Articles Posted in Student loans

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Christie_1The deadline to consolidate FFEL loans to Direct loans under the IDR Waiver program requiring a one time account adjustment has been moved from May 1 to the end of the year.  This takes some pressure off for sure — but it’s still a good thing to do now rather than later.

I have some questions about how qualifying payment counts will be credited now that the IDR Account Adjustment period has been extended:

  1. Under the Account Adjustment rules, if you consolidate loans with different payment histories, the longest history is applied to the entire consolidated balance.
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Here’s a copy of a redacted letter our client received today – her loan is now toast!  We should expect many many more in the next few days…

Borrower Defense Application School: Argosy University

Approval of Your Borrower Defense Case Under Exhibit C of the Sweet v. Cardona Settlement

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ABIReminder, ABI’s presentation for the new DOJ bankruptcy attestation discharge process is today at 3:00 p.m., here’s the link:  https://abi.org/events/student-loans-in-2023-is-bankruptcy-finally-a-viable-option?utm_source=social&utm_medium=banner&utm_campaign=abiLIVE_studentloan23&mibextid=unz460

We are presenting along with Chad VanHorn from South Florida to explain how to file these cases, and give practical tips along the way!  I’m sure the ABI will have a recording of this national webinar available on their website if you can’t make it .

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Christie_1I’m jointly presenting a webinar this week for the ABI on the new DOJ procedures to allow the discharge of federal student loans.  The intent of the DOJ in reviewing student loans for discharge is to help create a process that allows:

  • Clarity, transparency and consistency
  • Reduce burdens by simplifying the fact gathering process through a form Attestation
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Christie_1Turns out yes.  I just read a pretty cool story in the New Yorker about a 91 year old lady, perfectly healthy, obtained a full forgiveness under a “compromise and settlement authority” provided for under the Higher Education Act of 1965.  Although it is a last ditch effort as there are many other ways to obtain forgiveness now.

There is an easier way.  The IDR Waiver program will allow for someone like this to consolidate their older federal loans to Direct Loans (provided this is done before May 1, 2023), and after 20 years of repayment all undergrad loans would be forgiven.  25 years for grad loans.  I believe this lady would have qualified for that as well – although I don’t have access to her loan history to know for certain.

But if you miss that May 1 deadline, or the IDR Waiver, TPD, BDTR or PSLF don’t fit your circumstances for some reason, then this is a way out – used mostly when the Department of Education believes it would be more costly to collect the loan, or when it cannot locate the original promissory note.

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Christie_1What is the IDR Waiver?

The Short Version:  if you have an older FFEL loan, even a prior FFEL Consolidation Loan, make sure to consolidate this to a newer Direct Loan asap if you want all of the relief this program allows (contact us if you have any doubts or concerns about losing prior IDR time, interest rate increases, effects on PSLF etc.)  While the deadline to do so is May 1, the servicers are busy and it doesn’t pay to wait until the deadline!!

For many years, student loan servicers steered struggling borrowers into forbearance instead of guiding them toward income driven repayment.  Income driven payment generally caps payments at no more than 10 percent of income, and ultimately leads to loan forgiveness after 20 or 25 years of repayment.  Many of these loan servicers also failed to accurately track borrowers’ progress toward forgiveness.  Some of these companies had no system for tracking payments and identifying when borrowers would qualify for forgiveness.

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Christie_1The Brunner standard is a legal test used in certain circumstances to determine whether a borrower’s federal student loans can be discharged in bankruptcy. The test was established by the U.S. Supreme Court in the case of Brunner v. New York State Higher Education Services Corp. (1987).

The Brunner test has three prongs:

  1. Hardship: The borrower must prove that repaying the loans would impose an undue hardship on the borrower and their dependents.
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Christie_1There are several ways to discharge federal student loans, including:

  1. Total and Permanent Disability (TPD) discharge: If you are completely and permanently disabled, you may be eligible for TPD discharge.
  2. Death discharge: If the borrower of a federal student loan dies, the loan may be discharged.
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Christie_1The Borrower Defense to Repayment (BDTR) program has undergone so many changes over the past decade it’s hard to keep track.

Notably, I wanted to set the record straight for those who may be receiving weird messages about their pending BDTR apps.

Only the 2019 Borrower Defense Rule imposed a statute of limitations on borrowers, and that rule only applied to loans that were issued after July 1, 2020– it does not apply to most of the BDTR applications. Unfortunately, when ED created its borrower defense application, it used a single application for all three standards without adequately differentiating what warnings would be shown to borrowers applying under different standards. As a result, borrowers get misleading warnings that don’t actually apply to them at all. There are no limitations periods for the 2016 or 1994 Rules (although there are some restrictions on when borrowers can receive a refund of amounts paid towards the loans implicated by the borrower defense application).

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