Federal Schools Codes List as being eligible for federal funding. That particular fact allowed us to obtain a full discharge of several hundred thousand dollars in private student loans. The loans were not “qualified educational loans” as that term is defined by the Internal Revenue Code and therefore were dischargeable under Section 523(a)(8) in an adversary proceeding.
This case, In re Lysiuk, Case No. 6:16-ap-00124-CCJ is available here. It was decided by Bankruptcy Judge Cynthia Jackson out of Orlando, Florida.
This case was not brought as a typical undue hardship. I felt it would be exceedingly difficult to prove under the existing Bruner Standard that our client met the burden to discharge his loans based upon hardship. While he was only making $10/hour when we filed the case, he was potentially capable of much more (despite being unable to pass the medical boards) and was young and healthy. So instead we chose to go the route of a more technical argument that was gaining ground in the United States but was still an issue of first impression in Florida.
What should you do if you are sued by NCSLT for student loans?
In recent years, lawsuits brought by the National Collegiate Student Loan Trusts (NCSLT) has become an epidemic. Defending these cases can be fun and rewarding. Often, consumers are faced with a lawsuit for tens of thousands of dollars on a loan they barely remember, from a trust they have never heard from. They are often sued in multiple cases. The deficiencies in the collectors’ proof have been well documented. We raise many evidentiary and standing issues and conduct discovery to prevent a judgment. Some clients are simply not collectible. Between the legal problems with the cases and often times the financial condition of our clients, we can often obtain dismissals with prejudice – meaning they forgive the debt in full and agree not to come after our clients in a future case.
We had nine dismissals today. This is life changing for our clients. It can change your life too for the better. These cases can be defended and can be settled for reasonable amounts. If you haven’t been sued yet, please consult with an attorney about your rights – you’ll likely be sued in the next year as we are seeing more and more of these cases be filed. For more information, we offer a free consultation and have tons of information on our blog and website at Arkovich Law
In examining the typical debt that a person lives with nowadays, Sorboni Banerjee, Fox News Consumer Reporter, interviewed Tampa, Florida Student Loan Attorney Christie Arkovich for a news story on Monday. The portion dealing with student loan debt is copied below:
Christie Arkovich specializes in helping people negotiate their student loans down. She says when students first graduate it’s usually not that bad, but as they push back payments, the problem balloons. “When grads first graduate, it’s mid 30’s and that’s actually sustainable if you have a job that pays $30,000 to $35,000. That’s a one-to-one ratio that’s usually OK. But people run into trouble, they do forbearances where the balance keeps increasing, so most of what we see are 50 or 100 or beyond 100.”
That’s 100k people. That’s a house for many people. And many of these people received only two year degrees or may have even dropped out. Sorbani goes on to point to a recent study that found 70 percent of people said the reason they were delaying buying a house was because they’re swamped by their student loans. Americans owe more than $1.4 trillion in student loans which is about $620 billion more than the total U.S. credit card debt.
Reboot Your Life: Tampa Student Loan and Bankruptcy Attorney Blog