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Christie_1We also would want to take advantage of any other programs out there such as the IDR recount going on right now. Normally, we walk borrowers through the process for that during our strategy session and get it done then. The IDR recount is huge – it’s allowing forgiveness for people with older loans, counting extended forbearances and other things to get to 20/25 yrs – the only requirement is that a borrower consolidate to Direct loans which would allow re-dating all of the loans for IDR purposes to the earliest repayment date of ANY loan contained with the consolidations. It works really well especially for those with older loans, or gaps between education. For instance someone who went to grad school during covid, can consolidate now with their undergrad loans perhaps in 1990s and their IDR start date for ALL loans would be six months after graduation from undergrad. Borrowers could obtain a full forgiveness of even the grad loans as soon as the consolidation finishes and the loan is reviewed under the IDR recount.
For our attorney followers in the Middle District Tampa Division, I’m speaking at the TBBBA Sept consumer luncheon September 12 about student loans including this IDR recount if you’d like to listen in.
For borrowers, we offer strategy sessions where we go over your specific loans and figure out your options, often doing it right then with you on the phone or via shared screen on Zoom.
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Christie_1For people granted TPD, who are also eligible for IDR AUDIT Forgiveness, Dept. is moving TPD people from TPD forgiveness to IDR Audit forgiveness.  While there is no 3 year income monitoring on TPD anymore, there still is a three year monitoring on TPD for things such as returning to school so moving them to IDR Audit forgiveness will give these people faster forgiveness.  

Forgiveness before 12/31/25 is very good!  That’s when the stimulus bill expires allowing for federal tax waiver on any student loan forgiveness (private or federal).  It’s also when the TPD discharge provision providing for tax free forgiveness has to be re-funded by Congress.  So forgiveness now is Great News!  Even if the IDR Waiver is somehow stopped due to someone filing a court case down the road, it is unlikely to unravel a forgiven loan.  Rather it would most likely stop anyone in the future from obtaining forgiveness.  Of course, someone who has already consolidated their loans for the IDR recount can argue that they relied upon the program’s rules when doing the consolidation, and that laches (a fancy legal term for delay) prevents the creditor from asserting that now.

This information will be processed soon.

Your Discharge Will Be Reprocessed as IDR Forgiveness
Account Number: XXXXX
Dear XXXX,

 

The U.S. Department of Education (the Department) discharged your Federal Family Education Loan (FFEL) Program and/or William D. Ford Federal Direct Loan (Direct Loan) Program loan(s) on the basis of your total and permanent disability (TPD) as of 05/01/2023. The Department has since reversed your TPD discharge because all of your loan(s) will instead be discharged on the basis of your income-driven repayment (IDR) forgiveness. We use the terms “you” and “your” to refer to the disabled individual who applied for discharge, XXXXX.

 

Because your loan(s) have been forgiven as they have accumulated time in repayment of at least 20 or 25 years, we, as your Total and Permanent Disability servicer, will transfer your loan(s) to Nelnet, who will work with you on the income-driven repayment (IDR) forgiveness. Nelnet will inform you by mail once the income-driven repayment (IDR) forgiveness is complete and which loans were included.

 

Please note that you will no longer remain in the TPD discharge program or be subject to the TPD three-year post-discharge monitoring period.
For additional information:
Please visit DisabilityDischarge.com or email us at DisabilityInformation@Nelnet.net. You can also contact us at 888.303.7818.

 

If you have questions about your income-driven repayment (IDR) forgiveness, call Nelnet at 888.486.4722 from 8 a.m. to 9 p.m. (Eastern) Monday, 8 a.m. to 8 p.m. Tuesday and Wednesday, and 8 a.m. to 6 p.m. Thursday and Friday. You may send mail to Nelnet, Attn: Claims, P.O. Box 82505, Lincoln, NE 68501-2505.

 
Sincerely,
Your Total and Permanent Disability Servicer
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arkovich_law-narrowThe Supreme Court decision of United Student Aid Funds v. Espinosa (2010) 559 U.S. 260 is usually cited for the proposition that a court may not make an order on whether student debt is discharged without an adversary proceeding.

In USAF v. Espinosa, the issue was whether confirmation of a chapter 13 plan which provided for discharge of the student loan debt could be reversed. Rafael “Ted” Cruz lost in his quest to convince the Supreme Court to void the plan by means of FRCP Rule 60(b)(4).

But bankruptcy judges and practitioners were cautioned to always use an adversary proceeding for determinations on whether educational debt is discharged by § 523(a)(8).

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arkovich_law-narrowI just put a client together with a reporter doing a story about high interest vehicle loans.  I’ll leave the details to him and post here when the story comes out — but I did want to remind folks that there are ways out of these loans.

