Showing posts with label Get Out Of Debt Guy. Show all posts
Showing posts with label Get Out Of Debt Guy. Show all posts

Wednesday, December 5, 2018

"Education Corporation of America, Virginia College, and Brightwood College Turn Out the Lights": Important Advice to ECA students from Steve Rhode

By  (originally posted on December 5, 2018)
I just received a comment from an awesome reader that said, “Just got reports (from several campuses) that ECA has decided to close down all schools (teach out and go forward) effective immediately. Apparently, ACICS pulled their accreditation. Current employees are being let go immediately with no severance or insurance after Friday, 12/7. Don’t know all details yet as its only been a few hours and the media and news outlets have not picked up the story. I wanted to let you know since you have reported the most accurate coverage on ECA’s unraveling. It’s very sad to see ECA end like this. Many people that worked for the colleges truly cared about the students and making a difference in their life. There will be many students that will not be able to finish their education and many remaining employees that will be without a job right before Christmas. This is all so very sad.”
It does appear that ECA and Virginia College are turning out the lights. WRDW 12 in Georgia said yesterday, “A news photographer on the scene spoke with at least two people who say employees were called into a meeting this morning and told the College was being closed. Workers were reportedly told to go home and that they will not be receiving further paychecks. People we spoke to also say they were told this is occurring at locations in other states.” – Source
WTVC in Tennessee has reported similar closures in Chattanooga. – Source
Virginia College in Birmingham Alabama is reported to have closed as well. Officials at this campus are reported to have said they don’t know why this is happening. – Source
Another ECA school, Brightwood College in Texas have announced its closure as well. – Source
Inside Higher Ed is reporting, “In an email to campus employees Wednesday morning, ECA president Stu Reed said that the Department of Education had added new restrictions on its access to Title IV student aid. And on Tuesday night, the Accrediting Council for Independent Colleges and Schools suspended the colleges’ accreditation. Those steps meant the company couldn’t secure the additional capital needed to operate its campuses, he said.
The company also told employees that it would complete current course modules, which will finish in the next two weeks. A skeleton crew of employees will remain on campuses to assist students with obtaining documentation on their programs.”
The schools said they will work with students to access transcripts.
Students who owe federal student loans should immediately talk to their loan servicer regarding the process for a full discharge of their federal student loans if there is no available teach-out program offered by ECA.
By receiving a closed school loan discharge,
  • you have no further obligation to repay the loan,
  • you will receive reimbursement of payments made voluntarily or through forced collection, and
  • the record of the loan and all repayment history associated with the loan, including any adverse history, will be deleted from your credit report.
To be eligible for a full discharge of your student loans, your loans must have been “William D. Ford Federal Direct Loan (Direct Loan) Program loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans.”
Loans most easily eligible for forgiveness are ones if:
  • you were enrolled when your school closed;
  • you were on an approved leave of absence when your school closed; or
  • your school closed within 120 days after you withdrew.
For more information on obtaining a closed school discharge, click here.

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This article first appeared on Get Out of Debt Guy blog site.

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here. 

Tuesday, August 28, 2018

Student Loan Ombudsman at CFPB Can’t Take the BS Anymore. Quits in Scathing Letter Telling Director Mulvaney He Sucks. Essay by Steve Rhode

By Steve Rhode

Seth Frotman, an Assistant Director and Student Loan Ombudsman at the Consumer Financial Protection Bureau, told CFPB Director Mick Mulvaney to shove it and quit in an honest resignation. His experience inside the slowly gutted consumer protection agency was enough to say he’s mad as hell and not going to take it anymore.

Frotman’s resignation letter said, “It is with great regret that I tender my resignation as the Consumer Financial Protection Bureau’s Student Loan Ombudsman. It has been the honor of a lifetime to spend the past seven years working to protect American consumers; first under Holly Petraeus as the Bureau defended America’s military families from predatory lenders, for-profit colleges, and other unscrupulous businesses, and most recently leading the Bureau’s work on behalf of the 44 million Americans struggling with student loan debt. However, after 10 months under your leadership, it has become clear that consumers no longer have a strong, independent Consumer Bureau on their side.


Each year, tens of millions of student loan borrowers struggle to stay afloat. For many, the CFPB has served as a lifeline — cutting through red tape, demanding systematic reforms when borrowers are harmed, and serving as the primary financial regulator tasked with holding student loan companies accountable when they break the law.

The hard work and commitment of the immensely talented Bureau staff has had a tremendous impact on students and their families. Together, we returned more than $750 million to harmed student loan borrowers in communities across the country and halted predatory practices that targeted millions of people in pursuit of the American Dream.

