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Borrower Defense to Repayment

On the surface, Borrower Defense to Repayment is quite simple. If your school misrepresented important facts to you, and thereby induced you to enroll in that school, you can petition to have your federal student loans discharged. Borrower Defense can be very helpful, because in the past many for-profit schools routinely exaggerated or lied about the classes they offered or your employability after graduating from their schools.

Student loan helpIt’s simple to apply for Borrower Defense. Go to the federal government website  here to read more about Borrower Defense, and fill in the on-line application form you find there.

For graduates of some schools, Borrower Defense is even easier. Certain students of Corinthian Colleges (including Everest College, Heald College, and WyoTech) and also certain students of the American Career Institute have an expedited process to get their Direct federal student loans discharged. More information here.

For students from other schools, however, the Borrower Defense process can have difficulties. Here’s why.

–You must show the specific acts (or failure to act) by your school that constituted misconduct toward you, or breached the school’s contract with you. This is different than just showing that the school engaged in general misconduct during the time you attended that school. You must show how the school’s actions impacted you directly. Then, there’s the question of evidence. Written documentation is helpful to your case, however it is unclear the type or amount of evidence that is required about your school’s misconduct that will convince the Department of Education to forgive your federal student loans.

 

–You must describe in convincing detail how the school’s misconduct affected your decision to attend the school and to take out federal student loans to pay to attend the school. “Convincing” is the important word here. Again, written documentation helps with this.

–You need to know that federal regulations require that the school’s misconduct must violate an applicable state law or cause of action. However, the Borrower Defense application does not currently require you to list the state law being violated. That’s good, because the question of which particular state’s laws apply, and exactly which laws were violated, can become complex very quickly. However, including references to state law violations in your Borrower Defense application may increase the likelihood that you may find student loan forgiveness.

–Your federal student loans must be Direct loans to be discharged. While Federal Family Education Loans (FFEL loans) can also apply for Borrowers Defense, the process for FFEL loans is much more complicated and unlikely to be successful. FFEL loans may need to be consolidated into Direct loans in order for Borrower Defense to be successful.

–You must be patient. The Department of Education is moving relatively quickly on Corinthian College applications, but Borrower Defense applications for other schools are taking a long time to process—sometimes in excess of a year.

New Borrower Defense regulations have been proposed by the Department of Education. These would streamline the Borrower Defense application and decision-making processes. However, these updated regulations are currently on hold. Further, as written they will only apply to federal student loans taken out after July 1, 2017.

Borrower Defense to Repayment–a simple and useful concept, but with a number of potential pitfalls.

 

If you are struggling under suffocating student loans, I am your resource for student loan student loan assistance and your help center- I want to help make your life better with my student loan help, and way your options of reducing your student loan debt. Click here for student loan help!

The Coming Wave of Student Loans, Part Two

In my last blog post I discussed the possible effect of President Trump’s proposed budget on student loans.  Now I will look at another proposal lurking in the Congressional wings—to terminate PLUS loans.

Federal PLUS loans are federal loans that parents and graduate students use to finance educational expenses that regular student aid doesn’t cover.  (Parents use PLUS loans to help with their kids’ educational expenses.)  About 10% of all existing student loans are PLUS loans, used by about 4.6 million borrowers.

Some federal lawmakers are pushing to eliminate federal PLUS loans in favor of private student loans.  What would this mean?

The downside of private student loans

Private student loans are available only to credit-worthy applicants, and the applicable interest rate depends on the applicant’s financial circumstances.  Individuals in comfortable financial circumstances get lower interest rates; those in more difficult financial circumstances must pay higher interest rates.  Due to their financial circumstances, some individuals don’t qualify for private student loans at all. By contrast, PLUS loans use a less-stringent credit-worthiness, and there is only one interest rate available, currently a relatively robust seven percent.

As you can imagine, graduate students and parents with children in college often fall toward the “more difficult” end of the private loan interest rate spectrum.  As a consequence, in the private student loan market, they would be required to pay higher interest rates.  This is an example of “the less you can afford, the more you have to pay.”

