A “forbearance” allows student loan borrowers to temporarily postpone payments on their student loans. It’s a great – and important – option available to people who cannot afford their regular monthly payments, because it allows you to stay in good standing on your student loan and avoid default. But forbearance is not without its consequences, and when used improperly, it can cause major problems.Read More
Student Loan Tax Season Tips
Tax time is a stressful time, I know. And if you have student loans, there’s even more to think about. Here are are some tax-related tips to help guide you.
Deduct Your Student Loan Interest
Some of the student loan interest that you paid during 2016 may be tax deductible, which could lower your tax bill. Watch for a 1098-E statement issued by your student loan lenders, which will show the total amount of interest payments during 2016. Just keep in mind that the amount of this deduction is capped, and it is phased out entirely for higher income earners. Be sure to talk to your accountant to see if you’re eligible for this deduction.Read More
7 Student Loan Protections to be Thankful For
It’s been two weeks since the election, and there’s still much uncertainty about what the consequences of the election will be for student loan borrowers. While Hillary Clinton had mapped out a series of student loan reform proposals, Donald Trump has been far less specific about how he plans to deal with the $1.4 trillion in outstanding student debt.
In this time of uncertainty, and in keeping with the upcoming Thanksgiving holiday, I think it’s a good time to take stock of what we have and be grateful. If you follow this blog, you know that I frequently write about problems and deficiencies with the the student loan system. And for good reason – student loans are a mess, with inefficient servicing, damaging debt collection, and the potential for life-altering negative consequences for borrowers. There’s a lot to be angry about, and a lot that should change.
But, there are also good elements of the student loan system – programs and laws that keep people in good standing, allow them to repay their loans fairly, and protect them from abuses. As we press forward into this period of change and uncertainty, we may have to do some hard work to preserve what we have.Read More
What the Election Results Mean for Student Loan Borrowers
It’s the political upset of the century, and this election is going to be studied by analysts and political scientists for years. But the reality is clear: Donald Trump has been elected the next President of the United States, and both houses of Congress will remain firmly in Republican control for the next two (and likely four) years. This is starkly different than what was expected by the political class just 48 hours ago – a Hillary Clinton win, with the Senate likely flipping to Democratic control.
A lot is being written right now about this election, and what it might mean for the country. I have seen very little, however, on what the election might mean for student loan borrowers. I’ve been quite clear that this election was going to be hugely consequential for student loan borrowers, regardless of who won. This is certainly still true today. And now we have to start thinking about what may be next for people with student loans.
Below are my candid thoughts on what I think student loan borrowers may be looking at over the next four years. I should be clear – while I believe my assessments below are consistent with the rhetoric and with the past actions of our next executive and legislative leaders, absolutely nothing is concrete at this time. There is a lot we just don’t know – and can’t know – at this early juncture. With that caveat, read on. Read More
Changes Are Coming to Income-Driven Repayment
Income-Driven Repayment (IDR) plans are a true lifeboat for millions of federal student loan borrowers struggling to repay their student loans. The programs provide uniquely-tailored monthly payments for borrowers based on income and family size, with a loan forgiveness safety net at the conclusion of the repayment term (20 or 25 years, depending on the specific plan). For many student loan borrowers, an IDR plan is the only thing standing between them and default.
The problem, though, is that the IDR system is a mess. For one thing, we have a confusing menu of individual IDR plans – there’s Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE). Each plan has its own formula, unique eligibility criteria, and strange programmatic quirks. Figuring out what plan is right for you – and whether you should switch – can be a daunting task.
The complexities of IDR programs don’t make the struggling student loan servicing system any better, either. The CFPB recently released a report slamming student loan servicers for IDR-related processing delays and mistakes. Borrowers are frequently getting bumped off of IDR plans through no fault of their own, leading to serious negative consequences.
I think the current system is just not sustainable on a long term basis, even as more borrowers rely on these IDR programs to stay afloat. Things must change. Well, I think we’re starting to see the beginnings of reform.Read More
CFPB Releases Scathing Report on Student Loan Servicing
The Consumer Financial Protection Bureau (CFPB) has released a scathing new report on the student loan servicing system, with a particular focus on borrowers having difficulty accessing income-driven repayment plan programs like Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE).