The challenges of student debt affect borrowers young and old, urban and rural, in professions ranging from infantrymen to clergymen. Tackling these challenges should know no ideology or political persuasion. I had hoped to continue this critical work in partnership with you and your staff by using our authority under law to stand up for student loan borrowers trapped in a broken system. Unfortunately, under your leadership, the Bureau has abandoned the very consumers it is tasked by Congress with protecting. Instead, you have used the Bureau to serve the wishes of the most powerful financial companies in America.


As the Bureau official charged by Congress with overseeing the student loan market, I have seen how
the current actions being taken by Bureau leadership are hurting families. In recent months, the Bureau has made sweeping changes, including:

Undercutting enforcement of the law. It is clear that the current leadership of the Bureau has abandoned its duty to fairly and robustly enforce the law. The Bureau’s new political leadership has repeatedly undercut and undermined career CFPB staff working to secure relief for consumers. These actions will affect millions of student loan borrowers, including those harmed by the company that dominates this market. In addition, when the Education Department unilaterally shut the door to routine CFPB oversight of the largest student loan companies, the Bureau’s current leadership folded to political pressure. By undermining the Bureau’s own authority to oversee the student loan market, the Bureau has failed borrowers who depend on independent oversight to halt bad practices and bring accountability to the student loan industry.

Undermining the Bureau’s independence. The current leadership of the Bureau has made its priorities clear — it will protect the misguided goals of the Trump Administration to the detriment of student loan borrowers. For nearly seven years, I was proud to be part of an agency that served no party and no administration; the Consumer Bureau focused solely on doing what was right for American consumers. Unfortunately, that is no longer the case. Recently, senior leadership at the Bureau blocked efforts to call attention to the ways in which the actions of this administration will hurt families ripped off by predatory for-profit schools. Similarly, senior leadership also blocked attempts to alert the Department of Education to the far-reaching harm borrowers will face due to the Department’s unprecedented and illegal attempts to preempt state consumer laws and shield student loan companies from accountability for widespread abuses. At every turn, your political appointees have silenced warnings by those of us tasked with standing up for service members and students.

Shielding bad actors from scrutiny. The current leadership of the Bureau has turned its back on young people and their financial futures. Where we once found efficient and innovative ways to collaborate across government to protect consumers, the Bureau is now content doing the bare minimum for them while simultaneously going above and beyond to protect the interests of the biggest financial companies in America. For example, late last year, when new evidence came to light showing that the nation’s largest banks were ripping off students on campuses across the country by saddling them with legally dubious account fees, Bureau leadership suppressed the publication of a report prepared by Bureau staff. When pressed by Congress about this, you chose to leave students vulnerable to predatory practices and deny any responsibility to bring this information to light.

American families need an independent Consumer Bureau to look out for them when lenders push products they know cannot be repaid, when banks and debt collectors conspire to abuse the courts and force families out of their homes, and when student loan companies are allowed to drive millions of Americans to financial ruin with impunity.

In my time at the Bureau I have traveled across the country, meeting with consumers in over three dozen states, and with military families from over 100 military units. I have met with dozens of state law enforcement officials and, more importantly, I have heard directly from tens of thousands of individual student loan borrowers.

A common thread ties these experiences together — the American Dream under siege, told through the heart wrenching stories of individuals caught in a system rigged to favor the most powerful financial interests. For seven years, the Consumer Financial Protection Bureau fought to ensure these families received a fair shake as they as they strived for the American Dream.

Sadly, the damage you have done to the Bureau betrays these families and sacrifices the financial futures of millions of Americans in communities across the country.

For these reasons, I resign effective September 1, 2018. Although I will no longer be Student Loan Ombudsman, I remain committed to fighting on behalf of borrowers who are trapped in a broken student loan system.

Sincerely,
Seth Frotman
Assistant Director 5 Student Loan Ombudsman
Consumer Financial Protection Bureau – Source

Steve Rhode, the Get Out of Debt Guy



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This essay by Steve Rhode originally appeared on August 27, 2018 at Getoutofdebtguy.org I highly recommend Mr. Rhode's blog site--a robust ongoing commentary on consumer debt issues.



