Boston Student Loan Lawyer

Law Office of Adam S. Minsky

The Pros and Cons of Student Loan Refinancing

| Articles Cosigners Private Student Loans

There’s about $1.3 trillion in outstanding student loan debt in the United States. Most of that consists of federal student loans, but there are several hundred billion dollars in private student loans, as well.

Both federal student loan lenders and private student loan lenders charge interest – a percentage of the loan principal balance that acts as the cost of borrowing and a way of reducing risk to the lender. But borrowers have no real control over their interest rate and are largely stuck with it – federal student loan interest rates are set by Congress, and private student loan interest rates are set by the terms of the underlying loan contract. Given these limitations, the only option available to borrowers to lower their rates is to refinance their loans through a private lender (there is no federal student loan refinancing program that results in a lower interest rate). This is a major undertaking, and borrowers who are considering student loan refinancing should be aware of the potential risks and rewards.Read More

CFPB Releases Scathing Report on Student Loan Servicing

| Articles Current Events Income-Based Repayment Income-Driven Repayment Pay-As-You-Earn Policy & Reform Private Student Loans

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

| Articles Current Events Default For-Profit Colleges Income-Based Repayment Income-Driven Repayment Loan Forgiveness Pay-As-You-Earn Policy & Reform Private Student Loans Taxes

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

4 New Debt Collection Rules in New York

| Articles Current Events Default Policy & Reform Private Student Loans

New York State recently implemented new, stronger laws regulating debt collectors – including debt collectors that pursue student loan borrowers. The changes go above and beyond what is required under federal debt collection laws and make New York one of the strongest states in the country for consumer protection.

Strengthening consumer debt collection laws is critical for student loan borrowers. Nearly one in four borrowers are delinquent or in default on their student loans, and that figure has been stubbornly persistent despite the addition of new repayment programs and increasing scrutiny on student loan servicing. It doesn’t help that federal student loan collectors have enormous powers to pursue defaulted borrowers. Private student loan lenders often engage in aggressive tactics as well, and may resort to filing lawsuits against student loan borrowers.

Here’s a summary of some of the major new rules in New York protecting student loan borrowers and other consumers:Read More

Major Reforms Proposed for Student Loan Credit Reporting

| Articles Current Events For-Profit Colleges Policy & Reform Private Student Loans

Representative Maxine Waters of California has introduced sweeping legislation designed to improve the credit reporting system for student loan borrowers and other consumers.

Credit reporting has become a major national issue. Even with critical consumer protection laws like the Fair Credit Reporting Act (FCRA), creditors and credit bureaus often still report inaccurate information about people’s credit histories. This can have serious and damaging consequences – credit reports can be the deciding factor in obtaining housing or employment, and negative information can make a huge difference. And even when negative events are accurately reported on people’s credit reports, their effects can be far-reaching and long-lasting, since damaging credit report information can remain on a consumer’s credit report for many years.

This new bill, called the “Comprehensive Consumer Credit Reporting Reform Act,” is designed to increase protections for consumers and make credit reporting a bit more fair. Here are some of the highlights of the bill:Read More

Introducing “The Student Loan Handbook for Law Students and Attorneys”

| Articles Private Student Loans Student Loans 101

The Student Loan HandbookI am thrilled to announce the release of my new book, The Student Loan Handbook for Law Students and Attorneys, published by the American Bar Association. It’s the first and only book of its kind: a concise student loan management guide geared specifically to lawyers and soon-to-be law grads.

Here’s what the ABA has to say about the book:

Getting student loans is remarkably easy – but dealing with student loan repayment can be a nightmare. And as student loan debt continues to grow and repayment programs get even more complicated, it’s no wonder that so many borrowers feel lost. The typical college graduate takes on an average of over $30,000 in student loans, and the numbers are even more staggering for law school graduates. Considering the combined cost of an undergraduate and law school education, the average law school debt burden can easily exceed $100,000. With the many challenges unique to new lawyers, it can be difficult to create an effective plan for managing student loans while studying for the bar exam, searching for a job, and adjusting to a new work environment.Read More

The End of the Worst Student Loan Clause?

| Articles Cosigners Current Events Default Policy & Reform Private Student Loans

 

Many private student loan contracts have a tiny little clause, hidden away in the obscure depths of the fine print. It’s written in formal and somewhat vague language, but it basically says that if the cosigner or the borrower dies or declares bankruptcy, the entire balance of the private student loan is due immediately. This can be true even where the borrower (or cosigner) has been making regular, on-time monthly installment payments and can continue to do so.

