There has been a surge in new collections lawsuits in Massachusetts against student loan borrowers during the past year. Based on what I’m seeing on the ground, the majority of these suits are being initiated by one entity: an organization called the Massachusetts Educational Financing Authority, also known as MEFA.Read More
Defaulting on student loans can be terrifying, damaging, and costly. Federal student loan lenders have enormously powerful tools to pursue student loan borrowers in default. For example, the federal government and federally-backed guaranty agencies can garnish a borrower’s wages, offset a borrower’s Social Security benefits, and intercept a borrower’s tax refund, all without a court order. Private student loan lenders don’t always have the same powers, but they can file lawsuits against borrowers in state courts, and then try to attach assets to satisfy any resulting judgments. Defaulting on both private and federal loans can lead to financial penalties and significant credit damage, as well.
But it’s not all doom and gloom. Borrowers in default on their student loans have legal rights and options. And they may ultimately have the ability to fix their defaulted student loans.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
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
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
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
Well, 2017 has been quite an explosive year, hasn’t it? And there’s been a lot going on in the world of student loan law – so much, in fact, that it can be a bit overwhelming to keep everything straight. So as we wrap up this year, here’s an overview of what went down for student loan borrowers, and some hints of what’s to come in 2018.Read More