Monday, July 30, 2018

A Deep Dive Into the Debtor Blaming 2018 Borrower Defense to Repayment Regulations. Essay by Steve Rhode










By Steve Rhode (originally posted on July 25, 2018)

Today the Department of Education (ED) has released their new rules for the program so let’s jump in and see what the Borrower Defence to Repayment program now looks like. I’m going to read the 433 pages so you don’t have to.The Department of Education put a hold on forgiving federal student loans for students who were victims of fraud by the schools that enrolled them. Under the Obama administration, the program would suspend collections activity while claims were being investigated and total forgiveness was a possible outcome.
Under the Trump administration claims were not approved and the rules were changed to only allow a partial forgiveness for most debtors based on an impractical standard.
It appears ED is trying to shift the responsibility for making good decisions for enrolling in questionable schools by pushing that obligation and blame on the student. The new rules say, “The goal of the Department is to enable students to make informed decisions on the front end of college enrollment, rather than to grant them financial remedies after-the-fact when lost time cannot be recouped and new educational opportunities may be sparse. Postsecondary students are adults who can be reasonably expected to make informed decisions and who must take personal accountability for the decisions they make.”
While ED says educational institutions should not mislead the students and “remedies should be provided to a student when misrepresentation on the part of an institution causes financial harm to that student,” let’s see how much power and practicality those remedies have.
The ED again turns back to putting the responsibility and blame on the student for enrolling in the wrong school that may have misled them. ED says, “students have a responsibility when enrolling at an institution or taking student loans to be sure they have explored their options carefully and weighed the available information to make an informed choice.”
But what seems to be missing from that lofty goal is some sort of pre-screening by the school to review the cost of the education and the expected salary for the chosen field. For example, the other day I wrote about the $90,000 associates degree in web design. Does the school have a responsibility to sell a fair product or is the responsibility now focused on the student for believing the hype?
ED says, “The Department has an obligation to enforce the Master Promissory Note, which makes clear that students are not relieved of their repayment obligations if later they regret the choices they made.” So if your 18-year-old self made a bad choice of schools that provided an overpriced education with little value, that’s your own damn fault.
The proposed rule document says, “As of January 2018, it had received 138,989 claims, of which 23 percent had been processed.” Some of these claims go back more than a year.
It is quite possible those became a major issue with the new ED because Borrower Defense Claims were being submitted and approved. These claims were not approved on no basis but because students had been misled or deceived by the school.
But here is where ED is turning the table on debtors, “the Department is concerned that several features of the 2016 final regulations might have put the Department in the untenable position of forgiving billions of dollars of Federal student loans based on potentially unfounded accusations. Specifically, those regulations would allow the Department to afford relief to borrowers without providing an opportunity for institutions to adequately tell their side of the story.”
These new rules say, students who feel they were misled and deceived by schools to get them to enroll and take out federal student loans, may still submit claims but as long as they are “not in a collections status.” So students who were saddled with questionable loans by a questionable school will have to continue to make monthly payments or stay out of collections while their claim is processed for an undetermined amount of time.
ED wants to encourage students to enroll in income-driven repayment plans and make payments on their loans. These would be the same plans that put people into decades-long repayment plans with potentially big tax bills at the end. Balances in these programs go up, not down, as the monthly payment is insufficient to cover the interest building.
ED is worried that students claiming they were harmed by their schools will strategically default on their otherwise unaffordable debt. As evidence to support this concern, ED cites research by those who intentionally defaulted on their mortgage payments to take advantage of mortgage modifications. Talk about apples and oranges here.
“The Department is trying very carefully to balance relief for borrowers who have been harmed by acts of institutional wrongdoing, with its obligation to the taxpayer to provide reliable stewardship of Federal dollars.” And while that might be true, then why isn’t the Department limiting access to federal funds by schools that engage in questionable practices?
Those questionable practices have led to massive amounts of unaffordable student loan debt sitting in a non-payment status. The lack of oversight by ED to rein in the access to federal student loan dollars by typically for-profit schools who have been approved by questionable accreditation.
So ED says, “With more than a trillion dollars in outstanding student loans, the Department must uphold its fiduciary responsibilities and exercise caution in forgiving student loans to ensure that it does not create an existential threat to a program that lacks typical credit and underwriting standards.”
But where were the underwriting standards for schools selling degrees that students would never be able to afford to repay? Where was the fiduciary responsibility for ED and student loan debtors?
ED appears to say they are not going to get involved in resolving disputes or claims of wrongdoing against schools. That is going to be left up to the individual student to fight with the school through the courts. How students will be able to afford to do that, is a mystery.
And ED is not going to block schools from forcing students into secret arbitration or stopping schools from allowing students to enter class action suits against the schools. Instead, ED says in its press release on the rulemaking “that institutions requiring students to engage in mandatory arbitration or prohibiting them from participating in class action lawsuits provide plain language explanations of these provisions to enable students to make an informed enrollment decision.” So students who decide to go to schools that block access to courts to remedy claims were stupid to enroll.
Here is what the rule says, “it seems reasonable that consumer complaints should continue to be adjudicated through existing legal channels that put experienced judges or arbitrators in the position of weighing the evidence and rendering an impartial decision.”
Even with the Borrower Defense to Repayment program in place, ED again takes the step to say the student was the idiot in this situation when they enrolled at a school they believed. ED says, “As stated in the Master Promissory Note the borrower signs when initiating their first loan, the borrower is expected to repay the loan even if the borrower fails to complete the program or is dissatisfied with the institution or his or her outcomes.”
On the issue of a group discharge of federal student loans if a school is found to have engaged in “a misrepresentation made with knowledge of its false, misleading, or deceptive nature or with a reckless disregard for the truth,” ED punts and says that will be the focus of a different rule. This appears to close the door for bulk discharges of schools found guilty of deception, like in the Corinthian Colleges case.
As evidence why the group discharge would be harmful to students, ED says “Because an institution can refuse to provide an official transcript for a borrower whose loan has been forgiven, group discharges could render some borrowers unable to verify their credentials or work in the field for which they trained and have enjoyed employment.” Maybe the real answer is that is a school was found to deceive students they should still have to provide a transcript.
In the past, schools who enrolled students who never graduated from high school or had a GED could be found to have taken advantage of people who may not have been qualified to enroll in higher education. The proposed rule shifts the burden back to the uneducated student when it says, “We also propose changes to the Department’s current false certification regulations. The Department believes that in cases when the borrower is unable to obtain an official transcript or diploma from the high school, postsecondary institutions should be able to rely on an attestation from a borrower that the borrower earned a high school diploma since the Department relies on a similar attestation in processing a student’s Free Application for Federal Student Aid (FAFSA).”
Where is the underwriting in this process that ED says it engages in?
These new rules would apply to federal student loans first disbursed on or after July 1, 2019.
They would also “require a borrower to sign an attestation to ensure that financial harm is not the result of the borrower’s workplace performance, disqualification for a job for reasons unrelated to the education received, a personal decision to work less than full-time or not at all, or the borrower’s decision to change careers.”
Feel free to read the entire document, here.
My impression of the proposed new rules is the Department of Education wants to shift all the responsibility for falling for school marketing overpriced education to the least informed person in this transaction, the student.
It doesn’t take a crystal ball to see how this is going to work out. Badly for debtors.
If ED is worried about underwriting and a fiduciary responsibility then why are they passing out easy loans with little regard to affordability, to begin with? Does the government have a duty to protect it’s citizens or does it need to protect its poor financial decision making and schools they pump loans through? Or is this new policy all about blaming the victim instead of investigating the claims for validity?