In addition, private student loans only infrequently come with any of the safeguards provided by federal student loans, including PLUS loans.  No income-based repayment plans, no disability forgiveness, no forgiveness upon death, no required forbearances.  Matter of fact, other than potentially lower interest rates for some borrowers (which can be significant), private student loans are almost always a bad choice for student loan borrowers.

Why do lawmakers want to get rid of federal PLUS loans?

If private loans are so bad, what’s behind the push to eliminate federal PLUS loans?  “The government shouldn’t be in the business of making loans at all,” say some lawmakers.  “Private student loans do a better job of predicting risk of non-payment by charging high-risk individuals higher interest rates,” say other lawmakers.  That raises an interesting question: Should private student loans charge higher interest rates to students studying for professions with lower expected incomes?

The future of PLUS

Current PLUS loans have an important role to play.  It’s unlikely they will disappear tomorrow.  However, the tilt in the current Congress in favor of free-enterprise solutions may cause PLUS loans to get an eventual boot in favor of private student loans.  Right now, however, the bottom line is clear: eliminating PLUS loans would be a minus for many hard-working families and students.

If you are struggling under suffocating student loans, I am your resource for student loan student loan assistance and your help center- I want to help make your life better with my student loan help, and way your options of reducing your student loan debt. Click here for student loan help!

BDR Delayed; Betsy DeVos Sued

Education Secretary Betsy DeVos recently delayed implementation of the new Borrower Defense to Repayment regulations.  These regulations would have allowed students to cancel their student loans in situations whereBetsy DeVos for-profit schools (and other schools) had mislead them, lied to them, defrauded them, or ripped them off.  These rules were set to take effect on July 1.  These regulations would have been an update of existing Borrower Defense regulations that provide for the student loan forgiveness in the same circumstances, but that are more cumbersome and difficult to comply with.  It was a win for the troubled for-profit school sector, which lobbied heavily to delay the new regulations.

The result (you guessed it) is that the Secretary was sued by 18 different states, demanding that the Secretary allow the new rules to go into effect.  This lawsuit will take months to play out.  In the meantime, all Borrower Defense to Repayment applications must be submitted under the old rules to achieve student loan forgiveness.

If you are struggling under suffocating student loans, I am your resource for student loan student loan assistance and your help center- I want to help make your life better with my student loan help, and way your options of reducing your student loan debt. Click here for student loan help!

How Trump’s Education Budget Affects Student Loans

If you are a student receiving assistance with student loans from a work study program, Public Service Loan Forgiveness program, or aided by the Perkins loan, President Trump’s recent budget cuts will hit close to home. President Trump recently submitted his first budget to Congress, and the Education sector will be seeing major budgeting and defunding of crucial student loan programs. Some of the more important changes to the coming wave of student loans that this article will focus on are:

–The cut to funding of Perkins loans for disadvantaged students.

–Elimination of the Public Service Loan Forgiveness program.

–Slashed work-study programs.

Where will that money go if not to student loan assistance? Well, the money from these programs would instead be directed toward charter schools and school choice initiatives.

 

Public Service Loan Forgiveness program

The Public Service Loan Forgiveness (PSLF) program would be the hardest hit. Designed to encourage college graduates to enter professions such as social work and teaching that are traditionally low-paying, the PSLF program rewards student lenders for entering these professions by forgiving the entirety of anTrump and Studen tDebt individual’s federal student loans after ten years of payments. The amount is forgiven regardless of the total amount still owing at the end of that ten years. Unfortunately, this incentive won’t be as appealing after Trump’s Budget cuts.  

Currently over 552,000 individuals have registered for the PSLF program, and it is vague what the future holds for these individuals. Trump’s budget is silent on how these people should be treated. However, this change may not apply for those who have already qualified for the PSLF program. However for some fortunate individuals, they may still have the opportunity to be grandfathered into the program allowing their federal loans to be forgiven after ten years. Others, just starting their public service jobs, would not be able to get their federal student loans forgiven. In summary, the result of eliminating the Public Service Loan Forgiveness program means a growing amount of student loan debt for former students and less incentive for public service work.

