Showing posts with label Public Service Loan Forgiveness. Show all posts
Showing posts with label Public Service Loan Forgiveness. Show all posts

Friday, October 2, 2020

If You Have Problem Debt and Student Loans – Do Not Vote for Trump--Essay by Steve Rhode

 


Written by Steve Rhode

The 2016 election is a cantankerous event. What surprises me most are the people that want to decide who to vote for based on what they see on social media or one political learning media outlet.

Strictly speaking from a consumer debt point of view, who to vote for isn’t even close.

And frankly, if you care about creditors being responsible for abusing consumers or you are drowning under student loan debt then there is only one candidate to vote for.

Under Trump--Student Loans

The DeVos Department of Education has gone out of its way to punish student loan debtors at every opportunity. In fact, the level of aggressiveness by the Department has made it look like they want to punish all debtors and go back on the word of the government to help people to see light at the end of the tunnel.

Abusive Schools – The Department has removed or eliminated rules that require schools to be responsible for abusive practices and fraud that let to enrolling students who are then on the hook for federal student loans.

The Department of Education all but stopped processing valid claims for the elimination of federal student loans under the government policy that is known as the Borrower Defense to Repayment.

Student Loan Servicers

Student loan servicers have been allowed to give debtors poor advice, bad advice, or self-serving advice with little consequences. The Department has asserted that States can’t go after student loan servicers for abusive and deceptive practices. Since the servicers are acting on behalf of the federal government.

Public Service Loan Forgiveness

The first wave of debtors eligible to have their student loans forgiven under the President Bush initiated the Public Service Loan Forgiveness program, which came due under the current Department of Education.

Secretary DeVos has done a lot to prevent people from getting the promised forgiveness. Roadblocks and hurdles have been artificially created to prevent people from getting the forgiveness they worked towards for ten years. One of the more ridiculous measures was the position that even though a person is eligible for loan forgiveness after 120 payments, it was stated the person must continue in eligible employment for however long afterward it takes for the Department to review the application for forgiveness. Given the current delays, that could be a year or more stuck in a lower-paying job.

Another person ran into an issue where they made the payment the monthly statement from the loan servicer said to make and it was found the servicer statement was off by less than a dollar so none of the 120 payments were eligible to be counted towards forgiveness.

You can see the crazy things the Department has done in these past posts.

Sliding Scale Forgiveness

Even when a school was found to be fraudulent or deceptive and the Department of Education was supposed to forgive the debt, the Department came up with an arbitrary sliding scale of forgiveness that left students harmed by the school, to hold a life of debt. And these are for schools that the courts determined were fraudulent scams. The previous position of the Department of Education was to grant full forgiveness.

Bankruptcy Discharge for Federal Student Loans

The Department of Education has fought bankruptcy discharge for debtors that are clearly in hardship and distress. Even though they have a policy to not do this.

Instead, the current administration has wanted people to enroll in Income-Driven repayment plans that will never repay the debt but make it continue to grow. For more articles on this, see these posts.

A Bankruptcy Judge even said the lifetime of unpayable student loans creates a prison of emotional confinement. While students are left to struggle the schools that enrolled them face little to no consequences for putting the student in federal student loan debt.

The Judge said, “It is this Court’s opinion that many consumer bankruptcies are filed by desperate individuals who are financially, emotionally, and physically exhausted. Sometimes lost in the discussion that the bankruptcy discharge provides a fresh start to honest but unfortunate debtors is that, perhaps as importantly, it provides a commensurate benefit to society and the economy. People are freed from emotional and financial burdens to become more energetic, healthy participants.”

CFPB

Through the Trump presidency, the Consumer Financial Protection Bureau has been under assault to gut their abilities, power, and protection of consumers. Efforts had been put forward to restrict the protection of consumers.

For example, the CFPB terminated the consumer advisory board members and then made meetings secret.

The CFPB Financial Law Taskforce claimed “to have established the Taskforce to obtain recommendations about how to improve and strengthen consumer financial laws and regulations. The Taskforce’s objective therefore goes to the heart of the Bureau’s mission—and positions the Taskforce to provide a blueprint for the CFPB to revise the laws that protect financial consumers across the United States.” – Source

“None of the selected Taskforce members has a background advocating for consumers, nor does any appear to believe that the CFPB should vigorously protect consumers from dangerous and confusing financial products.”

The meetings led by creditor representatives are closed and secret. Who knows what is going on.