Steve's essay was originally posted on The Get Out of Debt Guy web site.


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here. 

Thursday, May 10, 2018

CFPB to Shift Focus From Protecting Student Loan Debtors to Something Else. Essay by Steve Rhode

By  on May 10, 2018
Recently the Trump administration has tried to change the law so individual states would not be able to enforce ;laws covering student loan debt collectors.

The new head of the Consumer Financial Protection Bureau (CFPB), Mick Mulvaney, has just released the updated agenda for the CFPB.
According to the new agenda, the CFPB would drop its efforts to push forward regulations of student loan collectors and scrap “student loan servicing” from its focus.
Mulvaney has also indicated the CFPB will retreat from doing anything regarding student loans in general.
“This defangs the watchdog and instead turns the office into a lapdog for the industry,” said Chris Peterson, a former top CFPB official who is now director of financial services at the Consumer Federation of America.
The unit which has been the tip of the spear on these CFPB student loan efforts to protect debtors has been informed they will be reorganized into the CFPB Office of Financial Education. Now there is a department title which just screams no enforcement.
“This is a very significant change in the mission of the student office,” said Christopher Peterson, a law professor at the University of Utah and former enforcement attorney at the CFPB.
“America is facing an ongoing student debt crisis, with outstanding student debt surpassing $1.5 trillion and over 8 million borrowers in default on their student loans. Closing the office for students is like shuttering the fire department in the middle of a three-alarm fire,” Alexis Goldstein, the senior policy analyst at Americans for Financial Reform, said.
I don’t get it. All actions that have been taken by the Department of Education and now the new modified CFPB have the net effect of restricting supervision of student loan collectors, limit state authority to protect citizens from student loan collection abuse, reduce debt elimination from federal student loan fraud by schools, and give easier access to student loan money by for-profit schools.
You don’t need to read the tea leaves here to see what is going on, you just need to look at the billboard.
I don’t care what your political stripes are. With all these changes any student with any student loan debt should expect to be less protected from collector misinformation, bad advice, and poor servicing.
If you don’t believe me, just go ahead and file a complaint against your student loan servicer and see how much protection you get. Your new friend will be the word NONE.