 

Perkins loans for disadvantaged students and Work Study programs

It is unfortunate that a majority of Trump’s Budget cuts target the assistance given to disadvantaged students. Many low income students were given student loan assistance through the Perkins loan, offering low interest federal loans for undergraduates and graduates with exceptional financial need. This program’s funding will be minimized in Trump’s budget cuts, meaning that student loan assistance will not be as widely available for disadvantaged students.

On top of slashed funding for Perkins Loans, work study opportunities will be even more scarce after Trump’s budget cuts. The Fewer Perkins loans and diminished work-study opportunities will force students to take out additional loans in order to complete their schooling. While some students will take out more federal student loans than others, many students will be driven toward private student loans. With higher interest rates and few, if any, future repayment options, private student loans are, simply put, a bad option. Cutting the funds for Perkins loans and the drastic decrease in work study options will inevitably increase the amount of student loans former students will have to pay. Aiding to the growth of college graduates needing help with student loans.  

 

What to expect for future Graduates

Currently 1.4 trillion dollars is owed in student loan debt. And that is increasing at the rate of $2,667 per second. To the extent that Trump’s proposed education budget becomes law, we can expect a new and higher wave of student loans and the search for student loan forgiveness.

 

If you are in need of student loan legal help, set up a consultation concerning your student loan payments  or student loan assistance options, and call the number above to schedule your 30 minute consultation. You must live in the state of Colorado to do so.

Trump’s Proposed Changes

Well, President Trump promised changes, and here they come. Trump will soon submit his proposed budget to Congress, and in it he wants some radical changes to student loan repayments.  Specifically…

He would end the Public Service Loan Forgiveness program also known as (PSLF).  The PSLF program was started in 2007.  It encouraged graduates to pursue careers in government service, such as teachers or public service lawyers.  It also encouraged college graduates to work for 501(c)(3) organizations, which do charitable work. So Individuals that are employed would have their federal student loans forgiven after 10 years of payments.  More than 552,000 people are currently enrolled in PSLF.  It’s unclear how this proposed budget would treat those currently enrolled.

He would also consolidate the five major income-based repayment plans for federal student loans into one single plan.  That plan would require payments of 12.5% of income for a maximum of 15 years, if an individual’s student loans were all for undergraduate work.  If any of the loans were for graduate work, monthly payments would be the same 12.5%, but now over 30 years.  This would be a payment increase from existing repayment plans, which can be as low as 10% of income.

These are elements of Trump’s proposed budget.  Congress will review it and decide which, if any, of these changes to implement.  I’ll keep you informed.

If you are worried that this budget will effect you negatively, it could be beneficial to seek student loan assistance. If you are in need of student loan legal help, set up a consultation concerning your student loan payments or student loan assistance options, click here for your 30 minute consultation. You must live in the state of Colorado to do so.

Hack to Pay Off Student Loans-Refinance Your Home!

Student Loan Cash-Out Refinance program

Are you a homeowner and still making student loan debts on top of your mortgage payments? Do you dream refinanceof reducing your monthly payments? Well there’s a new program in town—the Student Loan Cash-Out Refinance program. This program encourages homeowners to refinance their existing mortgage and use their home equity to pay off student loans. In this blog we will enlighten you with this great life hack for homeowners still struggling to pay off student loan debts!

 

 

Second Mortgages vs. Student Loan Cash-Out Refinance

Second mortgages have been used by homeowners for decades to pay off debts. But second mortgages have their downfall, in that they usually have higher rates of interest. To avoid high interest rates, the Student Loan Cash-Out Refinance is a great alternative.  It is different than the usual “home equity loan” second mortgage. This program is a complete refinance of your existing mortgage. The benefit to you?  Compared to a second mortgage, this complete refinance will usually result in lower interest rates.  

 

The Smart Decision

Mortgage rates are currently at an historic low, hovering around 4%! This should encourage you to consider completely refinancing your existing mortgage. In comparison, student loan interest rates may be as high as 8.25%, depending on the year the student loan was taken out. Many, if not most, past federal student loans have interest rates closer to 7%. As a result, it is often a smart decision to use your home equity to pay off a higher-interest student loans.