Trump: F-

If you want to see people go further in debt, live lives of student loan financial slavery, and have fewer protections against the interest of creditors and banks, vote Trump.

Biden

Since former Vice President Biden is not currently in office, I have to turn to what his policies state.

Student Loans

  • Stop for-profit education programs from profiteering off of students. Students who started their education at for-profit colleges default on their student loans at a rate three times higher than those who start at non-profit colleges. These for-profit programs are often predatory – devoted to high-pressure and misleading recruiting practices and charging higher costs for lower quality education that leaves graduates with mountains of debt and without good job opportunities. The Biden Administration will require for-profits to first prove their value to the U.S. Department of Education before gaining eligibility for federal aid.
  • The Biden Administration will also return to the Obama-Biden Borrower’s Defense Rule, forgiving the debt held by individuals who were deceived by the worst for-profit college or career profiteers.

    Finally, President Biden will enact legislation eliminating the so-called 90/10 loophole that gives for-profit schools an incentive to enroll veterans and servicemembers in programs that aren’t delivering results.


  • Crack down on private lenders profiteering off of students and allow individuals holding private loans to discharge them in bankruptcy. In 2015, the Obama-Biden Administration called for Congress to pass a law permitting the discharge of private student loans in bankruptcy. As president, Biden will enact this legislation. In addition, the Biden Administration will empower the Consumer Financial Protection Bureau – established during the Obama-Biden Administration – to take action against private lenders who are misleading students about their options and do not provide an affordable payment plan when individuals are experiencing acute periods of financial hardship. – Source

More than halve payments on undergraduate federal student loans by simplifying and increasing the generosity of today’s income-based repayment program. Under the Biden plan, individuals making $25,000 or less per year will not owe any payments on their undergraduate federal student loans and also won’t accrue any interest on those loans. Everyone else will pay 5% of their discretionary income (income minus taxes and essential spending like housing and food) over $25,000 toward their loans. This plan will save millions of Americans thousands of dollars a year. After 20 years, the remainder of the loans for people who have responsibly made payments through the program will be 100% forgiven. Individuals with new and existing loans will all be automatically enrolled in the income-based repayment program, with the opportunity to opt out if they wish. In addition to relieving some of the burden of student debt, this will enable graduates to pursue careers in public service and other fields without high levels of compensation. Biden will also change the tax code so that debt forgiven through the income-based repayment plan won’t be taxed. Americans shouldn’t have to take out a loan to pay their taxes when they finally are free from their student loans.

Affordable Education

For too many, earning a degree or other credential after high school is unaffordable today. For others, their education saddles them with so much debt it prevents them from buying a home or saving for retirement, or their parents or grandparents take on some of the financial burden.

  • Providing two years of community college or other high-quality training program without debt for any hard-working individual looking to learn and improve their skills to keep up with the changing nature of work.
  • Creating a new grant program to assist community colleges in improving their students’ success.
  • Tackling the barriers that prevent students from completing their community college degree or training credential.
  • Invest in community college facilities and technology.

We have a student debt crisis in this country, with roughly more than 44 million American individuals now holding a total of $1.5 trillion in student loans. One in five adults who hold student loans are behind on payments, a disproportionate number of whom are black. Thus, student debt both exacerbates and results from the racial wealth gap.

This challenge is also intergenerational. Almost one in ten Americans in their 40s and 50s still hold student loan debt. But, college debt has especially impacted Millennials who pursued educational opportunities during the height of the Great Recession and now struggle to pay down their student loans instead of buying a house, opening their own business, or setting money aside for retirement.

There are several drivers of this problem. The cost of higher education has skyrocketed, roughly doubling since the mid-1990s. States have dramatically decreased investments in higher education, leaving students and their families with the bill. And, too often individuals have been swindled into paying for credentials that don’t provide value to graduates in the job market. As president, Biden will address all of these challenges.

Biden’s plan to make two years of community college without debt will immediately offer individuals a way to become work-ready with a two-year degree or an industry certification. It will also halve their tuition costs for obtaining a four-year degree, by earning an associate’s degree and then transferring those credits to a four-year college or university. And, as a federal-state partnership, it will ensure states both invest in community colleges and give states some flexibility to also invest in college readiness or affordability at four-year institutions.