Steve's essay was originally posted on The Get Out of Debt Guy web site.


*****
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here. 

Tuesday, November 14, 2017

Department of Education Coming to Jesus Moment With For-Profit Schools. Article by Steve Rhode

By  on November 10, 2017
99 percent of student loan fraud claims come from for-profit colleges and schools.
I’d love to tell you I absolutely think the current Trump administration Department of Education is going to get the message that for-profit colleges are problematic, but I doubt it.
The Century Foundation has obtained data from the U.S. Department of Education through a Freedom of Information Act (FOIA) request which paints a very clear picture of issues surrounding for-profit schools and student loan fraud issues. I can’t wait to see the magic the Department of Education uses to make these facts go away or not be relevant.
Out of the total of 98,868 complaints reviewed by TCF, for-profit colleges generated more than 98.6 percent of them (97,506 complaints). Of these complaints nonprofit colleges generated 0.79 percent (789 complaints) and public colleges generated 0.57 percent (559 complaints).
Approximately three-fourths of all claims (76.2 percent) were against schools owned by one for-profit entity, the now-closed Corinthian Colleges (75,343 claims). Removing Corinthian from the analysis, the vast majority of claims, over 94 percent, were still against for-profit colleges (22,160 of the 23,525 non-Corinthian claims).
Claims are concentrated around fifty-two entities—forty-seven for-profit companies and five nonprofit institutions—that have each generated twenty or more borrower defense claims. Of these five nonprofits, three converted from for-profit ownership.
The backlog of fraud complaints—currently numbering 87,000 not yet reviewed—is increasing, with the number of new claims submitted per month averaging approximately 8,000 since mid-August.”
The data uncovered while for-profit schools account for ten percent of student enrollment the students who attended were 1,100 times more likely to file a fraud claim.

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This article appeared on The Get Out of Debt Guy site. Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve here.

Wednesday, September 27, 2017

Student Loan Debt Hurts Economy, Consumers, and Retirement Savings, essay by Steve Rhode

When you live in a society like ours that is dependent on consumers to consumer goods and services, a reduction in the ability for growing sections of society to do their job and purchase stuff is going to lead to slower growth. That’s not good.

When growth slows there is less of a need for workers, jobs are cut, wages go flat, and life becomes tougher for many.

Historically, people accumulated wealth through homeownership and savings. When reaching the age of retirement the home could be sold and the equity created could be withdrawn. With less access to this type of wealth accumulation and the inability to save for retirement due to growing student loan debt, tragedy is on the horizon.

Student loan debt is hurting an entire generation of consumers who are setup for financial failure at this point.

The easy access to student loans has led to a growing for-profit private student loan industry that since 2009 has been drawing in many through loans and co-signing. Private student loans exploded with the advent of the for-profit schools. As an example, read Navient Knew Loans Were Garbage When They Saddled Students With Them. Yet the current Department of Education under Secretary Betsy DeVos seems resistant to crack down on protections from these schools.

Federal government student loans have been a blessing for many to obtain funds to attend higher education but they have been a curse as well. Schools who were qualified to receive federal funds looked at that easy money as a way to make an easy sale of a student into a seat regardless of the ability of the student to benefit from the loan and school.

Data published by the Federal Reserve Bank said, ” findings are consistent with American youth having accommodated tuition shocks not by forgoing schooling, but instead by amassing more debt.”
The Federal Reserve Bank of New York goes on to say, “Further analysis demonstrates that the tuition hike and student debt increase, despite leaving higher educational attainment unchanged, can explain between 11 and 35 percent of the observed approximate eight percentage-point decline in homeownership for 28-to-30-year-olds over 2007-15 for these same nine cohorts. The results suggest that states that increase college costs for current student cohorts can expect to see a response not through a decline in workforce skills, but instead through weaker spending and wealth accumulation among young consumers in the years to come.”

At the same time as homeownership has been declining, kids are living with their parents at an increasing rate.


As a society nothing good is going to come from lower amounts of wealth accumulation, and weaker spending.

Unless we tackle the growing problem of excessive student loan debt and allow those with unmanageable student loan debt to have access to a fresh start in bankruptcy, the economic future of the days ahead is going to be less than it could have been.

Steve Rhode


This article appeared on the Personal Finance Syndication Network web site and also on The Get Out of Debt Guy site. Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve here.

Thursday, September 7, 2017

Terrific essay by Steve Rhode: Is Betsy DeVos Nuckin Futs With Break From Student Loan Debtor Protections?