 

What to take into consideration

Paying off a high-interest student loan with a lower-interest mortgage—what could go wrong? Well, there are the helpful protections that federal student loan borrowers have that would no longer be available. These include the ability to defer payments if necessary, and the ability to set monthly payment amounts based on actual income. Once you pay your student loans with an increased mortgage, you lose those protections. Then if you can’t pay the mortgage payments, your house may be foreclosed.

 

Who should utilize this Student Loan Cash-Out Refinance program? Here are some examples:

–Your student loans have high interest rates, and you want to lower the effective interest rate. This is particularly the case if you took out Parent Plus loans to pay for your children’s education, as these have much higher interest rates.

–You make too much money to be able to take the student loan interest rate deduction on your tax returns. By converting your student loans into a refinanced mortgage, you can then use all the mortgage interest deduction on tax returns.

–You qualify for a mortgage refinance because you have a stable income and a good payment history.

–You have home equity that can be refinanced. In most cases, the new refinance loan cannot exceed 80% of your home’s value.

Want to know more about this Student Loan Cash-Out program? You will need to talk with your local real estate professional. But because this program is brand-new, not all real estate persons may be current on it.

If you are currently taking advantage of student loan assistance, or looking for student loan forgiveness,  you may want to consider investing in student loan legal help. Call Attorney Doug Triggs now to set up your initial consultation (303-499-1336) or fill out the “Quick Start” form.

Student Interest Deduction: How to Save Money with Student Loans

Leverage your student loan payments for an annual tax deduction

student interest deductionAre you one of the 44.2 million Americans presently burdened with student loan debt? If you’re faithfully paying your federal student loans you are aware of what a financial burden student loan debt can be, but are you also aware of the financial benefits of making your student loan payments? Paying your federal student loans has an advantage come tax season. You could be saving hundreds, even thousands of dollars on your annual federal taxes. In this blog post we’re going to walk you through the steps to find out if you qualify for the student interest deduction on your federal taxes.

How much interest did you pay?

First, you need to know how much interest you actually paid in the past year on your student loans. At the beginning of each year, you receive a form 1098-E from each of your loan servicers, but only if you paid that servicer more than $600 in interest.  This 1098-E form shows that amount of interest that you paid during the past year.  

If the amount of interest you paid was less than $600 to a particular loan servicer, the interest amount you actually paid will usually be shown as a line item on the end-of-year monthly statement you receive from the loan servicer, or as stated interest on each monthly account statement you received throughout the year.

Do you qualify for Student Interest Deduction?

We all want student loan relief, but do you qualify?  Here are the general guidelines you need to know whether you have access to this type of student loan assistance.

  • If you file your tax returns as single (not married) and made less than $80,000, you qualify for help with student loans through the student interest deduction.
  • If you file your tax returns jointly (married) and made less than $160,000, then you qualify for student loan assistance through the student interest deduction.
  • If you file your tax returns as “married, filing separately,” then you cannot use the student interest deduction.

How much you can save?

The maximum savings is $2500 per year.  That’s $2500 taken right off the amount that you owe on your federal tax return. But the amount of the saving varies.  It depends on the total student loan interest you paid (if you only paid $1300 in interest, you can only claim that amount) and the total of your income for that year.  After a certain point, the more you made, the smaller the amount of student loan interest you can deduct.

Talk to your local tax professional

Unless you are proficient in doing your own taxes, you will need to utilize the services of an accountant or tax person to make sure that you make maximum use of your deduction for student loan interest.  If you are planning to do your taxes yourself, you should look online for a “Student Loan Interest Deduction Worksheet” to help work through the numbers.

Do you need more student loan assistance than this information can offer? If you are in need of student loan legal help, set up a consultation concerning your student loan payments and call the number above or click here to schedule your 30 minute consultation. You must live in the state of Colorado to do so.

Department of Education says “Don’t believe FedLoan”

Many student loan borrowers are pursuing Public Service Loan Forgiveness (PSLF) for their federal student loans.  This requires them to make qualifying payments for 10 years, after which their federal student loans are forgiven.  And that forgiveness is tax-free.