Public Service Loan Forgiveness

Make loan forgiveness work for public servants. Public servants do the hard work that is essential to our country’s success – protecting us, teaching our children, keeping our streets clean and our lights on, and so much more. But the program designed to help these individuals serve without having to worry about the burden of their student loans – the Public Service Loan Forgiveness Program – is broken. Biden will create a new, simple program which offers $10,000 of undergraduate or graduate student debt relief for every year of national or community service, up to five years. Individuals working in schools, government, and other non-profit settings will be automatically enrolled in this forgiveness program; up to five years of prior national or community service will also qualify. Additionally, Biden will fix the existing Public Service Loan Forgiveness program by securing passage of the What You Can Do For Your Country Act of 2019. Biden will ensure adjunct professors are eligible for this loan forgiveness, depending on the amount of time devoted to teaching. – Source

I would expect a Biden Department of Education to honor the promise of Public Service Loan Forgiveness for people under the past program.

Bankruptcy

  • Make it easier for people being crushed by debt to obtain relief through bankruptcy.
  • Expand people’s rights to take care of themselves and their children while they are in the bankruptcy process.
  • End the absurd rules that make it nearly impossible to discharge student loan debt in bankruptcy.
  • Let more people protect their homes and cars in bankruptcy so they can start from a firm foundation when they start to pick up the pieces and rebuild their financial lives.
  • Help address shameful racial and gender disparities that plague our bankruptcy system.
  • Close loopholes that allow the wealthy and corporate creditors to abuse the bankruptcy system at the expense of everyone else. – Source

Biden: You Give Him the Grade

So if student loan debt and consumer protections are important to you and if facts matter, then I welcome you to make your own informed decision based on the information above. But given what the positions and policies are, clearly, Biden would be the logical choice if these issues matter to you.

But here is the bottom line, if you vote for Trump, don’t complain later when your student loan servicer lies to you, your loans aren’t dealt with as promised, and you find yourself stuck in a life of debt without consumer protections.

You get what you vote for.

******

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.  You can read this essay on Mr. Rhode's web site at https://getoutofdebt.org/153979/if-you-have-problem-debt-and-student-loans-do-not-vote-for-this-candidate#respond.

Saturday, October 19, 2019

Betsy DeVos' Education Department is a clown car, but no one is laughing

For the last three years, the national political debate has focused on international issues: Russia, Ukraine, and now Syria. But look at what's happening at home. More than 45 million people are indebted by student loans, and more than half of these debtors cannot repay what they borrowed. In effect, they are victims of financial homicide.

Betsy DeVos, President Trump's Education Secretary, is spectacularly indifferent to this crisis, and she has made the crisis worse by her callousness and craven obsequence to the for-profit college industry. Without a doubt, she is guilty of malfeasance and venality. Let's summarize her reprehensible conduct:

Public Service Loan Forgiveness. The Department of Education has flatly refused to administer the Public Service Loan Forgiveness program (PSLF) competently.  More than three-quarters of a million borrowers were qualified for the  PSLF program by Navient, DOE's contracted loan servicer. But DOE has only approved roughly 1 percent of the applications for loan forgiveness. Apparently, DOE takes the position that 99 percent of the people who believed they were qualified for PSLF loan forgiveness were mistaken.

A federal judge ruled last February that DOE had administered PSLF arbitrarily and capriciously in a lawsuit brought by the American Bar Association. Later, the American Federation of Teachers sued DOE, arguing, like the ABA, that DOE was administering DOE in violation of the Administrative Procedure Act.  Has Betsy made amends? No.

Borrower Defense Program.  The federal government has a"borrower defense" process in place for student-loan borrowers to have their student loans forgiven if they can show that their for-profit college defrauded them. A few weeks ago, DOE issued new rules for administering the program. Betsy will allow the for-profit colleges to force students to sign covenants not to sue and waive their right to join class-action lawsuits. DOE's revised rules for processing borrower-defense claims are so onerous that DOE itself estimates that only 3 percent of applicants will get relief.

Student-Loan Bankruptcies.  DOE continues to take the position that distressed student-debtors are ineligible for bankruptcy relief, no matter how desperate the debtor's circumstances.  DOE has a policy in place (perhaps unwritten) that authorizes Educational Credit Management Corporation to assume the right to fight student-bankruptcy cases, and ECMC fights them all.  ECMC, by the way, has accumulated a billion dollars in unrestricted assets--a fat reward for naked brutality.

Betsy DeVos, a multi-millionaire who owns a huge yacht, presides over this clown car of an Education Department, which she has stuffed with cronies from the for-profit college industry. And the taxpayers provide her with a personal security detail that costs almost $8 million a year.

