A stunning new report has just come out describing ongoing and systemwide failures by federal student loan servicing companies to manage student loan accounts. The report blames both the servicers themselves and the U.S. Department of Education for its failure to hold these servicing companies accountable for their actions. Remarkably, the report was issued and released by the U.S. Department of Education itself.Read More
After years of working with student loan borrowers, I can safely say that one of my clients’ biggest fears is that lenders will garnish their wages – seizing money directly from their paychecks. This is particularly troubling for folks who are living paycheck to paycheck. Wage garnishment can represent a very real financial danger.
Is this a legitimate fear? Yes. Student loan wage garnishment can and does happen, all the time. But as with so many issues when it comes to student loan debt, it’s a bit more complicated than just a simple “yes” or “no” answer. A lender’s ability to garnish wages – and a borrower’s rights to limit or stop it – really depend on the type of student loan, its status, and the intersection of federal and state law.Read More
Private student loans and federal student loans don’t have a lot in common, and one of the key differences is the role of cosigners. The vast majority of federal student loans don’t have a cosigner (the exception to that rule are spousal consolidation loans – which haven’t been issued in over a decade – and certain federal PLUS loans in rare circumstances). For private loans, however, cosigners are ubiquitous, and often required.
A lot of my clients over the years have been cosigners, and some of them didn’t fully understand what they were getting into when they agreed to cosign a student loan for their friend or family member. If they had, they could have avoided years of stress and financial trouble. If you’re thinking about cosigning for someone else’s student loan, make sure you understand the potential consequences – before you sign your name on that contract. Read More
A “statute of limitations” is a period of time within which someone must bring a legal claim or file a lawsuit in court. These time periods are set by law, and they vary in length depending on the subject matter. There are statutes of limitations for charging someone with a crime, for suing someone for breaching a contract, and for seeking recovery from someone who caused an injury. If someone brings a legal action or files a lawsuit after the statute of limitations has run (meaning, after the requisite time period has passed), the action could be dismissed, and then they wouldn’t be able to prevail on their claims.
In the student loan context, it’s usually student loan creditors who are suing borrowers to collect on defaulted student loans. In some cases, if the creditor waits too long, collection of the debt could be “time-barred” by the statute of limitations. If the borrower raises this as a legal defense in response to the lawsuit and prevails, the creditor’s lawsuit would be dismissed, and the debt would effectively become uncollectible (although it doesn’t necessarily just cease to exist).
But when it comes to student loan collections, understanding the statute of limitations can be challenging. How long does a lender have to sue someone to collect on student debt? The length of that limitations period – and whether there even is one – depends on a number of key elements including the type of student loan, the status of that loan, federal law, state law, and the loan’s history. It can be complicated; let’s break it down.Read More
Student loan refinancing has been a hot topic during the past several years. Trendy new companies – like SoFi, Earnest, LendKey, and CommonBond – have been offering slick refinancing products to entice borrowers. Major banks and credit unions have also jumped in, sometimes offering tantalizingly low interest rates. The best loan products are generally marketed to doctors, lawyers, and other high-income professionals who tend to have large amounts of federal student loan debt, but great earning potential and excellent credit.
A lower interest rate is often the central reason to explore refinancing; after all, a lower interest rate will save you money in the long run, and could lower your monthly payments, as well. But that’s not the only thing borrowers should be considering. Turning federal student loans into private student loans through refinancing can have major, irreversible consequences, and it’s important to know what you might be giving up in exchange for that lower rate.Read More
The Trump administration released a budget blueprint yesterday, outlining how it wants Congress to address government spending. The proposal calls for sweeping changes to student loan programs – reforms that would have a major national impact. Here are some specifics:
- Public Service Loan Forgiveness (PSLF) would be eliminated.
- Current Income-Driven Repayment (IDR) programs like Income Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE) would be eliminated, and a new IDR plan would take its place. This plan would have payment amounts somewhere between PAYE/REPAYE and IBR, with a shorter repayment term (15 years) for undergrads and a longer term (30 years) for grad students.
- Subsidized federal loans would be eliminated, meaning all federal loans would accrue interest at all times, even during periods of in-school deferments.
During the past few months, I have seen a fairly rapid increase in new collections lawsuits being filed against student loan borrowers in Massachusetts for defaulted student loans that were previously held by Sallie Mae and/or Navient. This is noteworthy because in my experience, these loans had been predominantly placed with non-attorney third-party debt collection agencies, or out-of-state collection law firms that rarely filed suit. This is a major shift.Read More
Getting sued on a defaulted student loan can be overwhelming and terrifying. In my experience, most people who are brought to court by student loan debt collectors have never been sued before, so they don’t know what to expect. And dealing with debt collectors, attorneys, court personnel, and judges can be intimidating and embarrassing.
However, being sued does not mean all is lost. The initiation of a lawsuit is the beginning of a legal process, not the end. You have rights, and you may have some options. The lawsuit could end in any number of ways ranging from a dismissal of the case, to some sort of negotiated agreement, to a judgment against you. While no one (not even me) could tell you with any certainty what the final outcome of a student loan lawsuit may be, I can tell you that doing certain things may ensure that you lose.Read More
It’s time to start liberating yourself from your student loan debt.
We’ve got a true student loan crisis – there’s over $1.4 trillion in student debt, and that number keeps on rising. The average undergrad leaves college with nearly $40,000 in student loans, and over 7 in 10 recent graduates are in the red. Twenty-five percent of student loan borrowers are in distress – meaning they are in a suspended status, behind in payments, or in default. And things only seem to be getting worse.
With this as a backdrop, it’s easy to become paralyzed. The loan balance figures and payment amounts can be distressing. Figuring our your repayment options can be overwhelming. It doesn’t help that loan servicers often provide incorrect or misleading information. It’s easy to feel like you’re lost.
But ignoring the problem isn’t going to make it go away; student loans don’t just disappear. Even if there are only imperfect solutions out there right now, it’s important to take stock of your situation, figure out what your options are, and optimize your student loan management approach. Only then can you start getting on the path to student debt freedom. Here’s how you can get started.Read More
This is a developing story.
The federal Consumer Financial Protection Bureau (CFPB) has reached a major enforcement agreement with National Collegiate Student Loan Trust, the holder of hundreds of thousands of student loan accounts, about its debt collection practices. This agreement has the potential to impact thousands of student loan borrowers across the country.
National Collegiate Trust (“NCT”) is a collection of individual trust entities that purchased hundreds of thousands of private student loan accounts from commercial lenders (mostly banks) through securitization. In other words, banks bundled many private student loan accounts together, and then sold the bundles to NCT. When student loan borrowers with NCT-purchased accounts became unable to pay, NCT aggressively pursued these borrowers through private debt collectors and litigation.Read More