Congress to Shuffle Deck Chairs on the Titanic!

Student Loans

News came out recently that Senator Elizabeth Warren has proposed new legislation called the Bank on Students Emergency Loan Refinancing Act. Under this legislation students who borrowed prior to 2013 to fund an undergraduate degree to refinance both public and private student loans into a new loan bearing a 3.86 percent rate. Loans taken out for graduate school could be refinanced at a 5.41 percent rate, while parent loans could be refinanced at 6.41 percent.

The good part of this program is that it would apply not only to federal student loans, but to private loans as well. However, the devil is in the details. In order for private student loans to be included, the borrower must be in good standing with the lender and must meet certain debt to income ratios that have yet to be determined by the Department of Education. The problem is really two-fold.

First, private student loan borrowers who are in default need this the most but will be unable to get it. Those in default on private student loans often face interest rates of 29%, and they won’t be able to do a thing about it. Second, the debt to income ratio will probably keep most people out of this. It is very common for a borrower with private student loans to have over $100,000 in student loans and due to the economy they only have a job that pays $45,000 or less. Ironically, it seems that the people with the most student loan debt often have the least amount of income.

So what is the real solution? Simple. Restore Bankruptcy Protection to Student Loans. Lowering interest rates is great, but that still leaves us in a situation where students have exorbitant amounts of debt that they will never be able to pay off. This debt keeps them from fully participating in the economy by doing things such as buying houses and cars. While allowing bankruptcy protection on student loans may mean less student loans are granted, that may end up being the best thing. It used to be that someone could get a decent job without a college degree, but now that everyone has bought into the idea that they need a degree, it is almost impossible to get a decent job without one.

Ultimately, I tend to think this won’t pass anyways. Why not? Well, it would be harmful to the banks that lent the money, and the banks have a much better lobbyists than borrowers. Secondly, the government makes too much money off of student loan interest. the government will make $66 billion off of federal student loans disbursed between 2007 and 2012. Yes, Billion, with a B. If loan rates are reduced, so is the amount the government will take in. While i try not to be too cynical, I have yet to see the government do things that reduce revenues.

So, this is a step in the right direction, and it could help a lot of people, but let’s not pretend it is actually going to solve anything.

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National Collegiate Student Loan Trust & The Looming Student Loan Crisis

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You may remember a few years ago when there were several news stories about mortgage companies and robo-signing. It was discovered that many mortgage lenders had been incredibly sloppy in completing their paperwork, and when mortgages were bundled and sold, there was never the appropriate documentation. So the end result was that while you may have taken out the loan with Bank of America, it was another entity trying to foreclose on the home. When borrowers started asking questions, it turns out that nobody really knew who owned the mortgage. Well, it is deja vu all over again with student loans.

National Collegiate Student Loan trust is a Delaware trust that has purchased many private student loans from the original lenders. The is called an assignment of a contract, and is usually completely legal. However, in order for the assignment to be valid it must state what loans are being sold and give all relevant information on the loans so that a chain of ownership can be traced. This way a borrower can in fact verify that the person trying to collect the money from them is in fact the rightful person. National Collegiate has filed a large number of lawsuits against consumers in West Michigan. Most people never bother to respond since they don’t think anything can be done, and they end up getting a judgment against them. The problem is that most of these lawsuits can be defeated because National Collegiate does not have the right to sue.

A client of mine is a good example of this, she took out a private student loan with fifth third bank back in 2006, and subsequently was unable to pay on it. Fifth Third allegedly sold the loan to National Collegiate, and National Collegiate then filed suit to collect. I was able to review the lawsuit documentation it was apparent that National Collegiate did not have a valid assignment, meaning they had no right to sue my client. Because of this we were able to have the lawsuit thrown out and now my client does not owe the loan anymore.

The fact that law firms are filing these lawsuits without proper documentation is despicable and just plan wrong. They are trying to pull a fast one on our Court system to cover up their mistakes, and we can’t let that happen. If you have been sued by National Collegiate or another private loan company there may be options, the worst thing you could do is nothing. Even if National Collegiate already has a judgment against you, there is still hope. Please, call us today and let us help you to defend your rights.

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DEFAULTING ON YOUR STUDENT LOANS — THE CONSEQUENCES

Student loans have been a big topic for me lately, mainly because I see so many people with so much student loan debt. Recently, the amount of credit card debt outstanding in the nation was surpassed by the amount of student loan debt. According to  recent report, roughly 20 million people attend college each year, and of that 20 million, 12 million borrow money to help pay for tuition. Current estimates show that the total amount of outstanding student loan debt is somewhere between $902 Billion and $1 Trillion  — Trillion, with a T. Perhaps even more frightening are the following statistics:

1. Only 37% of federal student loan borrowers between 2004 and 2009 managed to make timely payments.

2. Two out of every five student loan borrowers are delinquent at some point in the first five years after entering repayment.