This clown car is not funny. Surely DeVos' maladministration of the Public Service Loan Forgiveness program, apart from everything else she has done or failed to do, provides ample grounds for impeachment.  I feel sure that if the Democrats voted articles of impeachment against her in the House of Representatives, some Republicans would vote for it.

And, if her reckless and lawless behavior was brought to the U.S. Senate, I think there would be enough bipartisan votes to remove her from office.

 Without question, 45 million student-loan borrowers would be interested in the outcome of any impeachment proceedings, and several million of these people are probably single-issue voters. In other words, millions of college-loan debtors will vote for the presidential candidate in 2020 who promises student-loan debt relief.  That candidate is not the guy who appointed Betsy DeVos to run the Department of Education.

Betsy DeVos's Education Department is a clown car.



Friday, October 4, 2019

Feds spend millions on Betsy DeVos' personal security: Do Americans hate her that much?

Politico (Nicole Gaudiano and Caitlin Emma) reported that Education Secretary Betsy DeVos' security detail is projected to cost taxpayers $7.87 million in the coming fiscal year. That's up by about $1.5 million over last year's cost: $6.24 million.

Betsy is protected by the U.S. Marshals Service, which says its job is to "monitor and mitigate threats" to DeVos's personal safety.

Is that cost really necessary? After all, the four previous Education secretaries were content to be protected by the Department of Education's modest security force.

I have a few comments about Secretary DeVos' security detail. First, since DeVos' security costs are going up, that must mean that threats against her are accelerating. If that's true, maybe DeVos and President Trump should ask themselves why so many people are angry with her instead of just hiring more marshals.

Indeed, millions of student-loan borrowers have lots of reasons to be mad at Betsy DeVos: her gross mishandling of the Public Service Loan Forgiveness program, her efforts to water down protections for students who were defrauded by their colleges, and her shameless pandering to the for-profit college industry.

But then Betsy DeVos' heavy security detail is probably not that unusual among the nation's top public officials. I feel sure that most powerful politicians--Republicans and Democrats alike--have bodyguards. Do you think Nancy Pelosi, Chuck Schumer, Lindsey Graham, and Mitch McConnell go to the grocery store unaccompanied?

What a world we live in! Our elected and appointed officials--people we count on to look after the public interest--are being driven around in chauffeured limousines--protected from public contact by tinted glass and armed bodyguards. The only citizens they spend any time with are rich people with big checks in their hands.

So if you want to meet Betsy DeVos, you have two choices. You can become filthy rich and make a big donation to the Republican Party. In gratitude, Betsy might invite you over for cocktails on her yacht, the Seaquest.

If you aren't rich, you won't meet Betsy DeVos unless you throw yourself in front of her limousine and get run down by her chauffeur. Maybe then you and Betsy could have a little chat about your student loans while you're waiting for an ambulance.

Betsy's yacht






Tuesday, September 24, 2019

Like driving into a CAT 5 hurricane, the Department of Education is taking the student-loan program toward catastrophe

I lived in Houston when Hurricane Rita hit the Gulf Coast in 2005. Weather forecasters predicted that Rita would make landfall in Galveston Bay and that Galveston and towns south of Houston would suffer massive flooding and wind damage. The hurricane predictors also warned that parts of Houston would flood.

Responding to these warnings, hundreds of thousands of people--perhaps a million--fled Greater Houston in every direction. Some Houstonians traveled west toward San Antonio on I-10, some drove up I-45 toward Dallas, and others evacuated to the east on I-10.

My wife and I decided to head east toward Baton Rouge, where we could shelter with family. But we miscalculated. Our major mistake was to evacuate too late. As we drove east on I-10, we discovered that the highway was clogged with cars as were all auxiliary routes and surface roads.

Moreover, as we listened to our car radio, we heard the hurricane experts change their prediction about where Rita would make shore. It would not batter Galveston, they said; it would make landfall in southwestern Louisiana near the town of Cameron.

After about an hour on the road, my wife and I reached these conclusions. First, we would not reach Baton Rouge before Rita made landfall because the Interstate was fast turning into a parking lot. Second, we would run out of gas before reaching our destination and become stranded on the highway. And third--and perhaps most importantly--we were driving straight into the storm!

So we turned around and headed home to Houston. We arrived at a deserted city, but the Alabama Ice House was open and serving cold, draft beer to a small group of patrons. I still remember the taste of my ice-cold Red Stripe, served by a bartender who didn't give a damn about hurricanes. In the end, we suffered no damage from Rita.

After that experience, I vowed to pay closer attention to oncoming storm and evacuate early if I had any indication that a hurricane was headed my way.