I call this the “death and bankruptcy clause.” It’s essentially an automatic default: if you can’t pay the entire loan balance right then, the “accelerated” loan will go into default and collections. Sometimes, borrowers are not even notified of the situation until the loan has been placed with a third-party debt collector and has been reported to national credit bureaus as charged-off or defaulted.

As you can imagine, this leads to terrible situations. Imagine a borrower who has a good job and is making regular payments, when the cosigner (perhaps a well-meaning family member who got into trouble, or an ex-spouse who the borrower hasn’t heard from in years) declares bankruptcy. Suddenly, the student loan is in default. Or how about the situation where the borrower’s mother dies – mom is a cosigner on the borrower’s private student loan, and hasn’t really had much to do with the loan since she originally signed for it. But now, the borrower is going to have to deal with default and a collections agency, on top of the grief of losing a parent.

Absurd, isn’t it?

Well, this little clause from hell might be getting extinguished.Read More

“Earnest” Student Loan Refinancing: The Inside Scoop

| Articles Default Income-Driven Repayment Private Student Loans

Student loan refinancing is the process by which a borrower can obtain a lower interest rate on their student loans, usually by taking out a new student loan that pays off the old one. If this new loan comes with a lower interest rate and better repayment terms, the borrower may save substantially, both on a monthly basis and in total.

During the past few years, up-and-coming private student loan refinancing companies have been offering various options to student borrowers. These programs are relatively new, and they tend to be restricted to people with good income and excellent credit, so we don’t know much about them. But as more and more borrowers turn to these programs in the absence of federal student loan refinancing options, I’ve been trying to find out more information about them.

Last week, I wrote a review of “SoFi” student loan refinancing based on a borrower’s experience and my analysis of their loan contract.

This week, I’m taking a look at “Earnest” student loan refinancing. Like SoFi, Earnest offers student loan borrowers with various refinancing options. However, Earnest seems to focus more on its technology-based application process and customer-service-oriented approach.

I recently had the opportunity to talk with a borrower (we’ll call her “Amanda”) who refinanced her student loans through Earnest. Like “Aaron” (who refinanced his loans through SoFi), Amanda graciously answered my barrage of detailed questions about her experience, and also provided me with a copy of her Earnest loan contract so I could write this article. Here’s what I found. Read More

An Exclusive Look at “SoFi” Student Loan Refinancing

| Articles Default Income-Driven Repayment Private Student Loans

Student loan refinancing is the (somewhat elusive) process by which a borrower can obtain a lower interest rate on their student loans, often by taking out a new student loan from a different lender. If this new loan comes with a lower interest rate and more favorable repayment terms, the borrower may save a good deal of money, both on a monthly basis and in total over the course of repayment.

Right now, there’s unfortunately no way to refinance federal student loans within the federal student loan system, which is troublesome for many borrowers who have high-interest federal student loans. Private student loan refinancing largely dried up during and after the financial crisis of 2007-2009. However, in the past few years, new and somewhat unique private student loan refinancing companies have begun offering some options to borrowers. Because these companies and their programs are relatively new, and student loans generally must be repaid over a long period of time, we don’t yet know enough about these companies to say with certainty whether they provide viable long-term solutions for borrowers. What we do know is that these programs tend to be geared towards borrowers with excellent credit and good earning potential, which effectively locks out many borrowers who need the most relief.

One of these new student loan refinancing companies is called SoFi (short for “Social Finance”). SoFi offers student loan borrowers with various refinancing options through a unique investor-based funding mechanism. It’s one of the leaders in this nascent industry.

I recently had the opportunity to sit down with a borrower (we’ll call him “Aaron” to protect his privacy) who refinanced his student loans through SoFi. Aaron agreed to share his experience with me, and he even let me review his loan contract with SoFi. As a student loan attorney, this was an exciting opportunity for me to get an inside look at a new type of student loan.Read More

Understanding Student Loan Consolidation, Modification, and Refinancing, Part II: Modification

| Articles Private Student Loans Student Loans 101

Many people want to better manage their student loans and optimize how they repay them. There are a variety of ways to achieve this, but (as is the case throughout many aspects of the student loan world) understanding the confusing array of options can be challenging.

In my next several articles, I’m going to give you a crash course in student loan “consolidation,” “modification,” and “refinancing.” People often casually use these terms interchangeably, but they actually can mean very different things, and it’s important to understand their definitions.

Last week, I discussed student loan consolidation. Today’s post is about student loan modification.

Student Loan Modification

A modification is a change to the terms and conditions governing the repayment of an existing student loan. Unlike consolidation, it’s not a new loan; you keep your same student loan, just with some changes (hopefully good ones).Read More