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arkovich_law-narrowSo the Consumer Financial Protection Bureau is in the process of being shut down.  I expect that private consumer claims will increase thereafter when consumers realize that the government will not be taking action to protect them through the CFPB, FTC or other entity.

Many collection attorneys send out communications to a consumer’s past attorney as required by the Florida Bar.  We review them and send to our former client.  Here in the 11th Circuit which includes Florida, collection letters that are made from a collection attorney to a consumer’s attorney are actionable under the Fair Debt Collection Practices Act (“FDCPA”) per  Bishop v. Ross Earle & Bonan, P.A., 817 F.3d 1268 (11th Cir. 2016).  To defeat a standing issue, it’s important that the consumer attorney relay the letter or communication to the client though.  Sometimes charging a small fee to review the matter can also defeat a standing challenge.

So what is a communication?  We use email a lot (who doesn’t right?) and there was just a case out under the Florida Consumer Collection Practices Act, Quinn-Davis v. TrueAccord Corp, No. 1:23-cv-23590-LEIBOWITZ/REID (S.D. Fla. Nov. 20, 2024) which held that merely sending an email does not constitute a “communication” unless it is actually opened and read.  This will reduce the viability of class actions based solely on information sitting in someone’s inbox.

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arkovich_law-narrowMore and more signs are pointing toward bankruptcy being the best platform going forward to address student loans.  Why?

  • We can often discharge private and even federal student loans (if either an undue hardship exists or it’s an unqualified education loan);
  • We can cure a default of a federal student loan (where consolidation or rehab opportunities no longer available);
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Christie_1So I’m hearing that President Trump is moving the federal student loan system over to the Small Business Administration (“SBA”).  I’m also hearing today that they are cutting the SBA’s workforce by 40%.  Interesting.  I admit, I was expecting big changes, but I didn’t really have this on the bingo card.

I have always been an advocate of looking at the ROI, return on investment, when deciding how much to pay for what degree.  I imagine this change will only emphasize this.  I’d hate to get a degree that resulted in unemployment or underemployment and then default on an SBA loan.  The SBA has a reputation of playing hardball when it comes to negotiation of past due balances.

At least the SBA has a system in place for loans and the collections of loans.  How they would incorporate all the Income Driven Plans and the other oddities and complexities of the federal system I really don’t know.  Maybe they won’t or they will do only that which was passed by Congress like IBR and PSLF.  I do know there was a report out by the Inspector General’s office a few years back that 62% of the time the dozen or so federal student loan servicers would do whatever wrong.  So the bar is pretty low to do it correctly.  I used to say that if I cited the wrong law or something 62% of the time, the Florida Bar would probably ensure my disbarment.

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Christie_1President Trump signed an executive order titled Restoring Public Service Loan Forgiveness a couple days ago.  While this should have to go through the normal channel of rulemaking which will take approximately one year, it appears that PSLF will be excluded for non-profits which engage in a “substantial illegal purpose” including:

(a)  aiding or abetting violations of 8 U.S.C. 1325 or other Federal immigration laws;

(b)  supporting terrorism, including by facilitating funding to, or the operations of, cartels designated as Foreign Terrorist Organizations consistent with 8 U.S.C. 1189, or by engaging in violence for the purpose of obstructing or influencing Federal Government policy;

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Christie_1As I blogged about a couple weeks ago, you can check the amount of IDR time you have been credited for on studentaid.gov now.  If for any reason it is not there, a private company has released the VIN Foundation Download My IDR Progress browser extension for Chrome.  It allows a borrower to grab a copy of their IDR payment history showing the qualifying vs. ineligible payments.

Yesterday the new Secretary of Education, Linda McMahon, was confirmed so perhaps we will learn of some concrete plans for the Department of Education shortly.

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Today’s webinar went off without a hitch – link here.  I tried to update our fellow attorneys on what we are seeing or hearing out there in our student loan world.  Lots of changes, practically to everything in fact.

Student Loan Essentials:  Updates, Strategies, and Advocacy for Legal Aid Practitioners.  It’s one hour and free.

This is approved for Florida Bar 1.0 General CLE credit – see link for specifics.

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arkovich_law-narrowI read today in the Pomp Letter that the average credit card balance is $21,000.  And the average interest rate is 28.6%.  Just wow.  In 30 months, the debt would double.  In our bankruptcy practice here in Tampa, Florida, we are regularly seeing people with 100k of credit card debt.

Many people are making only minimum payments of their bills – 10.75% according to a new report from the Philadelphia Federal Reserve (reviewing data for the third quarter of 2024.

I don’t know how you get out of that – unless you file bankruptcy.  Or have some kind of windfall such as a much better paying new job, inheritance or something.  Even with a much better paying new job, you would have to dedicate funds quickly to pay down that debt.  Back during the foreclosure crisis we ran into a lot of people who thought that they could easily catch up once they started working again.  Didn’t happen.  Even a $20k increase in pay is not that much paycheck to paycheck.  With interest so high, the balances got even larger or remained the same.

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Christie_1So the big news in the world of student loans is that the online system has once again been shut down for consolidations and IDR applications – as of Friday, Feb 21.  This is likely due to the 8th Circuit expanding its stay to stop all forgiveness under PAYE and ICR.  For now, someone’s best bet for forgiveness is to get onto IBR – Income Based Repayment.  IBR was Congressionally passed in 2009 and does not appear to be going anywhere.  It’s a 25 year program that allows for full forgiveness of any remaining balance once 25 years of IBR credits is obtained.

The 8th Circuit also halted the IDR Recount. While we don’t believe that any loans previously forgiven will be reinstated, we really don’t know what will happen to those pending loans benefitting from the IDR Recount – but still have months or years to go.  The best we can say is to keep copies and screenshots of anything to do with the IDR Recount.  You may need this one day.

So why is the consolidation button greyed out?  Both FFEL loans and Direct Loans are eligible for IBR.  So a consolidation isn’t necessary for IBR.  If the government is discouraging Double Consolidation for Parent Plus loans, PAYE, ICR and the IDR Recount, there really isn’t a reason to consolidate older federal student loans under the FFEL system to the newer Direct loans.  Also the government has to pay the private originators of a FFEL loan upon its consolidation to a Direct loan.  It doesn’t want to do that.

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Christie_1A post on Theresa Sweet’s [Plaintiff in Sweet v. Cardona’s class action BDTR lawsuit] Facebook page says the majority of workers reviewing BDTR claims have been laid off and majority of Ombudsman staff have been fired.

For several months now, we have been of the opinion that while filing a Borrower Defense to Repayment application is free and available, we do not expect to see any discharges any time soon for new applications that are filed after the Cardona class action settlement.  You may expect to see a forbearance due to the filing, but use it more as a place marker to give you time to explore and take advantage of other ways to deal with your student loans.

Please see our last blog re: documents/downloads you should do now to keep track of your records.

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Christie_1While it is unlikely that the Trump administration will close the Department of Education anytime soon, it is clear that ED will be dismantled in some form over the next few months to years.  Many of its functions may discontinue or be passed to other federal or even state agencies.

It may be important to download information now while it is easily accessible to save time in the future.  You may need to prove loan balances, payments and the like to protect yourself in case of inaccuracies with a systemic change.  We would suggest that you download your StudentAid.gov records (NSLDS file, dashboard screenshot, PSLF and IDR tracking details), and your loan servicer records (payment histories, key notices/letters).

Keep this information just in case.

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