Student Loan Forgiveness News & Information

Department of Education Stirs Controversy with Latest Moves

Department of Education Stirs Controversy with Latest Moves

The Department of Education (DOE) has been making headlines since President Trump took office and appointed Betsy DeVos as Secretary. Which of the Department’s recent actions affected the world of student loans? Two moves have stirred up some controversy. DOE Picks New Student Aid Enforcement Leader First, the DOE announced their pick to head the Student Aid Enforcement Unit: former DeVry University dean Julian Schmoke. The unit was created in 2016 to combat the threat of fraud in the student loan industry. Considering his former position at an institution that was the subject of multiple federal investigations for fraud, which has garnered strong criticism, and his little to no experience investigating fraud claims, Schmoke was an unexpected pick. Schmoke was never implicated in any of the fraudulent actions of the for-profit school; in fact, DeVry’s parent company, Adtalem Global Education, handled it and settled the federal accusations against them for $100 million. However, though he had served solely in academic roles, some interpret his hiring as a signal that for-profit colleges will face less scrutiny by federal regulators. DOE Steps Back from Agreement with CFPB Second, the DOE recently ended an agreement with the Consumer Financial Protection Bureau (CFPB) that requires the Department to share information with the CFPB (and vice-versa) regarding complaints from borrowers about their student loans. For example, if someone had an issue with their student loan servicer or their lender, they could lodge a complaint with either entity and the two would communicate to resolve it. In their letter withdrawing from the agreement, the DOE cited “overreach” by the CFPB into issues of federal student... read more
The Myth of the Self-Indulgent Student

The Myth of the Self-Indulgent Student

The conversation about who’s in college needs to change. The typical college student is not the stereotypical college student anymore. Most college students are not attending private, four-year institutions like you might assume. They’re not attending full-time or living on campus. More than two-thirds of students these days are “non-traditional.” They might be older, commuting, part-time, or parents. They might be seeking a degree meant for a specific job. They might have a low income. The “Impractical Degree” And often the conversation about student debt — in articles, in the comments section, and at the dinner table — brings up the idea of the self-indulgent student. This theoretical student goes to a fancy four-year school, takes out loans to attend, and graduates with a degree with no practical application for a real-world job. For some, this kind of degree may still enrich the life of the student. It could open the door to great connections or prep them for an advanced degree. For others, “impractical” degrees are applicable to a variety of jobs that require strong analysis and critical thinking. But in truth, the students who go this route are few and far between. Of the thousands of colleges and universities in the United States, only several dozen are ranked as highly selective and might be considered “elite.” And at those schools is where you have a good chance of finding a theater major or a philosophy major. (To be sure, you still will find chemical engineers, programmers, and pre-med students at elite colleges, too.) An Education Focused on Jobs, but Debt Persists So where do the vast majority... read more
Tuition Burden Weighs Heavily on Students

Tuition Burden Weighs Heavily on Students

According to a new report published by the Center on Budget and Policy Priorities, lack of state funding in higher education is driving up the costs for students at public universities and colleges. After the recession began in 2008, state funding to public universities plummeted, hitting bottom in 2013. Since then, it has risen but has not fully recovered. The consequence of this, the report says, is an increased financial burden on the students in the form of higher tuition. The burden has shifted to the students for several reasons: State spending per student has not regained 2008 levels. Public universities and colleges rely on tuition to make up the lack of state funding. Median household income has risen a tiny amount compared to the rise of tuition. Slow to Rebound Only a handful of states — North Dakota, Wyoming, Montana, Nebraska, and Indiana — have rebounded and are spending more per student than they were in 2008. The rest are still behind, some significantly so. Arizona tops the chart in terms of spending cuts per student, with a drop of 53.8 percent since 2008. Louisiana follows with a 44.9 percent cut. College Costs Are Up, Share of the Burden Increases The sticker price of tuition — the published price, that is — at public universities has risen 35 percent nationally since 2008. Louisiana institutions have had the biggest jump with a 100 percent increase, amounting to $5,217 per student. Montana saw the smallest rise in tuition with a 4.4 percent climb, or $272 per student. College costs have also been on a massive upward trajectory in the long... read more
Over $190 Million of Student Debt Forgiven, Reduced