3. The current student loan default rate is 14.7%, and for every student loan that goes into default, two others become delinquent.

I am pretty sure I’ve convinced you that this is a massive problem. What I am really hoping to do is convince you to do something about it before you go into default on your student loans. So, let’s start with the basics, what is default? Well, that depends on whether you have federal or private student loans. Let’s talk about private student loans first.

Private student loans become defaulted as soon as you miss one payment. No grace periods, no 30, 60, or 90 day late notices. If you miss just one payment, you are technically in default. As soon as you are in default on a private loan, your lender could accelerate the amount due and could file a lawsuit. Now, most private lenders don’t do that right away, but they could.

Federal loans are different than private in how a loan goes into default. Once your federal loan enter repayment status you have to start making payments. If you miss payments, you will not be in default until 270 days after the first payment was due. If you don’t know how long it has been since you made a payment, call your lender, they can tell you exactly.

So now you know how loans go into default, but what does it really mean? Well, for private loans, not much. They can sue you, and they might, but there isn’t much more that they can do except bother you and harm your credit. Now federal loans are a different story. Once you go into default these are just some of the actions they can take:

1. COLLECTION FEES: Once your loan goes into default, a debt collector who has contracted with the department of education is assigned the file. This collector gets to automatically tack on a 25% collection fee to the outstanding balance of your loan. So let’s say you had $100,000 in outstanding student loans, once you default, you now owe $125,000! Now, you can get rid of this fee by curing your default, but it is replaced by an 18.5% cure fee. So instead of $125,000 you now owe $118,500. Better than $125,000, but still a heavy price to pay.

2. ADMINISTRATIVE WAGE GARNISHMENT: The department of education can garnish your wages without having to file a lawsuit. All they need to do is give you notice that they intend to garnish, and thirty days later they can begin taking up to 15% of your wages.

3. TAX REFUND INTERCEPT: The IRS will send any refund you may receive straight to the department of education, you get nothing.

4. SOCIAL SECURITY OFFSET: Not even Grandma’s social security check is safe.

5. LOSS OF SECURITY CLEARANCE: If you are a government employee, or a government contractor, you could lose your security clearance, which could then mean you lose your job.

6. PUBLIC SHAMING: Doctors who have defaulted on certain loans have the news that they defaulted published on the internet by the department of education. And, their ability to participate in Medicaid programs could be jeopardized. http://bhpr.hrsa.gov/scholarshipsloans/heal/defaulters/index.html

Terrified yet? Don’t be. There is no good reason you should ever go into default on a student loan. We can help you to avoid default by getting you in a manageable repayment plan, your payment could even be $0.00. If you are already in default, call us immediately. We can help you get out of default and obtain a manageable repayment. The worst thing you could possibly do is ignore the problem. Student loans are scary, but manageable with the right planning. So don’t default, call us instead.

For additional information on this topic visit our Student Loan Help services.

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FORGIVENESS OF YOUR STUDENT LOAN – YOU MAY QUALIFY

If you have student loans and work for certain employers, you may be eligible for Public Service Loan Forgiveness. There is a government program that far too few people know about, but it could save people with student loans tens of thousands of dollars. Here is how the program works, if you work for a 501(c)(3) non-profit corporation or a governmental entity, you can enroll in an income-based repayment plan, and after ten years of payments, the balance of your federal student loans is completely forgiven by the government.

Unfortunately, this provision is barely used because most people either don’t know about it, or think that it only applies to certain groups. Most people usually think that only people like Teachers, Nurses, and Police Officers qualify, but that is not true. For example, Spectrum Health is a Non-Profit, so guess what, if you work at Spectrum Health in ANY capacity, whether janitor, parking attendant, or anything else — You can have your loans forgiven! This also means anyone who works for any form of government, federal, city, or state, whether you are a crossing guard or a lunch lady, you can have your federal student loans forgiven.

Here is a good example, let’s say Jim is a medical assistant at Spectrum Hospitals. He is married with two children, earns has a total household income of $60,000 per year and has $55,000 worth of student loan debt. Under the standard repayment plan, Jim would pay $632.94 per month for ten years for a total of $75,953.02 paid over the ten years. Now if Jim enrolls in Public Service Loan Forgiveness, he would have a monthly payment of $308.00 per month for the next ten years. Jim would pay $36,960, and the rest would be forgiven. So by enrolling in the loan forgiveness, Jim will save $38,993.02!