This terrific essay by Steve Rhode first appeared on Consumer Debt Guy blog site on September 6, 2017.
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By Steve Rhode on September 6, 2017
   
The Consumerist is reporting the Department of Education has terminated its cooperation with the Consumer Financial Protection Bureau in dealing with student loan servicer problems.
“DeVos accuses the Bureau of not living up to its end of agreements established in 2011 and 2013, by doing too much to hold loan servicers accountable.”
“DeVos suggests that actions taken by the CFPB to rein in shoddy student loan servicers and collectors only confuses borrowers.
“The Department takes exception to the CFPB unilaterally expanding its oversight role to include the Department’s contracted federal student loan servicers,” DeVos wrote. “The Department has full oversight responsibility for federal student loans.”
However, the Department’s ability to root out fraud was thrown into question last week, when the agency appointed former for-profit college executive Julian Schmoke to run the Department’s enforcement division.
While Schmoke currently works as a high-ranking director at a community college in Georgia, he spent several years working for DeVry University, a college that has been repeatedly accused of fraud by both federal and state authorities.”
“The claim that the CFPB ‘unilaterally’ expanded its oversight role over servicers and collectors of federal student loans is unfounded,” Persus Yu, director of the National Consumer Law Center’s Student Loan Borrower Project, said in a statement.
“Education is now trying to stop the CFPB from handling loan-related complaints, but Education’s failures are what led Congress to give the CFPB authority to help students,” Yu said. “DeVos is prioritizing the interests of predatory for-profit schools, debt collectors, and troubled student loan services over the interests of student loan borrowers.”

This recent action and the fact the Department of Education has not approved Borrower Defense claims leads me to wonder where is any proof the Department of Education gives a damn about student loan debtors.

Tuesday, July 25, 2017

National Collegiate Student Loan Trust's student loans may be uncollectible against California co-signers: Sweet!

National Collegiate Student Loan Trust (NCSL)has been in the news lately. The New York Times recently broke a story about NCSL's efforts to collect on the defaulted student loans it holds. According to the Times, NCSL holds $12 billion in private student loans, and more than 40 percent of those loans ($5 billion) is in default.

Squadrons of NCSL attorneys have fanned out across the United States to sue student-loan defaulters, but they have been running into trouble. In case after case, judges have thrown NCSL's collection lawsuits out of court because NCSL can't produce the paperwork to show that it owns the debt.

And now, in California,  NCSL faces another obstacle to its debt-collection efforts. An obscure  California statute may make it impossible for NCSL to collect against co-signers on private student loans taken out in the Golden State.

Section 1799.91 of the California Civil Code requires lenders to provide loan co-signers with a specific written notice that warns them of the risk they take when they co-sign a loan. The warning states:
You are being asked to guarantee this debt. Think carefully before you do. If the borrower doesn't pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.

You may have to pay the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which increases this amount.
 The creditor can collect this debt from you without first trying to collect from the borrower. The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become part of your credit record.
Importantly, California law requires co-signers to acknowledge receipt of the statutory warning by signing their names below the cautionary message.
National Collegiate Student Loan Trust requires most of its student borrowers to obtain co-signers on their loans; and reportedly, most NCSL loans do not contain the California statutory warning. The combination of missing documents and the California co-signer statute may make it virtually impossible for NCSL to collect on defaulted student loans in California. Moreover, when NCSL borrowers in California find out that their student loans may be uncollectible, it seems inevitable that more of them will default.

Of course no one should encourage a solvent debtor to welsh on a lawful debt. People who took out private loans held by NCSL should pay them back if they have the ability to do so. But the banks made it virtually impossible for destitute private student-loan borrowers to discharge their private college loans in bankruptcy when they lobbied Congress to pass the so-called Bankruptcy Reform Act of 2005. Now, at least, hard pressed student-loan defaulters have some defenses if they get sued by NCSL--particularly in California.

I am grateful to Steve Rhode for alerting me to this important development. Mr. Rhode wrote on this issue in the Get Out of Debt Guy blog site.  I'm also grateful to California attorney Christine Kingston for calling Steve's attention to the California co-signer statute and its significance for student-loan debtors.

 References

Stacy Cowley and Jessica Silver-Greenberg. As Paperwork Goes Missing, Private Student Loan Debts May Be Wiped Away. New York Times, July 17, 2017.

 Steve Rhode. California Student Loan Co-Signer Statute Helps to Kill Student Loan Debt. Get Out of Debt Guy, July 25, 2017.











Thursday, July 20, 2017

Building a Better America Budget A Laugh for Student Loans: Great Essay By Steve Rhode

The House Budget Committee has just rolled out a first pass at a new federal budget titled Building a Better America.