FedLoan is the designated servicer for borrowers wanting PSLF.  FedLoan accepts the borrowers’ monthly payments.  Then each year FedLoan encourages these borrowers to have their employers complete the form certifying their public service.  These forms go to FedLoan.  FedLoan then sends “approval letters” to the borrowers which state that the past year’s payments qualified for the PSLF program.

What could go wrong?

Here’s the quick story.  FedLoan sent one borrower four annual approval letters covering four years of payments.  Then FedLoan sent the borrower an “oops” letter that said those approval letters were not correct–and that none of his past four years of loan payments qualified under the PSLF program.  Borrower sued FedLoan, saying FedLoan had already approved those four years of payments and couldn’t back out now.  As part of the lawsuit, the Department of Education said that borrowers can never rely on the FedLoan approval letters.  That was a shock!

What does it mean?  FedLoan approval letters are nice to have in your student loan file at home (and you should do them every year), but they are worthless.  Whether your monthly loan payments qualify for PSLF is a question of whether you meet all the requirements for the PSLF program.  That means: 1) you have to know the requirements, 2) you have to comply with the requirements, and 3) you have to keep your own records for the ten years of payments.  You can’t rely on the FedLoan approval letters to “bless” your past federal student loan payments.

Working toward PSLF?  The requirements for the PSLF are numerous and technical.  You an get more information here, or by making an appointment to see me about your rights and obligations under the PSLF program. Just looking for help with student loans or want professional student loan legal help? Contact me here!

$1.31 trillion in student loan debt—a new record!

student loan debtYes, it’s a new record: $1.31 trillion in student loan debt.  It’s the 18th consecutive year that education debt has increased.  Student loans are increasing at the rate of $2,667 per second.  Outstanding student loans increased by $31 billion just in the last quarter.  Whew!

To add insult to injury, 11% of this student loan debt was at least 90 days delinquent.  That’s over $131 billion in overdue student loans.

You have student loan debt?  Here are two different strategies for dealing with it for paying off your student loans.

Strategy #1: Pay your student loans off completely.

If you plan to pay your student loans in full, simply send as much money as possible each month toward these loans. Pay not only the minimum monthly payment, but also pay as much extra each month as you can.  When you get your income tax refunds, pay those toward your student loans.  Same with your work bonuses.  That will more quickly reduce the principal amount of your loans, and it will also reduce the loan’s increase due to interest, this means student loan relief-faster!  This tactic to student loan consolidation works with both federal and private student loans.

Also, consider consolidating all your student loans into a private consolidation loan, if that will lower your interest rate.  (But be aware that private loans have only a few of the repayment options that federal student loans have.)  While it’s possible to consolidate your federal student loans into a federal consolidation loan, that federal consolidation loan will not lower the effective interest rate.

In short, pay as much as possible as fast as possible on your student loans.

Strategy #2: Pay as little on the loans as possible.

There are four solutions for incrementally paying off your student loan debt.

First, on your federal student loans, opt for an income-driven repayment plan.  That usually lowers your monthly student loan payment.  Look to the future.  Are you nearing retirement or soon to quit working?  If so, your taxable income may be reduced considerably at that point, leading to even smaller monthly loan payments.  Are you a stay-at-home parent?  Then your monthly loan payments can be calculated just on your separate income, rather than the total family income.  If your income is zero, your federal loan payments will be zero dollars per month.

Second, postpone payments on your federal student loans.  How?  There are the standard deferments and forbearances on federal student loans that can help.  However, you may eventually want (or be forced) to consider a chapter 13 bankruptcy.  A chapter 13 bankruptcy forestalls collection activities by both federal and private student loan creditors, usually for five years.  After the bankruptcy, of course, you still owe the student loans, but then it’s back to using the income-driven repayment plan to minimize your monthly loan payments on federal student loans.

Third, if you work for the government (including public schools), consider the Public Service Loan Forgiveness program.  After 10 years of qualifying payments, your federal student loans are forgiven.  They disappear!