This particular loan was for 17.45% interest loan.  The client made low six figures in income from a very reputable employer at the time.  Why such high interest?  I’m not sure what her credit score was at the time, but the incredibly high interest rate caused her to pay $58k for a used vehicle she bought at $35k.  She made payments for approximately two years, but with a mortgage, and everyday expenses going up, she couldn’t keep it up.

Her solution was to file bankruptcy and surrender the car.  This way they couldn’t come after her for the deficiency balance.  Other things were addressed in the bankruptcy as well.  But this vehicle and the 17.45% interest rate was a leading cause.  We assist clients in obtaining other more sustainable vehicles during the bankruptcy – usually with a reasonable interest rate, warranty, sustainable payment.  We get that you need a vehicle.  You just need one that makes financial sense.

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Dear X,

Congratulations! The Biden-Harris Administration has forgiven your federal student loan(s) listed below with Nelnet in full.

This debt relief was processed as part of the Biden-Harris Administration’s one-time account adjustment because your student loan(s) have been in repayment of at least 20 or 25 years. An adjustment to your account updated the number of payments that qualify towards income-driven repayment (IDR) forgiveness. This forgiveness is effective as of 05/15/2020.

Loan Program Disbursement Date Original

Principal Banance
DIRECT CONSOL 05/15/20 $424,214.20

 

Log in to your account for details.

WHAT YOU NEED TO KNOW

Here are some important points on this IDR forgiveness:

  • Due to the American Rescue Plan Act of 2021 the balance of your loans that were forgiven is not considered taxable income for federal income tax purposes. Since state and local tax implications will vary, we recommend you contact a tax advisor for more information.

 

  • Not all your federal student loans may be represented in the table above as you may have begun repaying each loan on a different date. If you have federal student loans that are not included in the table, please continue to make payments on them. Payments are not required until after the payment pause ends at the end of August. Your first payment will be due in October 2023. To find options to help with repayment, visit studentaid.gov.

 

  • We have notified, or will notify by the end of the month, all national credit bureaus of your student loan forgiveness.

 

  • If applicable, we’ll process a refund for any payments made towards the loans listed above after the effective date of this forgiveness.

 
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For those of you facing repayment of federal student loans:  some people are asking whether SAVE is restricted to certain years of loans like PAYE.  Nope.

SAVE is open to all Direct Loan holders, except Parent PLUS.   No disbursement restrictions like PAYE.  So, as long as you have Direct Loans, without any Parent PLUS loans consolidated into them, they are eligible.  If the Parent Plus code is not picked up by your servicer through a double consolidation, it’s possible that SAVE may apply.  But with the new Parent Plus Consolidation Indicator added to the National Student Loan Database we believe that loophole may be closing or has already closed.  We have no idea if this Indicator will apply to only new consolidations or if the Department or its servicers will go back and change someone’s SAVE, PAYE, REPAYE  or IBR to ICR as Congress intended.

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Christie_1Lots of federal student loan borrowers are in the same boat now.  Have you consolidated your loans in an effort to get onto SAVE for the lowest possible payment?  But it seems to have backfired because your payment is now enormous?

Here’s some tips that you may want to be aware of:

  • A new consolidation will always provide an initial payment based upon the 10 year standard.  A client today reported her payment was to be $2,000!  She knew not to be concerned however because the SAVE review hadn’t yet occurred.  It’s a two step process:  first, consolidation, then evaluation for SAVE.
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Well folks, it appears that the Department of Education may have just closed the loophole which led to Borrowers double consolidating Parent Plus loans in an effort to get onto the more payment friendly SAVE program rather than the much higher ICR – Income Contingent Plan.  By doing a double consolidation, often the code showing an underlying loan to be a Parent Plus loan was removed.

We’ve just learned of a new entry on the NSLDS report:  the “Parent Plus Consolidation Indicator.”

Our guess is they’ve done this to close the “glitch”. It will now be readily apparent if any underlying loan within a consolidation contained a PLUS loan.

 

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Christie_1Lots of people are doing the mental gymnastics to determine whether they qualify for a Public Service Loan Forgiveness (PSLF) now under the IDR recount for Direct loans.  More time will count under this program than ever before such as extended forbearances, extended or even graduated payment plans or even just weird payments made from time to time.  Re-dating of all the loans in a Direct consolidation to the earliest date etc.  For many, this IDR recount will be a back door to PSLF after having missed the October 31, 2022 deadline to apply for PSLF.  Once 120 months are accumulated under PSLF, any remaining balance will be forgiven.  It’s 20-25 years for non-public service.

Remember though, any months of employment before October 2007 won’t count toward public service.  PSLF was instituted in October 2007 and didn’t even exist before then.

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