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
Last week, the New York Attorney General’s office reached a $9 million settlement with ACS – one of the country’s major student loan servicers – for systematically harming student loan borrowers by misinforming them, misleading them, misapplying payments, and more.
As far as I can tell, no one who works with student loan borrowers is surprised. The types of problems that the New York Attorney General’s office found are widespread, and by no means limited to ACS. The Consumer Financial Protection Bureau (CFPB) has reported extensively on rampant student loan servicing problems throughout the industry. Major lawsuits brought by other state attorney general’s offices are still ongoing against giants such as Navient and the Pennsylvania Higher Education Assistance Authority (PHEAA), which also runs FedLoan Servicing. Even smaller servicers such as ECSI have been under investigation.
Why is Student Loan Servicing a Mess?
It doesn’t take a rocket scientist (or a student loan expert) to understand what’s going on here: the federal government outsources the servicing and day-to-day operations of its entire student loan portfolio to a handful of private companies. And it pays them handsomely; one servicer, Nelnet, made more than $200 million in profits in 2016 alone. But there is virtually no oversight of these companies, and no accountability. It’s often up to individual states (usually via proactive attorney general offices) to try to protect borrowers, leading to a patchwork of enforcement actions that can sometimes get results (like we just saw in New York) but doesn’t always lead to systemwide change.
I am thrilled to announce that my first client got her student loans forgiven through the Public Service Loan Forgiveness program. It wasn’t necessarily easy, and it wasn’t necessarily quick, and she ultimately needed to request additional relief through a related program called Temporary Expanded Public Service Loan Forgiveness. But, it worked. She now has a $0 balance on her student loans, and she’s even getting refunded for some payments that she made. Incredible! I wrote about her experience in my latest article for Forbes – check it out here. And stay hopeful!
Well, it’s the day after Election Day 2018. Analysts and pundits are still trying to figure out what the election results mean nationally. However, today I want to focus specifically on student loan borrowers.
Ballots are still being counted in many precincts, and not all races have been called. But as it stands, it looks like Democrats have retaken the House of Representatives, while Republicans have expanded their Senate majority. Democrats have flipped at least seven state governorships, while Republicans have held on to several others. There was a Democratic wave in many states, but Republicans also generally held their own or exceeded expectations in several key races. So, how does this all add up for student loan borrowers?Read More
The U.S. Dept. of Education released a report this week on the Public Service Loan Forgiveness (PSLF) program – and the details are rather stunning.
First, some background. To get student loans forgiven under the PSLF program, borrowers must make 120 “qualifying payments,” which are payments that (1) are made on Direct federal student loans, (2) under a qualifying repayment plan – which is either the 10-year Standard plan or an income-driven repayment plan, while (3) working full-time for a qualifying public service employer.
The program was not enacted until October 1, 2007, and it’s not retroactive to before that date. This means that the soonest anyone could have been eligible for loan forgiveness was October 1, 2017. Since so few people knew about the program during the first few years of its existence, not many people have qualified so far. However, nearly 12 months into the “eligibility era” (as I call it), we haven’t had much specific information about the number of people applying.
Until today. Read More
There is quite a lot going on right now when it comes to student loans. It seems that every month there’s a new bill or a new rule that could significantly impact student loan borrowers. But keeping track of it all can be a bit overwhelming.
First, a very brief overview of how law-making works. Our legal and political system is multi-layered and may seem complicated, but I’ll break it down for you:
- Legislation – or a proposal for a new law – must be passed by a law-making body like Congress (at the federal level) or a state legislature (at the state level). Congress, and most state legislatures, have two chambers – the House and the Senate – and legislation must pass both chambers, and be signed by the President (or a Governor) to become law.
- Regulations (also simply called rules) can be created by executive agencies, such as the U.S. Department of Education. Agencies have broad powers to issue new rules or regulations under existing statutes, which can dramatically impact programs that were already created by previous legislation. When agencies create new rules or regulations, they have to follow a formal process before they can go into effect, but they do not typically require approval by Congress (or an equivalent state legislature).
So, with the above in mind, here’s my overview of the most important developments during the last few weeks.Read More
“Income-driven repayment” (sometimes referred to as income-based repayment) is an umbrella term for student loan repayment plans that allow borrowers to make payments on their federal student loans based on their income. The plans – and there are several, including one called Income Based Repayment – use a formula tied to the borrower’s income and family size, resulting in a monthly payment that lasts for up to 12 months at a time. The borrower must then renew the plan before the end of that 12-month period by submitting new documentation of income. Any changes to income could result in changes to the monthly payment, but after making payments for many years (the repayment term depends on the specific plan), any remaining balance gets forgiven.
Income-driven repayment has enormous benefits to student loan borrowers, as it allows borrowers to have affordable monthly payments, even for large federal loan balances, and thus keep their federal loans in good standing. These plans also do not require full loan payoff, as there is a loan forgiveness “safety net” at the end of the repayment term.
But it’s not all sunshine and roses. There are some potentially serious drawbacks to income-driven repayment, and borrowers considering these plans should be aware of them.Read More
A couple of months ago, Congress passed new legislation expanding eligibility requirements for Public Service Loan Forgiveness (PSLF). That legislation gave the U.S. Dept. of Education 60 days to create formal notice and a procedure for evaluating applicants requesting forgiveness under this expanded program. We haven’t known what the procedure would be, and how or when borrowers could gain access to this program – until now. And, unfortunately, I think it’s going to be a mess.
First, a recap of PSLF. To get your student loans forgiven under the program, a borrower must make 120 “qualifying payments.” A “qualifying payment” is one that is made (1) on the right type of federal student loan, which is a Direct loan; (2) under the right type of repayment plan – which is either an income-driven repayment plan or the 10-year Standard plan; while (3) working in qualifying employment. 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
The Trump/DeVos administration has been busy during the past 18 months, rolling back significant protections for student loan borrowers and their families. Just in the past couple of weeks, there have been two new developments that curtail regulation of predatory schools, lenders, servicers, and debt collectors.
First, the Consumer Financial Protection Bureau (CFPB), now under the leadership of Trump appointee Mick Mulvaney, effectively eliminated its student loan division by rolling it into a different department that has no investigatory or enforcement power. Previously, the CFPB’s student loan division had issued comprehensive, data-driven reports on the atrocious state of federal student loan servicing. It had also brought numerous enforcement actions and filed several lawsuits against predatory companies, including Navient, returning upwards of $750 million to student loan borrowers and other consumers harmed by unfair or harmful business practices. It looks like we can no longer count on the CFPB to do this work. Read More