People dealing with student loans had better start thinking quickly and clearly if their political ideology is more important than the future of student loan debtors.
Here are a couple of choice sections.
“The Federal Government holds most student loan debt; as of the first quarter of 2017, its portfolio was $1.29 trillion, up from roughly $516 billion in fiscal year 2007. As Federal lending consumes an ever-larger share of the student loan market, it crowds out private and other lenders that may have better products to meet borrowers’ needs.”
It would appear the argument is the government wants to get out of the student loan market and drive more people to private student loans which don’t have any of the payment options, forgiveness programs, or helpful options federal loans have.
“Account for the True Costs of Student Loans. By statute, the government’s accounting procedures for assessing the costs of student loan programs do not incorporate market risk. For example, borrowers may have trouble finding a job and repaying loans in an economic downturn. To measure student loan program costs, the budget recommends using fair value accounting, which does assume such market risk.”
While the budget may recommend fair value accounting, the Department of Education is busy trying to gut regulations protecting students from underperforming schools which lead to failed educations and problem debt. The administration can’t have it both ways.
“In areas such as health care, welfare, environmental regulation, education, workforce development, and transportation, we put federal spending on a budget and empower the states, which are best suited to address the individual needs of their citizens and communities.”
I get the philosophy of returning more responsibility to the states but won’t this just create an inequity in the ability of individuals to plan for education when there may be a patchwork of education initiatives by state instead of one federal regulation when it comes to student loan and education issues?
“Simplify and Streamline Higher Education Programs and Financing to Protect Students and Taxpayers. The current Federal aid system is complicated and time-consuming for students and parents trying to make higher education financing decisions. In addition to Federal grant aid, six loans, nine loan repayment plans, eight loan forgiveness programs, and 32 options for loan deferment and forbearance exist. Each program has different eligibility criteria and terms. The budget envisions a simplified, transparent, and fiscally sustainable aid system. Principles for reform include more transparency for loans and repayment plans, removing perverse incentives to over-borrow, consolidating the array of programs, and protecting taxpayers.”
While it is possible that some changes could be made in the loan options, forgiveness programs, and repayment options, the key question here in a budget that is poised to trim costs is what will be cut and eliminated? The administration has already indicated they would like to like to change income driven repayment programs to make them shorter but have higher monthly payments. The Trump administration also would like to make wholesale changes or eliminate forgiveness programs like the Public Service Loan Forgiveness program.
I’d love to hear your opinion. Do you think the changes proposed in this budget will help to make American education great again? Post your comments below.

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This essay by Steve Rhode first appeared in  Get Out of Debt Guy on July 18, 2017. To learn more about Steve Rhode, click here.

Wednesday, July 12, 2017

Half a millon bucks in student loans to become a pharmacist: Does that make any sense?

Earlier this week, I read a letter posted on Steve Rhode's web site: Get Out of Debt Guy and distributed on the Personal Finance Syndication Network.  An anonymous writer asked Mr. Rhode how to handle $500,000 in student loans that he or she borrowed to become a pharmacist.  Rhode's advice was spot on, and I won't comment further about how this individual should manage all that debt.

My purpose here is to ask the simple and obvious question: How could anyone be permitted to accumulate a half million dollars in student loans to obtain a pharmacy degree?

As I said, the writer posted anonymously, so I have no way of knowing whether the person is male or female.  I'll just refer to this debtor as Pete.

As Pete mentioned in his query to Steve Rhode, he obtained a GED when he was 35 years old, about ten years ago. He obtained a BS in Neuroscience, another BS in biochemistry, and a doctor of pharmacy degree, which he recently completed. So I'm guessing Pete is about 45 years old, and he's embarking on a new career as a pharmacist.

Will Pete earn enough money as a pharmacist to pay off $500,000 in student loans? No, he won't.  We don't know the interest rate on his loans, which are both federal and private; but let's assume all his loans are accruing interest at 6 percent a year. That's $30,000 a year just to pay accruing interest on the debt.

What are Pete's options? Perhaps he can enroll in a 20-year income-base repayment plant, whereby his loan payments are based on his income. If he obtains a job paying $60,000 a year, which seems reasonable, his payments will be less than $400 a month. But of course, a payment that low won't begin to cover accruing interest on Pete's loans.

Pete might get a public service job that will allow him to make income-based payments for 10 years with the balance forgiven if he makes 120 consecutive payments.  Again, his monthly payments probably won't even cover accruing interest.

Bottom line is this: Pete, who is in his mid-40s, doesn't have a snowball's chance in hell of ever paying back $500,000 in student loans.

