Articles Posted in Student loans

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Great news for Florida consumers with student loans! On April 21, 2015, the Middle District of Florida, Tampa Division, Bankruptcy Court issued a ruling on behalf of our client that a National Collegiate Student Loan Trust would be barred from pursuing student loans in Florida because the five year statute of limitations had expired. In doing so, the Court entered Final Judgment in favor of our client.

However, NCSLT apparently did not like this ruling and has subsequently filed an appeal. As neither party has submitted briefs yet, the outcome of the appeal remains unknown and should be resolved in approximately 4-6 months or less.

These clients owe a devastating $161,000 in private student loans. They also owe only about $20,000 in federal loans for which payments are current in a repayment program. However, prior to hiring us, these clients were not presented with realistic payment terms from the private lender. The household income for this family of four is only $40,000 as they have two young children and the wife stays at home to care for them.

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student loan reform.jpgToday, a legislator introduced a bill to treat student loan debt as other unsecured debt in a bankruptcy filing. This would be huge! As everyone knows, a bill isn’t a law and it could be awhile, but if this gains steam, we may have some relief for graduates over the past 20 years who are facing student loans that the new governmental forgiveness programs don’t cover.

Rep. John K. Delaney, D-Md., introduced the Discharge Student Loans in Bankruptcy Act (H.R. 449) on January 22, 2015. The bill itself can be found here. This link can also be used to track its progress through the House, Senate and finally the President if it makes it through. I just checked the link and the text of the bill isn’t up yet, but it should be in a couple days. I’ll be curious to see how it is worded and other legal commentators’ opinions of its likelihood of passage.

Presently, the burden to discharge student loans is not easy. The Brunner standard of what it takes to show an undue hardship is very difficult to meet. However, this 1987 case is starting to come under fire because of the impossible standards imposed. Over the past year, there have been approximately a dozen federal cases providing a framework for a new standard allowing for discharge of student loan debt. Brunner has some competition now.

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I’m looking for someone fitting this description to help to publicize this problem – CNN Money is interested in doing a story – Please contact me if you know someone who would be willing to share their story and be interviewed. Plus I may be able to help…

Stay tuned, I’ll update this blog post when the story develops.

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Phone-Police-150x150.jpgA three judge panel federal court ruled recently against Dell Computer when Dell continued to use an automated dialing system to make debt collection calls to a consumer. This consumer had written Dell asking it to stop calling her cell phone. Dell ignored the letter.

The 3rd Circuit Court of Appeals in Philadelphia ruled that although the consumer had initially listed her cell phone number on her application for credit, she later revoked the consent to call her on that cell phone. This case is likely to have far reaching implications including as far away as Florida because it is a federal court and believed to be one of the first to consider this issue.

The debt collector unsuccessfully argued that the consumer did not have a right to revoke consent. Once given, it argued Dell could call and call, and then call some more. It couldn’t have been more wrong.

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wheelchair grad.jpgThere are new TPD (disability) regulations going into effect on July 1, 2013 to help our student loan clients in Florida and elsewhere. These new changes apply only to applications received after July 1, 2013. In a nutshell, the significant changes are designed to make an application much more streamlined!

1. There will no longer be a requirement that student loan debtors obtain certification and medical documentation from a physician showing recent visits and lack of employability.

2. Only one application is required even if multiple loan servicers.

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student loan bubble.jpgEarlier this year, total student loan debt surpassed credit card debt for the first time ever. Student loan debt and the resulting high tuition are without a doubt in a huge bubble after having raised 800 percent in the past few years. After graduation, students are presented with the bill and most have no idea how it got that high.

Why is this? The cause of this student loan bubble is not unlike the mortgage crisis. The initial theory was to expand homeownership to the masses. Thereafter, lax lending standards allowed more and more people to buy homes. More buyers led to higher prices. The mortgage loans were securitized on Wall Street to unidentified investors. As the demand for these investments grew, the need for more questionable loans grew. People began to fear being left behind, if they didn’t buy now, they would be priced out of a home forever. It was actually cheaper to buy a home than it was to rent one with first month, last month and security deposit required in cash. Who cared if the loan couldn’t later be repaid when it was determined that the homeowner didn’t actually have a job that paid $200,000, but instead worked as a gardener for $20,000. Turns out that kind of thing really matters now that our housing market tanked 50% or more across the board as a direct result of this chain of events. Poorly run mortgage servicers or those with their own agenda has multiplied the number of foreclosures. The resulting crash hurt everyone, even people who could normally afford their home payments but god forbid lost their job or had to move.

Feeding the securitization beast was a common problem among mortgage brokers and investment banks. They had to create product to sell to the securitization machine. Kinda like making meth in large quantities in the popular show Breaking Bad that I am now hooked on and spent half of this past Labor Day weekend watching.

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disclosures.jpgToo late for many, but at least a step in the right direction, Senator Al Franken (D-Minn) introduced the Understanding the True Cost of College Act on May 24, 2012.

Were you aware that the Truth in Lending Act which requires disclosure of the cost of credit in home and vehicle purchases specifically excluded student loans? I just found this out myself. An education is an expensive purchase. If you make the wrong decision, bankruptcy is not available in most cases to simply give it back. But yet the powers that be decided that students and their parents didn’t need to be informed when making decisions as to what college to attend and how much financial aid to obtain.

This bill is intended to attack the complete lack of transparency that currently exists. Instead of wondering how this could have happened during the exit interview, basic minimum information will be required to be disclosed PRIOR to incurring the debt. Things such as the costs of tuition, fees, room and board, books and supplies, the amount of financial aid that the student does not have to repay, and the net amount the student will have to pay.

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student loan reform.jpgLast month, it was well publicized that student loan interest rates were about to double unless Congress acted. Actually, this only involved subsidized Stafford loan interest rates. However, President Obama made the most of it and traveled around the country garnering support to help students. At the last minute, Congress voted to stop the increase. CNN reports that the rate would have gone from 3.4 to 6.8. However, this is only for a small portion of loans and doesn’t address the large mostly unaffordable monthly payments that unemployed or underemployed students are facing.

However, real reforms are on the horizon or already exist that are not being publicized at all. I won’t go into great detail about these programs because mis-application of the available programs by students seeking to reduce their student loan burden could cause further damage. This is too big of deal to screw up. Many options are a one time only thing, and the wrong step can cause an expensive default.

It is very important to consult with an attorney experienced in student loan law. Up until now, there really hasn’t been much available legal advice in this area except for the standard line: you can’t discharge student loans in a bankruptcy without an undue hardship. I can’t count the hundreds of times I myself have said that. However, I have recently learned that there are things a student can do OUTSIDE of bankruptcy to manage or survive their student loan debt. Please see our Student Loan Survival Center for more information.

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What if I’ve co-signed my children’s student loan debt that is now in default?

Here in Tampa, Florida, I just read an outrageous story today in Nation of Change that exemplifies the problems in the world of student loans. Basically, shortly out of college, this man’s son was killed in a car accident. Most of his student loans were private and co-signed by his father who makes $21,000 a year as a gardener. Private loans survive someone’s disability or death.

The debt (over six figures) has changed hands many times and has been wrung through the Wall Street securitization process. He doesn’t know the exact amount or who is owed. But the debt collectors are all over this poor guy.

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graduates student loan debt.jpgDebt collectors excel at taking advantage of student loan borrowers by misrepresenting the law and options available to borrowers.

Common violations we see in Florida are:

1) Misrepresenting that the collector may use federal powers such as Social Security offsets or administrative garnishment of wages;

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