The federal student-loan program is the economic equivalence of a CAT 5 hurricane hovering just offshore of our national consciousness. Education Secretary Betsy DeVos has described the program as a looming thunderstorm but she seems intent on driving straight into it.

As everyone knows from listening to the media, 45 million Americans have outstanding student loans that now total $1.6 billion. As DeVos has publicly admitted, more than 40 percent of those loans are "in distress" and only about one debtor in four is paying back both principal and interest on this debt.

More specifically, we know that 7.3 million college borrowers are in income-driven repayment plans that are designed so that people will never pay off their loans. More than 5 million people are in default, and another 6 million have loans in deferment or forbearance.

That's 18 million people whose total indebtedness grows larger by the month. Very few of these 18 million souls will ever pay back their student loans.

What is the U.S. Department doing about it? As I said, Betsy DeVos is driving full speed into the storm.  She refuses to grant significant debt relief to the people who signed up for the Public Service Loan Forgiveness Program--granting only about 1 percent of the applications.

And DeVos's DOE is doing everything it can to deny distressed student-loan debtors relief in the bankruptcy courts. DOE or its hired gunslinger, Educational Credit Management Corporation, fight nearly every student debtor who attempts to discharge student loans by filing for bankruptcy.

DeVos is also slowing down and complicating the process whereby college borrowers can have their student loans forgiven on the grounds that their college or school defrauded them.

Is the student-loan program in a bubble similar to the housing bubble of 2008? Yes, it is. In fact, when the student-loan bubble bursts, the suffering will be greater than the home-mortgage disaster.

The Democrats are "woke" about this crisis and Senators Warren and Sanders propose massive debt relief.  As I have said in a previous commentary, I am OK with their proposals; but politically that is not likely to happen.

As I have been saying for a quarter-century (yes, really), the best solution to this train wreck is to allow insolvent student-loan debtors to discharge their loans in bankruptcy. The Democrats have introduced legislation to accomplish this, and several Democratic presidential candidates are among the bill's co-sponsors.

But that bill is going nowhere, in spite of the fact that the Democrats hold the House of Representatives.  So we have two political parties that are ignoring the hurricane warnings. The Democrats decry the situation without doing anything about it in Congress, and the Republicans are racing to the center of the storm, oblivious to the human disaster that is building like a tropical depression in the Gulf of Mexico.

This will not end well for anyone.



Monday, August 19, 2019

Trump hires a fox to run the chicken house: Former student-loan servicing exec named as new Student-Loan Ombudsman

President Trump and Education Secretary Betsy DeVos remind me of the two bullies in The Christmas Story: Scott Farkus and Grover Dill, who spend their days terrorizing elementary-school kids.

Since Trump was elected, his administration has aggressively signaled that it does it not give a goddamn about student-loan debtors. In fact,  his people seem to be looking for ways to demean them and increase their misery. Here's the latest:

The Trump administration recently announced that it is appointing Robert G. Cameron, a former executive of a student-loan servicing company as the Student Loan Ombudsman for the Consumer Financial Protection Bureau. Cameron is a former senior executive of the Pennsylvania Higher Education Assistance Agency (PHEAA), which operates nationally under the name of Fedloan Servicing, the outfit that royally screwed up the Public Service Loan Forgiveness program.

There's good money in being a student-loan servicing company. According to Mother Jones, PHEAA gave out $2.5 million in bonuses to executives in 2007 and spent hundreds of thousands of dollars a year on board retreats that included $150 cigars and falconry lessons.

As the Government Accountability Office reported last year, Fedloan Servicing (which GAO did not identify by name) processed more than one million people's applications to have their employment certified as eligible for student-loan forgiveness. Fedloan approved 75 percent of those applications.

Then when the borrowers filed to have their student loans forgiven, the Department of Education denied more than 90 percent of their claims. Fedloan Servicing has been sued for giving student borrowers inaccurate information, and the Department of Education has been sued for arbitrarily and capriciously denying public-service loan forgiveness claims.

So why would the Trump administration appoint an executive from a thoroughly discredited student-loan servicing outfit to be the Student Loan Ombudsman? Obviously, they don't care about the optics.

Trump and DeVos are blithely indifferent to the fact that there are 45 million student-loan borrowers in the United States, and most of them will vote in the 2020 election. They're "screwing over" an important constituency while Democratic presidential nominees are promising student-loan forgiveness.

By appointing Robert Cameron as Student Loan Ombudsman, Trump hired a fox to run the chicken house. But Trump forgot one important fact-- these chickens can vote.