Over $190 Million of Student Debt Forgiven, Reduced

Thousands of former students of now defunct for-profit Corinthian Colleges will be getting long-awaited debt relief — to the tune of over $190 million. The Consumer Financial Protection Bureau, along with 13 state attorneys general, reached a settlement with Aequitas Capital. Aequitas was a major investor and funder of Corinthian’s in-house loans. Over 40,000 former students from multiple campuses around the country will have their loans reduced or canceled altogether. A Profitable Arrangement The lawsuit brought by the CFPB identified Aequitas as a knowing partner in the unfair practices of Corinthian Colleges. Corinthian advertised misleading information in order to attract students, who would in turn take out private in-house loans to attend, which were bought or funded by Aequitas. The private loans were merely a vehicle for Corinthian to access federal funding. The scheme was created to fulfill a requirement that says for-profit colleges must receive no more than 90 percent of its funding from federal loans. Private loans, student contributions, or other funds must make up the rest. Opening access to federal funds meant a massive cash flow which kept Corinthian’s engines humming and, consequently, Aequitas’. Collapse and Uncertainty for Borrowers Corinthian Colleges closed in 2015 after the Department of Education imposed new regulations on for-profits. Corinthian left thousands of students in the lurch with unfinished coursework, unfinished degrees, and outstanding student loan balances on top of it all. Aequitas collapsed soon afterwards because of its heavy reliance on Corinthian, yet it continued to operate under less-than-ethical circumstances. The U.S. Securities and Exchange Commission sued Aequitas in 2016 for operating a Ponzi scheme following the demise of Corinthian.... read more
New Jersey Caps Student Loan Debt With New Law

New Jersey Caps Student Loan Debt With New Law

One of the problems with student loan debt is that it’s too easy to get too much of it. Unlike other debt, student borrowers don’t need good credit to obtain federal student loans. And after a certain point in their education career, they can take out unlimited amounts of federal student loans to cover the costs. That is most notable for graduate and professional students. In New Jersey, however, all students have easy access to unlimited student loans thanks to the Higher Education Student Assistance Authority (HESAA). They offer supplemental loans through the New Jersey College Loans to Assist State Students program (NJCLASS). HESAA has come under fire in the past year, being accused of predatory lending practices. They currently have around $1.9 billion in outstanding student loans. During a hearing about HESAA’s collecting practices, borrowers voiced many complaints. Some alleged that HESAA misled borrowers about repayment options. Others accused HESAA of inaccurately labeling accounts as default and sending them to collections agencies, who charged additional fees. Others even said HESAA refused to provide information about forgiveness of debt in cases where the student had died. Other complaints became the basis for the new law: students were allowed to borrow up to $200,000 in student loans, which they were often unable to pay off. The new law, signed into effect by Gov. Chris Christie on Monday, August 7, revises the requirements of the NJCLASS Loan Program. The program originally awarded supplemental loans up to the cost of education, after other aid resources. The new law adds the following provisions: Students must exhaust federal student loan offerings before taking out... read more
How Families Pay for College

How Families Pay for College

Student loans have been a growing problem for years. That’s bad news for those who have student debt or plan on taking on student debt in the name of higher education. But instead of wallowing in discouragement, families are learning. According to a Sallie Mae survey (conducted by Ipsos), families are being smart about the way they plan for college. They know that earning potentials are greater after graduating from college, making a college education worth it, so they make it work financially. Here are some of the findings: How They Pay Families pay for college in many different ways. Some families can cover the entire cost while others depend on loans. The survey found that, on average, the following is true: Scholarships and grants (free money) make up 35% of total college costs. Parents contribute about 31% of the costs, between savings and loans. 13% of the families surveyed use a 529 account to save for their child’s college. Students contribute about 30% of the costs, between savings and loans. Family contributes the remaining 4% of the costs. Half of the families surveyed use scholarship money, of which 87% got them through the college 75% got them through private, nonprofit, or community organizations 65% got them from states or local governments. Reducing the Cost Scholarships are a great way to reduce the cost of college, but there are other ways as well. The college a student chooses can greatly affect the total cost. Not only are private schools more expensive than public schools but out-of-state schools are more expensive than in-state schools. Families are increasingly choosing colleges based... read more

The New Federal Student Loan Servicer Plan

If you’ve ever tried to navigate your student loan accounts, you’ll know that the system could use some improvements. Thankfully, an overhaul is underway and a new system should be available in 2019. Department of Education Secretary Betsy DeVos announced this week that the Federal Student Aid office is reimagining the servicer environment. The FSA’s Next Generation Processing and Servicing Environment will be a one-stop shop for student loan borrowers to manage their student loans. While the press release also announced the cancellation of a solicitation for a single loan servicer, the department is focusing on the servicing system as a full solution for now. The single servicing platform will house all student loans, no matter who services them. This means every borrower will go to the same account login page to access their loan accounts. This consolidation will simplify access to personal loan information and improve customer service.   Each component of the servicing platform (database housing, system processing, and customer account servicing) will be acquisitioned by separate companies, “which will allow for maximum flexibility today and into the future,” according to the department’s press release. Dr. A. Wayne Johnson said, “When FSA customers transition to the new processing and servicing environment in 2019, they will find a customer support system that is as capable as any in the private sector. The result will be a significantly better experience for students – our customers – and meaningful benefits for the American taxpayer.” This announcement came hours after a bipartisan bill was introduced to prevent the department from contracting with only one servicer. Elizabeth Warren, D-Mass., co-sponsored the bill... read more
Interest: The Silent Killer of Student Loans

