Articles Posted in Student loans

Fannie Mae introduced new programs on April 25, 2017 allowing student loan borrowers to refinance their student loans into their home mortgage.  Fannie Mae explained that this would open home ownership to more candidates and reduce interest rates from what is often 6-8% to a more manageable 4% under present 30 year fixed rates.  The headline reads:  Innovations Help Borrowers Pay Down Student Debt and Overcome Debt Related Obstacles When Buying a Home – See more at this link.

While this will help many young borrowers I’m sure, I’m also cautious in that borrowers are giving up important federal rights in doing so.  For instance, if older Americans elect to refinance their Parent Plus loans into their mortgage as they downsize to a more affordable smaller home, they are giving up the right to an income based plan (often 0-$100 a month) and trading that in for a sizable chunk of their home equity.  Home equity that could have been used to help fund their retirement.

Even a younger person should be careful as they too are giving up important rights in the event they lose their job, have a drop in income or become disabled.  The present income based/debt forgiveness plans allow for a re-calculation of a student loan payment for all of these events.  A federal loan can also be discharged in its entirety under the Total and Permanent Disability Discharge program.  A refinance of a student loan, while it may sound inviting due to a lower interest rate, will result in the loss of these federal benefits.  It will also cause the student loans to now be collateralized by their home and the loss of a down payment or equity in that home should a calamity occur.

In my continued quest to help get the word out about things that can be done NOW to help relieve student loan debt, I was offered the opportunity to speak to about 100 bankruptcy attorneys on a panel about FDCPA violations.

We are constantly on the lookout for consumer collection law violations for our student loan clients here in Florida.  These violations of the FDCPA, FCCPA and TCPA give us much needed ammunition to settle student loan debt – particularly for our clients’ private loans.  These include letters our clients get that don’t make sense, don’t identify the debt collector etc. to phone calls to relatives, phone calls before 8:00 a.m. or after 9:00 p.m. or our personal favorite:  cell phone calls after our clients’ tell the debt collector not to call their cell phones.  At $500 – $1,500 per call, these violations tend to add up quickly.  Why not use these violations to reduce the student loan debt – while we get paid by the debt collector or student loan servicer?  Makes good sense to me.  And I hoped sharing my knowledge with other attorneys over the weekend helps them to recognize the good that come of such violations to reduce student loan debt!

For more information about potential collection law violations as they relate to student loan or credit card debt, please contact us at Arkovich Law

The CFPB announced in mid 2016 that it was looking more closely at student loan servicers  (companies that collect payments from borrowers) and their role in the increased student loan defaults.  It has announced this as one of their priorities for 2017.  Last fall, the CFPB issued a joint statement of principles on student loan servicing with the Department of Education and Department of the Treasury calling for greater consistency, accuracy, accountability and transparency in loan servicing. The bureau followed up with an annual report on complaints it has received about student loan servicers that could bolster the case for industry-wide standards.

Several student loan servicers have disclosed that they are responding to inquiries from the CFPB that could lead to enforcement actions. The companies include Navient Solutions Inc., Navient subsidiary Pioneer Credit Recovery Inc., The First Marblehead Corp., and Xerox Educational Services Inc.

Some companies have lost their licenses or governmental contracts to act as student loan services for federal loans.  Pioneer was one of five private collection agencies cut loose by the Department of Education in February, 2015, following a review that concluded they were providing inaccurate information to borrowers. The other companies that lost their government contracts were Coast Professional, Enterprise Recovery Systems, National Recoveries, and West Asset Management.  They may still be servicing private loans however.  In the summer of 2016, I believe Pioneer and Enterprise appealed the loss of their contracts and won – and as a result are still servicing governmental contracts.  In December 2016, the Department of Education announced the companies that received a contract to continue to service federal student loans are:

The Consumer Financial Protection Bureau just released a snapshot this week on the excess financial problems that student loan debt is causing our older population.  The CFPB reports that in 2015, nearly 40% of federal student loan borrowers age 60 and older were in default.  I’d venture to say that the number is even higher if we add in private student loans for which parents or grandparents co-signed for their children.  Three quarters of these loans were taken out for their children or grandchildren.  Older Americans are the fastest growing segment of student loan borrowers per the CFPB.

The CFPB reviewed the complaints it had received by these older borrowers and noted the following which I’d like to emphasize are potential violations of our national (FDCPA) and Florida (FCCPA) consumer collection laws:

• Delaying or prohibiting enrollment in income-driven payment plans:  Servicers are not advising some older borrowers that they may have their loan payment amounts reassessed under an income-driven plan when their income changes. Instead, some consumers on fixed or reduced incomes are being placed in plans designed for borrowers with growing incomes. Older borrowers in default report that their Social Security benefits are offset to repay a federal student loan—despite their right under federal law to cure their default and seek payment relief under an income-driven plan.

We are about to file a case in the Orlando Division this week based upon the recent discharge of private student loan debt for a non-accredited school that was not listed on the Federal Codes List.  We are relying upon a decision last Spring In re Decena, 549 B.R. 11 (Bankr. E.D. N.Y. 2016), where debts owed on private loans to attend a “for-profit” university not accredited by the United States fell within the exception to discharge of § 523(a)(8). See also In re: Meyer, Case No. 15-13193 (Bankr. N.D. Ohio 2016) and In re: Swenson, Case No. 16-00022 (Bankr. W.D. Wis. 2016).

Unfortunately, I just learned today that In re Decena was just reversed on other grounds on November 29, 2016 when it came to light that the service was improper.  We noted the zip code they used in their service was incorrect last week when we were putting the finishing touches on our Complaint.  Then today I read that the decision was overturned because the bank, Citizens Bank, was served by U.S. Mail rather than certified mail on an officer of the bank as required.

Fortunately, two other jurisdictions in Ohio and Wisconsin agreed with the analysis put forth in In re Decena and are good law.  It is not likely that the New York Judge in In re Decena will materially change his position after service is properly effectuated and the saga continues, but… you never know.