Boston Student Loan Lawyer

Law Office of Adam S. Minsky

Introducing “The Student Loan Guide for Parents and Cosigners”

| Cosigners Private Student Loans Site & Practice News

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I am thrilled to announce the publication of my next book, “The Student Loan Guide for Parents and Cosigners,” now available in paperback and Kindle formats.

As many of you might know, student loan debt doesn’t just impact students. Each year, parents take out millions of dollars in Parent PLUS loans to finance their child’s college education. And millions of relatives, spouses, friends, and acquaintances of students cosign private student loans. Federal Parent PLUS loans and cosigned private student loans are very different from other types of student loan debt, and parents and cosigners often do not fully understand their rights or their options, especially when things go wrong. And there are minimal resources out there to help them.

That’s why I wrote this book.

When I first started my student loan law practice, I thought that all of my clients would be recent graduates in their 20’s or 30’s, trying to understand and navigate their student loan repayment. But at this point, I estimate that over one third of my clients at any given time are parents and cosigners. To me, this says a lot about the student debt crisis.

I hope this book will be helpful to some people, and I hope some of you will take the time to read it.

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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Private Student Loan Modifications Offer (Limited) New Relief

| Default Policy & Reform Private Student Loans

Private student loans are, in my opinion, generally terrible. Why? Because their terms and conditions are very inflexible compared to federal student loans and some other types of consumer debt. Private student loan borrowers are typically stuck with whatever interest rate they have (which is often quite high), and they have very little choice about their repayment terms.

When private student loan borrowers experience some sort of hardship or distress and they can’t afford their monthly payments, even on a temporary basis, obtaining any sort of relief from their lender or servicer can be extremely difficult. Deferment and forbearance options are typically quite limited, any change in repayment terms will be temporary (if even offered at all), and default can occur quite quickly once the borrower starts falling behind on monthly payments.

But recently, some major private student loan lenders have been offering a new way out for distressed borrowers: private student loan modifications. Read More

How Navient Nearly Screwed Me

| Default Private Student Loans

If it can happen to me, it can happen to you.

So here’s the story. I have a small, private student loan with Navient (formerly Sallie Mae) that I’ve been paying for quite some time. I’ve been on automatic debit for years. I’ve written previously about being careful with auto-debit programs and this story illustrates why.

I recently changed banks, and wanted to change my banking information with Navient’s auto-debit program. So I logged into my online Navient account, and completed all of the necessary online forms to change bank account information. Navient issued me a confirmation email saying that if I submitted my request before my next billing statement had been generated, no manual payment would be necessary for the next bill, as the auto-debit would go into effect for that next payment. If I submitted my request after the next billing statement was generated, I would have to make a manual payment for that billing cycle, and the auto-debit would go into effect the following billing cycle. Okay, got it.

I had submitted my auto debit application in November, on a date before my December billing statement had been generated. So, based on Navient’s email, I was expecting that the December payment would be automatically paid via the auto-debit. But, since I’m me, I of course checked my account on the payment due date, just in case there was a problem. Turns out, there was: Read More

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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Have You Filed A Complaint with the Consumer Financial Protection Bureau?

| Policy & Reform Private Student Loans

I attended the annual National Consumer Law convention earlier this month in Tampa. It was a great opportunity for a bunch of consumer rights attorneys to get together and chat about consumer issues. Student loans were a huge topic at the convention.

One of the head leaders of the Consumer Financial Protection Bureau (CFPB) attended and spoke at the convention. The CFPB is the relatively new federal watchdog agency tasked with overseeing private and federal student loan servicers. The bottom line is this: the CFPB wants to hear from you.

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Co-Signer Release: Why You Should Consider It

| Cosigners Default Private Student Loans

Many private student loans allow for, or even require, a co-signer. Most of the time, the co-signer is not the person actually enrolling in school. The cosigner is the student’s parent, spouse, boyfriend, girlfriend, cousin, or friend. The cosigner believes, genuinely, that she is helping the student go to school to get an education. All the cosigner is doing (says the conventional wisdom) is enabling the student to get that loan that will pay for tuition, so that the one they love can get ahead in life. And that loved one will, of course, get employed upon graduation and promises (promises!) to pay that loan back.

What many people do not realize, however is this: The cosigner is just as legally responsible for the loan as the borrower.

What does this mean? If the borrower can’t or doesn’t pay, the co-signer is still on the hook. Even more disturbing, many private student loan contracts have what I call a “death and bankruptcy clause” that can be quite dangerous. Under this clause, if the co-signer or the borrower dies or declares bankruptcy, the entire balance of the loan will become due immediately, and if not paid in full, the loan goes into default. This means that if either the borrower or the co-signer experience some sort of catastrophic health or financial breakdown during the life of the loan, the loan can be in danger of defaulting, putting the other party in grave danger. This is particularly worrisome where a borrower has a private student loan cosigned by an elderly grandparent, or a parent is the co-signer on a private student loan where the child has become unable to pay.

Luckily, there may be a way out. Many private lenders allow for something called a “co-signer release,” where the lender will agree to release the co-signer from all legal responsibility on the loan under certain conditions. These conditions vary from lender to lender, and the specifics may be outlined in the loan’s original promissory note. In my experience, these conditions are often either a “buyout” (a lump-sum payment by the co-signer), or an installment arrangement (a series of on-time monthly payments over the course of time, ranging from 12 to 48 months). If the condition is met, the co-signer is released from all legal responsibility on the loan.

If you are a co-signer or borrower and you are concerned about the long-term financial stability or health of the other signer on the loan, a co-signer release may be a good pre-emptive measure to protect yourself from an unnecessary (and, arguably, unfair) default. If you want to learn more, review your loan promissory note and contact your private loan lender to get some more information about the process and requirements.

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.