Boston Student Loan Lawyer

Law Office of Adam S. Minsky

Zero-Interest Student Loans Offered in Rhode Island

| Policy & Reform

I was scouring the internet for some piece of good student-loan-related news to balance out all the gloom and doom that’s been dominating the airwaves and 24-hour news cycles. I came across this, and it’s definitely worth sharing.

Republican-turned-Independent Lincoln Chafee, Governor of Rhode Island, has introduced a zero-interest student loan program for nursing students who agree to work in the state after they graduate. The state expects to require 6,500 nurses by 2020, and the program is being used as an incentive to keep nurses working in Rhode Island after they graduate.

My sense is that this is an example of how student loan programs really can be used to further people’s education in a positive, productive, and fair way, and get them employed in stable, well-paying careers after they graduate. Students get to finance their program up-front with little-to-no borrowing costs and nearly-guaranteed employment, while the state gets to keep young talent within its borders. Sounds like a great deal to me. The program is being offered by the Rhode Island Student Loan Authority. Read more here, and also check out their loan forgiveness program for primary care providers.

Debt Ceiling Deal Avoids Default, But Shoves Student Borrowers Under the Bus

| Current Events Default

So our federal government has come up with a plan that avoids a national default on its financial obligations. Some people are cheering. If you’re a student loan borrower, though, not so much. In the name of deficit reduction, Congress has decided to eliminate subsidized federal loans for graduate students. While in school, the federal government has traditionally paid the interest for federal loans, providing an incentive to stay in school while keeping the actual cost of these student loans relatively low while you’re earning your degree. With interest subsidies eliminated, student borrowers will either have to pay the interest while they are full-time students, or have the interest added back to the loan principle. Either way, this drastically increases the cost of borrowing. Congress also eliminated a special credit for student borrowers who pay their bills on time.

All in all, the changes that are being rushed through Congress to the President’s desk will shift over $18 billion in borrowing costs to students over the next decade. Read more here: http://money.cnn.com/

U.S. Dept. of Justice Joins 11 States in Lawsuit Against For-Profit College Chain

| Current Events

I recently posted an article about investigations into the practices of for-profit schools. The U.S. Dept. of Education recently passed new regulations designed to protect students from some of the abusive practices of these schools. While all of this has been going on, the U.S. Department of Justice has joined 11 states in a lawsuit against Educational Management Corp., one of the largest for-profit college chains in the country.

The lawsuit alleges that the company, which receives up to 90% of its revenues from student loans, illegally paid school recruiters based on the number of students that they enrolled. The suit further claims that the company operates almost entirely to recruit students, often rewarding recruiters with lavish gifts and trips to exotic places, without devoting adequate resources to provide students with academic and vocational skills to help them find a career. Not surprisingly, student loan default rates at these types of schools are astonishingly high.

Read more about the suit here…

U.S. Senators Dick Durban, Sheldon Whitehouse, and Al Franken Introduce Legislation to Make Private Student Loans Dischargeable in Bankruptcy

| Policy & Reform

If you’ve read my previous posts about bankruptcy and private student loans, you’ll remember that one of the most significant problems with private student loans is that with rare exception, they cannot be discharged in bankruptcy. While many other types of debt (such as credit card debt) can be eliminated through bankruptcy if you are ultimately unable to pay, you will probably still be obligated to pay back your private student loans even if you successfully declare bankruptcy. These loans can thus haunt student borrowers for their entire lives (or even beyond, but that’s another story).

This wasn’t always the case. Before 2005, it was easier for student loan borrowers to include private student loans in bankruptcy discharges. Bankruptcy reform legislation, however, passed by Congress in 2005 and signed by President George W. Bush, drastically changed bankruptcy law’s treatment of private student loans. Suddenly, student loans became one of the most secure forms of debt for commercial lenders. U.S. Senators Dick Durban (D-IL), Sheldon Whitehouse (D-RI) and Al Franken (D-MN) have recently introduced legislation to restore bankruptcy protections for private student loan borrowers.

The bill is supported by other members of Congress as well as over 35 groups and organizations including the American Council on Education and the National Consumer Law Center. But given today’s political climate and our divided government, does this bill have any chance of passing? Read more here:http://durbin.senate.gov/public/index.cfm/pressreleases?ID=f7c84e6c-f2ac-4ee5-b466-f461b0f0de8a

New Regulations Protect Student Borrowers from For-Profit Colleges

| Policy & Reform

The U.S. Department of Education released new regulations last week that increase federal oversight of for-profit colleges (e.g., University of Phoenix, DeVry University, ITT Tech) and seek to protect student loan borrowers. This follows increasing scrutiny from lawmakers about the practices of for-profit colleges.

For-profit colleges spent about $8 million in federal lobbying last year, and they fought hard to stop these regulations. The regulations, in part, provide that for-profit colleges must pass a three-part test in order to be eligible to receive federal student loans and grants. Student debt advocates applauded these regulations, but many think they do not go nearly far enough to protect student borrowers. What do you think?

Read more here: http://www.politico.com/news/stories/0611/56077.html

Massachusetts Attorney General Investigates For-Profit Colleges

| Current Events

For-profit colleges have been coming under increasing scrutiny over the past couple of years. These schools have been accused of enticing students through misleading recruitment tactics, saddling them with enormous amounts of student loans, and then sending them off into the world with a degree that is near-worthless. Student loan default rates at for-profit colleges are astonishingly high, yet these institutions earn 90% or more of their revenue from federal and private student loans. Now, state attorney generals are investigating. Take a look at this Boston Globe article about what Massachusetts Attorney General Martha Coakley is doing about for-profit colleges:

http://www.boston.com/news/local/massachusetts/articles/2011/05/12/

Student Debt Outpaces Credit Card Debt For the First Time in History

| Current Events

Student loan debt outpaced credit card debt for the first time last year and is likely to top a trillion dollars this year as more students go to college and a growing share borrow money to do so.

While many economists say student debt should be seen in a more favorable light, the rising loan bills nevertheless mean that many graduates will be paying them for a longer time.

Read More

Total Student Debt at $896 Billion, 2/3 of Student Borrowers Unable To Repay On Time

| Current Events

Loan Study on Students Goes Beyond Default Rates
By Tamar Lewin, New York Times

For each student who defaults on a loan, at least two more fall behind in payments on their student debt, a new study has found.

The Institute for Higher Education Policy, a nonprofit organization, said in a report that two out of five student loan borrowers were delinquent at some point in the first five years after they started repaying their loans.

Almost a quarter of the borrowers used an option to postpone payments to avoid delinquency…. Read more at: http://www.nytimes.com/