And finally, think about the final resolution of your federal student loan debt.  After 20 (or 25) years of payments under an income-driven repayment plan, the remainder of your federal student loan debt is forgiven. Or, should you die sooner, any federal student loans in existence upon your death are forgiven at that point.  (Not so, unfortunately, for private student loans.)

In short, pay as little as possible for as long as possible, until your federal student loans reach forgiveness.  That can be an excellent strategy as to your federal student loans.  However, there is no comparable strategy for private student loans.

These are the two broad-brush strategies.  For the details for each of these strategies, I recommend you consult with a good student loan attorney for student loan leal help. If you are Colorado resident, click here to schedule your appointment with the Colorado Student Loan Attorney and find the best pathway for your student loan forgiveness.

Do Student Loans Discriminate

How student loans affect minorities, women and college drop outs.

Do student loans discriminate against women and minorities? At first blush, no. Federal student loans are available to all students, without any credit check.  These loans help students stay in school and graduate, to find better jobs and careers. But the impact of loans after leaving school can present a different story.  In fact, student loans affect some students much more than others after they finish their schooling. And in turn, causes a niche group to more often seek student loan forgiveness.

What is “predatory inclusion”?

Large student loans impact the lives of many former students.  It’s an oddity.  On the one hand, student loans promote opportunity and equality in education.  On the other hand, for some individuals these same loans can be unfairly detrimental in later life.  In this sense, student loans buttress discrimination.  The sociological term is “predatory inclusion,” meaning that for some the equal access to higher education comes only on terms that are ultimately unequal.  Here are three examples.

How student loans affect women

On average, women owe more in student loans than men.  Why?  Women are more likely to finish college and go on to post-graduate education, increasing their debt load. But after graduation these student loans have a double whammy.  Not only do women have greater student loan debts, but they also enter a workforce where they earn (on average) only 83% of what their male contemporaries make.  They owe more, but they make less.  Overall, women have a lower return on student loan investment than similarly-situated males. This all increases women’s search for student loan debt forgiveness, and need for student loan assistance.

How student loans affect minorities

African-Americans and Hispanics are twice as likely to have student loans as whites.  Because they often come from disadvantaged backgrounds, they borrow for schooling at much higher rates than whites.  And they borrow more heavily using expensive private student loans.  Now it’s the double whammy: minority students owe the student loans, but then make less (65%) than their white contemporaries in the workplace.  Further, their private student loans are rigid, with few, if any, of the safeguards and payment options of federal student loans.  All this prevents equal access to the American dream.  Overall, African-Americans have a lower return on student loan investment than whites or women. This all, makes them more in need for student loan assistance and often student loan legal help.

How student loans affect college drop outs

Did you have to drop out from college?  You are not alone—about 40% of student who start college drop out before graduating.  But if you did drop out from college, you didn’t get that income boost that comes from being a college graduate.  However, you still have all those student loans- and probably are still searching for help refinancing student loans.  Now you owe more student loans, yet your post-schooling income did not increase to match your student loans. Once again, not a good return on investment. This puts drop outs in the search for student loan help.

The beacon of hope for individuals with student loans

Nonetheless, there’s good news.  An equality boost comes from the federal government’s income-driven repayment programs.  No matter the size of your federal student loans, under these programs you simply pay a percentage of your income each month.  You make more, you pay more; you make less, you pay less.  It’s a form of “equal pain for each person” for student loan repayments.  This helps reduce the discriminatory effect of student loans.  Unfortunately, only 24% of eligible borrowers are taking advantage of these income-driven repayment plans. I bet that was one student loan repayment help that you’re glad you learned about!

Income-driven repayment options ideal for mitigating inequality

The same student loans that promote equality can reinforce inequality in later life.  Income-driven repayment plans can mitigate that inequality, but only if eligible students take advantage of these plans.  If you have not investigated available income-driven repayment plans for your federal student loans, you are missing out on a significant opportunity to get help with student loans.

 

If you’re interested in learning more about how you could take advantage of an income-driven repayment plan contact me today to schedule an appointment and get student loan legal help.  If you are Colorado resident, click here to schedule your appointment with the Colorado Student Loan Attorney and find the best pathway for your student loan forgiveness.