Based on complaints submitted by consumers, the CFPB is confirming what many of us already know: that student loan servicing problems impede the ability of student loan borrowers to access programs to repay their loans, and widespread bureaucratic delays and errors lead to negative consequences for people. The CFPB’s report echoes my recent article highlighting the widespread problems with one of the biggest federal student loan servicers, FedLoan Servicing/PHEAA.
Here are some of the highlights from the report: Read More
7 Reasons Why This Election Matters for Student Loan Borrowers
The presidential party conventions are over, and what seems like the “election that never ends” will actually be over in less than 100 days.
A lot is being said about this election – that it’s the most important in a generation; that it could fundamentally change the United States and its place in the world; that our core national values are at stake. All of this may be true, and there’s plenty of analysis out there about how big and important it is.
But as a student loan attorney, I can tell you without hesitation that this presidential election is going to have a real, tangible impact on millions of student loan borrowers. It’s going to have significant, lasting consequences. What these impacts and consequences look like, however, will depend primarily on who wins this November. If you have student loans, you should be paying attention. Here’s why:Read More
Student Loan Borrowers Experiencing Severe Delays in Income-Driven Repayment Plan Processing
With the introduction of the new Revised Pay As You Earn (REPAYE) plan in December, and the subsequent release of a mind-bogglingly complicated new application for all income-driven repayment plans, I have been seeing significant processing delays and backlogs across the federal student loan servicing system. These problems are affecting borrowers who are applying for income-driven repayment plans for the first time, borrowers who are re-certifying their income to remain in their current income-driven plans, and borrowers who are requesting to switch to a different income-driven plan, such as REPAYE.
By way of background, income-driven repayment applications are supposed to be processed within about 10 business days. Servicers rarely have been able to have such a “rapid” turnaround in my experience, but they typically process applications within one billing cycle.
Since January, however, federal student loan servicers across the board seem to be taking 30-60 days or longer to process applications for income-driven repayment, pushing many borrowers into temporary forbearances if they cannot afford their normal monthly payments. This isn’t just for the new REPAYE plan, but also for borrowers on Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR). Agents for the following federal student loan servicing companies have all told me that they are experiencing significant backlogs and delays:
- FedLoan Servicing
- American Education Services (AES)
- Great Lakes Higher Education
- Navient
If you have submitted an application or re-certification request for income-driven repayment, or you anticipate doing so soon, you should expect delays. Be sure to routinely follow up with your loan servicer to check on the status of your application, and stay on top of things to make sure your application gets processed.
The New Income-Driven Repayment Form is Here – And It’s a Mess
Federal student loan servicers are in the process of releasing a new application form for all income-driven repayment plans, including ICR, IBR, PAYE, and the “Revised Pay As You Earn” (REPAYE) plan, which is the latest income-driven repayment option available to borrowers. Not all servicers have released the application yet; it is being phased in this month as REPAYE is being rolled out. Some servicers are ahead of others.
Note: REPAYE is not yet formally available – servicers are saying REPAYE will be available to borrowers by the third or fourth week of December.
The good news? The new form provides an option for borrowers to select REPAYE.
The bad news? Everything else, basically.Read More
Who Should Switch to REPAYE?
A couple of weeks ago, the U.S. Department of Education released final regulations governing its newest income-driven repayment plan, the “Revised Pay-As-You-Earn” plan, or “REPAYE.” Because of the nature of our student loan system, the new program is complicated, confusing, and in many ways contradictory to its original intent. It has some good features that will undoubtedly help many borrowers, but it also has some twists and caveats that will exclude others, or at the very least, make it a less desirable option than some had hoped.
So, can or should you switch to REPAYE? The answer, as is all-too-often the case, is “it depends.” I hope my analysis below is helpful, but please understand that this is not intended as legal advice, and this is not a substitute for getting a personalized recommendation from a qualified student loan expert.Read More