We can blame Pete for borrowing so much money or for obtaining two bachelor's degrees instead of one. Perhaps we can criticize him for making poor choices when choosing where to study. Maybe he could have borrowed less money had he attended less expensive colleges.

But that would be pointless. The parties who bear the blame for Pete's unmanageable debt load are the U.S. government and the banks, which loaned Pete way too much money.

Pete's situation is atypical, I'll grant you, but it is far more common than many people believe. Not long ago I blogged on a Hofstra law graduate who owes $900,000 in student loans--pretty damn near a million bucks!

The student loan crisis is not small beer. Less than half of the nation's student borrowers in repayment are paying down the principle of their loans. The problem is as obvious as a tsunami barreling down on a beach full of sunning vacationers.

Why can't we put some limit on the amount of money students can borrow? The amount of interest that can accrue? The amount of penalties and fees that can get added to borrowers' debt when they default?

In fact there are lots of things we could do to limit the harm caused by the student loan crisis. But nobody is talking about fixes. The college presidents, whether they are Ivy League college leaders or the CEO of Bobby Joe's College of Auto Mechanics, are saying nothing about the student loan mess. Every school, college, and university participating in the federal student loan program--more than 4,000 institutions--is dependent on regular infusions of student-loan dollars to keep the doors open.

Someday, it will become apparent that a high percentage of the nation's accumulated student-loan debt--30 percent, 40 percent, perhaps 50 percent--is not going to be paid back; and this house of cards will collapse.

But until that day comes, our politicians, academics and the national media will continue focusing on what they think is the most important topic of the day--President Trump's alleged communications with the Russians. And like summer vacationers lolling on the beach, a lot of pundits, intellectuals and journalists are going to be caught unawares as the student-loan tsunami flows over America's colleges and universities and destroys a good many of them--beginning with the small liberal arts colleges.

References

Steve Rhode, How Do I Handle My $500K of Student Loans to Become a Pharmacist? Personal Finance Syndication Network. 


Monday, July 3, 2017

Department of Education Punts on Borrower Defense to Repayment Rules. Essay by Steve Rhode



I’m still waiting to be pleasantly surprised by the Trump Department of Education (ED) under Secretary DeVos. It has not happened yet.

From the recent actions to remove critical information from consumer notices to wanting to get a single loan servicer to handle all federal loans, the current incarnation of ED seems to be moving in a direction that provides less support and help for debtors.

On October 2016, the then ED announced new regulations to go into force on July 1, 2017. “The U.S. Department of Education today announced final regulations to protect student borrowers against misleading and predatory practices by postsecondary institutions and clarify a process for loan forgiveness in cases of institutional misconduct. These final regulations further cement the Obama Administration’s strong record and steadfast commitment to protecting student loan borrowers, deterring harmful practices by institutions, safeguarding taxpayer dollars and holding institutions accountable for their actions.” – Source

The Betsy DeVos ED is delaying the implementation of the Borrower Defense to Repayment rules. The ED announced today “Postsecondary institutions of all types have raised concerns about the BDR regulations since they were published on Nov. 1, 2016. Colleges and universities are especially concerned about the excessively broad definitions of substantial misrepresentation and breach of contract, the lack of meaningful due process protections for institutions and “financial triggers” under the new rules.” – Source

So the current ED is going to start over again and says, “The Department plans to publish its Notice of Intent to Conduct Negotiated Rulemaking on BDR and GE in the Federal Register on June 16, 2017. The Department will conduct public hearings on BDR and GE on July 10, 2017, in Washington, D.C. and July 12, 2017, in Dallas, Texas.” Goodness knows how long this new process if going to take and what opportunities student loan debtors will have to actually have their loans discharged due to misrepresentation by colleges and schools who received federal student loans.
For example, the ED previously said, “Many of these claims are from borrowers who attended programs that the Department found had been publicized with misleading job placement rates.” – Source

What do you think, should schools who misrepresented the success of their programs or actual employment rates to induce students to enroll, get a free pass and eliminated from the new rules? Let me know what you think by posting your comment below.
Even under the old administration the Borrower Defense to Repayment processing was less than optimal. There are students that have been waiting years for a conclusion to their claims and the next changes will only serve to slow down the entire process of assisting harmed student loan debtors.

As an example, ED previously said they had ” received a total of approximately 82,000 claims.” And while a previous report on the status of the program said 16,000 had been processed and approved, the current ED press release says, “Nearly 16,000 borrower defense claims are currently being processed by the Department, and, as I have said all along, promises made to students under the current rule will be promises kept,” said Secretary DeVos. So where are the rest of the claims?

Steve Rhode

Get Out of Debt Guy – TwitterG+Facebook
This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.