Sounds great right, so why don’t more people enroll in it? Well, most people just don’t know about it. Further, it can be complex because if you don’t have the right type of student loans, you don’t qualify. The trick is finding a good attorney with knowledge of student loan law. A qualified attorney can make sure that if you don’t have the right loans, we can turn them into the right kind so that you get your loans forgiven.

Not only will this save people tens of thousands of dollars, but for some people who are struggling financially, it could mean the difference between filing bankruptcy or not. While I am a bankruptcy attorney, I want to do everything I can to help people avoid bankruptcy if they can. So if you think you could benefit from being enrolled in this program, call us. It doesn’t matter if you are current or behind on your loans, call us so we can go over your information and determine what the best course of action may be.

For more information visit our services page about Student Loan Forgiveness.

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STUDENT LOANS AND THE ZOMBIE APOCALYPSE

Anyone with a student loan debt that has ever considered filing for bankruptcy, or met with a bankruptcy attorney, has probably been told the same thing — Student Loans Never Go Away. And while it is true that student loans are generally non-dischargeable, do they really stick around forever? Well, I say no, they don’t. You have options, not all great options, but options. So let’s go over them briefly. I promise starting next week I’ll go over all the options individually and more in depth, but for now, let’s just hit the highlights.

1. Bankruptcy:  It is true that in most cases student loans are non-dischargeable, but I personally believe that far too many bankruptcy lawyers just accept the fact that student loans will not go away instead of really delving into the facts. In order to have your student loans discharged, you must show that: (1) Based on your current income and expenses, you cannot maintain a minimal standard of living if you are forced to repay your loans; (2) Your financial situation is unlikely to improve; and (3) you have made a good faith effort to repay your student loans. This test has historically been very hard to satisfy, but with recent cases coming down, the standards are getting relaxed and improve the prospects of getting your student loans discharged. Check out this case in Oregon where a bankruptcy filer discharged almost all of his loans.  Yes, it is an uphill climb, but student loans CAN be discharged in bankruptcy, just make sure you have an experienced bankruptcy attorney to help you.

2. Income Based Repayment Plans: These plans allow you to make monthly payments based on your income if they meet a debt-to-income test. Under that plan, your payment would be lower than payments under the Standard (10-year) repayment plan. Some people even have $0 per month repayment plans. The upside to these is that it allows you to maintain your credit score, and after 25 years, if there is still a balance, the loan is forgiven.

These are the two main options for people staring down student loan debt, and we will go over them in depth next week, as well as several others that might help people struggling to pay their bills. Student loans are a problem, but they can be solved, you just need the right lawyer to help you out.

Make sure to visit our student loan help services page for additional information.

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DMX: Y’all gon’ make the US Trustee lose her cool up in here! Up in here!

Way back when, I was just a bright-eyed law student full of hope, full of vigor, and ready to take on the world. I figured I would assuredly be writing briefs to be submitted to the US Supreme Court one day. Today is not that day. Today I am writing about DMX. Yes, DMX the rapper (If you don’t know who that is, ask your children). It seems that DMX had to file Bankruptcy, because he has lost his money — and his damn mind.

This story in the Wall Street Journal explains how he has not properly filled out his bankruptcy schedules, has not disclosed all assets, has not shown up for any court hearings, and is generally being recalcitrant. Because of his behavior, DMX’s case may very well be converted to Chapter 7, or dismissed entirely. I really have to wonder what bankruptcy attorney he hired. The errors on his petition are astounding for example, he claims to spend $1,000 per month on clothes, yet states that he does not own any clothes.

I suppose this goes to show that just because your bankruptcy attorney is expensive, doesn’t necessarily mean they are a good bankruptcy attorney.

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New Report: Bankruptcy Should be an Option for Student Loans

The Center for American Progress recently released a report advocating that some student loans should be dischargeable under federal bankruptcy laws. The report recommends limited bankruptcy protection based upon the repayment terms and track record of employment for students from a particular institution.

This is encouraging because it could cause some institutions to take their students job prospects more seriously. Essentially, if a school had a poor track record of employment for its students, or their students regularly defaulted on student loans, those loans may be dischargeable. The hope is that this would force lenders to create loans that are better for borrowers, and discourage predatory practices because both lenders and, quite possibly, institutions could be on the hook if loans were able to be discharged in bankruptcy.

While this is a great first step, it does not go far enough. As the number of people with unmanageable student loans has exploded, their options for repaying the debt have shrunk. Ultimately it would take an act of Congress to restore bankruptcy protection to student loans, so if you or someone you love is affected by student loan debt, please contact your congressman or congresswoman and make your voice heard.