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Christie_1Some of you may have heard that the May 1 deadline to consolidate older FFEL federal student loans to the newer Direct student loans for the one time account adjustment has just been extended until the end of the year.  While that initially seems like great news, why is it NOT a good idea to wait?

The health emergency ends May 11.  Once the Department of Education presents the IDR Waiver in a few days, this will give plenty of ammo for commercially held FFEL loans to sue to cancel what will likely be $200 billion of student debt to avoid forbearance months from counting and other methods of counting payments that don’t exist outside of the IDR Waiver program.  $200 billion reasons to appeal.  The appeal alone may stretch that out to the next administration.

Our advice is to consolidate before mid May to get it done, while it can be done.  Just in case.  $200 billion is a lot of money and there is growing support behind commercially held loans to not just wipe them out.

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arkovich_law-narrowSomething going around one of the listserves I monitor daily is how debt settlement or debt consolidation companies are a sham.

The facts for this one:  (by the way, the client provided a copy of the written agreement to the attorney so the fees and proposed settlement amounts were verified)

The Debtor placed $54,000 with the debt settlement company.  The estimated settlement amount was $27,500 and the debt settlement company charged a fee of $12,500.  The settlement would cost them $40,000 on a $54,000 debt.  Plus this would be a taxable forgiveness, so the Debtor would receive a 1099-C for $27,500.  Why would anyone agree to this nonsense??

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You can bounce back from bankruptcy way more quickly than you think.  For instance, debtors who file bankruptcy can qualify for an FHA loan in as few as two years, or a conventional loan four years after filing.

What about credit scores?  They can and frequently do go up right after filing.

Bankruptcy can help repair credit faster than trying to chip away at debt with predatory interest rates or judgments that last for 20 years.  Most people that we talk with, if they decide to file, they usually wished they’d pulled the trigger and gotten that “fresh start” years before.

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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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Christie_1The new DOJ Guidance to discharge federal student loans in bankruptcy creates presumptions that the inability to repay a federal student loan will persist if:

  • The debtor is 65 or older;
  • The debtor has a disability or injury impacting income potential;
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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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