Boston Student Loan Lawyer

Law Office of Adam S. Minsky

7 Signs of a Predatory “Student Loan Relief” Company

| Articles Current Events Income-Based Repayment Income-Driven Repayment Loan Forgiveness Pay-As-You-Earn

I was recently interviewed by MarketWatch about the rise in student loan “relief” and “assistance” companies that purport to help student borrowers manage their debts, but often turn out to be predatory.

The problem, as the article points out, is that the rapid increase in student debt burdens, combined with the dearth of resources to assist borrowers, has resulted in an explosion of various companies promising (sometimes falsely) to help student loan borrowers manage, or even eliminate, their debts.

Many of these operations have recently gotten into big trouble because of their predatory nature. State attorneys general have been filing suit against some of the companies that have been essentially functioning as high-priced student loan document processing mills, blindly performing routine tasks such as federal loan consolidation and repayment plan selection, without providing any relevant counseling or competent advice, and often messing up. Other companies, such as GL Advisor, have been cited for poor customer service and actively defrauding their clients and investors. Still other companies are simply scammers: shell corporations set up to take as much money from student loan borrowers as possible, while providing minimum (if any) real services.

All that said, there are also legitimate people out there providing real, valuable assistance to borrowers.

So how can you tell the difference between a student loan assistance firm that may be legitimate, and one that may be predatory? Here are a few things to look for:Read More

Never Ever Share Your Federal PIN for Student Loans

| Articles Income-Based Repayment Income-Driven Repayment

This post is a bit of a student loan “Public Service Announcement.”

The U.S. Dept. of Education issues student borrowers a federal PIN (personal identification number) that, when used in conjunction with your other personal data, can be used to complete financial aid forms, access your federal student loan data through the Department’s online database, and apply for federal student loan programs (such as loan consolidation and income-based repayment). It’s a very handy tool to manage your federal student loans online, and it also provides an added level of security so that even if someone knows your name, social security number, and other personal identifying information, they cannot access your student loan information.

As a rule, never give your federal PIN to anyone. Not to your boyfriend or girlfriend, not to your husband or wife, not to your parent, not to your best friend. Not even to your attorney. And certainly not to any third-party who asks for it. Here’s why.Read More

My Student Loan Reform Predictions

| Default Pay-As-You-Earn Policy & Reform Private Student Loans

It’s 2015, and the new Republican Congress will be taking up legislative business soon. Some people think that the discord and dysfunction in Washington is here to stay, since we had a divided government for several years already (and the Republican takeover of the Senate doesn’t change that). Others think that the President will be more willing to compromise on certain issues now, because he wants to leave behind a legacy in his final two years in office.

There are “whispers” of rather major student loan reforms that I have been hearing about lately. Many are simply rumors or speculation. But undoubtedly, student loans continue to be a major national issue, and they’re not going away. Both Republicans and Democrats recognize that the system isn’t working, and both parties have ideas about how to fix it (or at least mend it). I think we are going to see some big changes in the coming year or two in certain areas, and no movement in others.

Here’s my speculation (and that’s all this is- speculation):

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Insourcing Collections: Good Idea or Bad Idea?

| Default Pay-As-You-Earn Policy & Reform Private Student Loans

As some of you may know, the current system that the U.S. Department of Education uses to collect on defaulted federal student loans is… messy. To put it nicely.

The Dept. of Education contracts with over 20 individual private third-party debt collection agencies to pursue defaulted federal student loan borrowers. Individual student loan accounts are often shuffled from agency to agency, leaving borrowers confused and unsure about who is actually handling their student loan. The government has paid these agencies billions of dollars over the past several years, but numerous reports have chastised the Department for shoddy oversight, allowing abuses and violations of the law to run rampant. The Department continues to contract with agencies accused of serious, systematic violations of the law. Meanwhile, default rates are only getting worse.

Something clearly isn’t working.

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Why Parent PLUS Loans Are the WORST

| Default Income-Based Repayment Pay-As-You-Earn

When people talk to me about my student loan law practice, most will assume that my clients are all struggling 20-somethings with overwhelming loads of student loan debt. People are always surprised when I tell them that I actually have many clients who are parents struggling with the debts that they incurred to pay for their child’s education. It is natural and understandable that parents want to pay for their kids’ educations. But many do not realize the dangers of parent debt until it’s too late.

The most common type of parent loan is a Parent PLUS loan. A Parent PLUS loan is a federal loan taken on entirely by the parent; the student has no legal responsibility, only the parent. Over $10 billion in Parent PLUS loans are disbursed every year. And they are some of the worst student loans out there. Here’s why:

  • Parent PLUS loans have very high interest rates, the highest among any type of federal student loan. Right now, interest rates for Parent PLUS loans are 7.21%. However, it is common for loans disbursed in prior years to have interest rates in excess of 8%, and under current law, they may rise as high as 10.5% in the coming years. That’s $1,050 in interest per year for every $10,000 disbursement.
  • Parent PLUS loans incur origination fees, which can be over 4% of the disbursed loan balance. Combined with the high interest rate, this makes PLUS loans exceptionally expensive.
  • Parent PLUS loans are not eligible for income-driven repayment, such as Income-Based Repayment (IBR) or Pay-As-You-Earn (PAYE). This is particularly problematic for parents who take out large Parent PLUS loans and intend to retire in the relatively near future. That may no longer be possible with huge monthly loan bills. (Parent PLUS loans can be repaid under Income-Contingent Repayment (ICR), an older and less-favorable income-driven option, under certain circumstances, but this can still be tough for many parents).
  • Parent PLUS loans are federal student loans, which means they are subject to the draconian collection powers of the federal government if the loan goes into default. This includes wage garnishment, tax refund interception, and, if the parent is disabled or retired, the offset of Social Security benefits. There is no statute of limitations on the collection of this type of debt, meaning it will follow the parent to the grave.

So if you are a parent and you want to help pay for your child’s college education, it’s advisable to do this through a long-term savings plan. Relying on Parent PLUS loans may be a decision you live to regret.

REMINDER: Sallie Mae to Become Navient

| Pay-As-You-Earn Private Student Loans

Got Sallie Mae student loans? Read on.

I blogged about this when this was first announced, but it is a good time to remind everyone that Sallie Mae has split into two companies: Sallie Mae and Navient. This fall, Sallie Mae will be transferring the servicing and billing operations of federal student loans and certain private student loans to Navient. So if you have been dealing with Sallie Mae, you will likely soon be dealing with Navient instead.

This is not quite the same thing as one company selling your loans to another company. Rather, the servicing arm of Sallie Mae is branching off, becoming a separate company, and changing its name to Navient. Nevertheless, changes to student loan servicing can be a confusing and scary process if it comes as a surprise.

If you have student loans through Sallie Mae, what does this mean for you?

  • You should receive an email or letter from Sallie Mae notifying you of any changes. If you do not receive an email or letter, you should contact Sallie Mae directly to confirm that your loans will be through Navient.
  • Sallie Mae says that if you are enrolled in auto-debit, your payments should continue to be automatically withdrawn from your bank account. If I were you, I would monitor your bank account to make sure this is actually the case. If a payment is not withdrawn, contact Sallie Mae or Navient.
  • If you make your payments manually each month via a check, Sallie Mae requests that you change the payee to Navient, but all other information can stay the same. Before making any changes to your billing practices, I suggest you contact Sallie Mae/Navient to confirm the details.
  • Online payments will be made to Navient (not Sallie Mae) via Navient.com.

Want more information from Sallie Mae directly? Visit SallieMae.com/future, or contact the company by phone.

The Six Most Common Student Loans, Ranked

| Default Income-Based Repayment Loan Forgiveness Private Student Loans

So, you’ve got a student loan. Don’t we all? One could argue that they are all pretty terrible, and you would not be totally wrong about that. However, in my opinion, some are better than others. If you are looking for some basic financial aid counseling, here is my own ranking of the most common student loans, least-worst to most-worst:

  1. Federal Perkins Loans. These are low-interest federal student loans available to both undergraduates and graduates who have significant financial need. The funds for Perkins loans are provided by the federal government to participating colleges and universities, and then leant by the schools to students directly. I like Perkins loans because they have low, fixed interest rates at 5% and relatively small loan balances. Interest accrual is deferred while you are enrolled in school, and they have fairly generous forgiveness and cancellation options if you work in the right profession. There are two major downsides, however: these loans are not eligible for Income-Based Repayment (IBR), and if you default on them, resolving the defaults can be quite costly, and might even involve litigation.
  2. Federal Subsidized Stafford Loans. These are next on my list and are probably the most common student loans out there. They are available to undergraduate, graduate, and professional students and have relatively low interest rates. The government waives interest accrual during school enrollment, which is a huge benefit.
  3. Federal Unsubsidized Stafford Loans. These loans are the Subsidized Stafford loan’s evil twin. Although they also tend to have relatively low interest rates and are widely available, they are typically disbursed in larger amounts, and the government does not waive interest during school enrollment or other deferment periods. This makes these loans significantly more costly for students than subsidized loans, given that thousands of dollars of interest can accrue by the time you graduate.
  4. Federal Graduate PLUS Loans. These loans are available only to graduate and professional students. They have much higher interest rates than most other federal loans and they can also have origination fees. Students can borrow up to the cost of attendance, but these loans are not subsidized, which means a huge amount of interest can accrue during school enrollment and other deferment periods. This can be quite costly.
  5. Federal Parent PLUS Loans. These are the worst federal student loans, in my opinion. These loans are only available to parents for the benefit of their child’s education. Like Graduate PLUS loans, these loans have very high interest rates, origination fees, high balance limits, and they are not subsidized. To make matters even worse, these loans are not eligible for Income-Based Repayment (IBR), which can cause a major hardship (although it may be possible to place these loans on a less-favorable income-driven plan in certain circumstances).
  6. Private Loans. If you follow my posts, this should come as no surprise to you. Private student loans typically have high interest rates, high origination fees, and few avenues for repayment flexibility or hardship relief. Private loans should be avoided at all costs, in my opinion.