Interest: The Silent Killer of Student Loans

When you think about student loans, what are your main concerns? Your total balance? Your monthly payment amount? How long it’ll take you to pay them off? What about your interest rates? According to a survey by LendEDU, 7.9 percent of students don’t know their interest rates on their loans. It makes sense; interest seems inconsequential next to larger numbers like the loan balance and monthly payment. Which number makes you more nervous, 5 or 35,000? When you hear horror stories about student loan balances ballooning, interest is often the culprit. So it’s in your best interest (pun intended) to learn everything you can about them so you can work with them. The Basics of Student Loan Interest First, federal student loan interest rates are set for the life of the loan. If you consolidate several federal loans, the new interest rate will be the average of the loans’ rates, no matter what the current interest rates are for new loans. The federal student loan interest rates are tied to the Treasury Department’s auction of 10-year notes each March. This year, the rates went up .69 percent, effective July 1 for loans taken out for the 2017–2018 school year. Interest accrues while you’re in repayment, but depending on the type of the loan, interest may accrue at other times. The following table outlines when subsidized and unsubsidized loans accrue interest. Some events in the life of a loan will trigger the interest to capitalize. That means all accrued interest will be added to the loan balance and will then accrue interest with the rest of the loans. The loan... read more
DACA Uncertainties Affect Prospective College Students

DACA Uncertainties Affect Prospective College Students

Student loans are easy for Americans to obtain, but it is much more difficult for DACA recipients to find funding for college. Though they are still encouraged to fill out the FAFSA, they are not eligible for federal financial aid. However, some states and colleges provide aid for DACA recipients. Deferred Action for Childhood Arrivals (DACA) is a program enacted in 2012 that protects immigrants who came to America as children from being deported. They are protected for two years at a time, at the end of which they can renew their application for continued deferment. DACA also gives approved applicants work visas. Due to the immigration climate in the Trump administration, many people fear DACA may be removed, regardless of Trump’s comments that he will “show great heart.” Though the administration claimed there was no policy change regarding DACA, a DACA recipient was deported in February and others were detained following the Trump administration’s moves on immigration. This puts into question whether Trump’s administration will “show great heart” or let it slide. Because of the uncertainty about whether DACA will continue to exist, lenders are increasingly hesitant to hand out student loans to DACA recipients. If DACA ceases to exist, the current recipients will lose their temporary work visas, which are necessary for them to pay their loan back. This makes lenders nervous about handing out tens of thousands of dollars to people who may not be able to pay them back. Some people are affected more than others. For example, Julio Ramos is a DACA recipient who has always dreamed of being a doctor. He applied to... read more
Private Student Loan versus Federal Student Loan

Private Student Loan versus Federal Student Loan

When getting loans for college, you can go two directions: federal student loans or private student loans. Some argue that one is always a better option than the other. But the truth is, they are both just options. There is no perfect solution for everyone when it comes to selecting which loans to get to help you through college. Sometimes students need both to cover all the costs associated with college life, including tuition, textbooks, housing and other living expenses, and other fees. Federal Student Loans Federal student loans come from the federal government. Anyone can apply for federal student loans by filling out the Free Application for Federal Student Aid (FAFSA). This application needs to be filled out every year you are in college. Besides generally lower interest rates, federal student loans have two major built-in protections for borrowers that can save them from slipping into default: Federal student loan borrowers are entitled to three years of forbearance time. During forbearance, borrowers do not need to make payments, but interest still accrues. Federal student loan borrowers have access to an income-driven repayment plan for student loan borrowers who need a lowered monthly payment. Those that qualify will typically be under financial strain and not able to maintain the high monthly payments that come with the standard repayment plan. Federal student loan borrowers who need to lower payments often choose to consolidate their loans first. Paired with income-driven repayment plans, this is an effective way to manage student loan payments. Private Student Loans Private student loans are issued by financial institutions; accordingly, benefits will vary from lender to lender.... read more