Donald Trump and Betsy Devos: Modern-day bullies 

Tuesday, July 16, 2019

Weingarten v. DeVos: American Federation of Teachers accuses the Department of Education of mismanaging the Public Service Loan Forgiveness program

Last week, Randi Weingarten and the American Federation of Teachers (AFT) sued Education Secretary Betsy DeVos and the U.S. Department of Education, accusing DOE of mismanaging the Public Service Loan Forgiveness program (PSLF). AFT sued on behalf of itself and eight educators whose applications for public-service loan forgiveness were denied. 

Weingarten is president of AFT and she sued the Department of Education in her official capacity as an AFT officer. In a call to reporters, Weingarten was highly critical of DOE's handling of the PSLF program. “This program was not supposed to be negotiable or debatable," Weingarten told reporters.  "It is a right under [the] law. It shouldn’t be a crapshoot, but under Betsy DeVos, that is exactly what it’s become." 

PSLF was enacted by Congress in 2007 to aid student-loan borrowers who desired to enter public service occupations but were deterred by their burdensome student loans. Under the program, student-loan borrowers in qualified public-service jobs who make 120 monthly payments in approved federal loan programs are entitled to have their remaining student-loan debt forgiven. 

The first PSLF participants became eligible for student-loan forgiveness in the fall of 2017, after having made 120 student-loan payments over the previous ten years. When they applied for loan forgiveness, however, DOE denied 99 percent of the applications. Most PSLF loan-forgiveness applications were denied on the grounds that the applicants were not eligible to participate even though their loan servicers had assured them they were eligible.

Why is AFT interested in the way DOE is managing the PSLF program? 

AFT represents 1.7 million teachers and public-service professionals, and many AFT members are hoping to obtain student-loan relief under PSLF. In a survey of its members, AFT learned that 82% of AFT members who had submitted PSLF applications were denied. Many applicants were denied for failing to meet eligibility requirements due to misinformation provided by their loan servicer

According to AFT's lawsuit, DOE disregarded repeated misrepresentations by its student-loan servicers that student-loan borrowers were qualified for PSLF loan forgiveness. 
Those servicers misinformed [AFT members] that they were “on track” for PSLF and making “qualifying” payments for PSLF, even though they did not actually have qualifying loans or were not in qualifying repayment plans. Only years later, after they had made 120 payments and applied for forgiveness, did these public servants learn for the first time that their payments did not count. Had the loan servicers given these Plaintiffs the correct information, they easily could have consolidated their loans, entered qualifying repayment plans, and been eligible for forgiveness under PSLF. 

AFT is suing under two primary legal theories. First, AFT argues that DOE violated the Administrative Procedure Act in the way it handled PSLF loan-forgiveness applications. Second, AFT accuses DOE of violating due process under the Fifth Amendment to the U.S. Constitution. 

In some ways, AFT's lawsuit is similar to the one filed by the American Bar Association (ABA) against the Department of Education in 2016. The ABA accused DOE of wrongly denying ABA the right to participate in the PSLF program. It also sued on behalf of four public-service lawyers whose applications for PSLF loan forgiveness were denied.

Judge Timothy Kelly ruled on the ABA lawsuit last February and the ABA won a partial victory. Judge Kelly ruled that the ABA had no legal right to be recognized as a qualified participant in the PSLF program. On the other hand, Judge Kelly ruled that DOE violated the Administrative Procedure Act when it denied PSLF loan-forgiveness applications by three of the lawyer-plaintiffs in the ABA's lawsuit. In Judge Kelly's view, DOE had acted arbitrarily and capriciously in handling the lawyers' PSLF applications. Judge Kelly ordered DOE to reconsider the lawyer's PSLF applications in accordance with his opinion. 

Judge Kelly elected to rule in the ABA lawyers' favor based solely on Administrative Procedure Act violations and did not consider the ABA's due process claims.  Now AFT is raising a constitutional due process claim in its own case. 

Why are these developments important to the 45 million people who have outstanding student loans? 

PSLF  an important avenue of relief for people who are heavily burdened by student loans and can't pay them back. If these individuals work in approved public-service jobs for ten years and make 120 payments on their student loans, they are entitled to have their remaining loan balances forgiven. 

Thus, the Trump administration's decision to deny PSLF eligibility to 99 percent of applicants is alarming. If AFT prevails in its lawsuit, that victory could pave the way for PSLF relief for millions of other Americans working in public-service jobs.


*****


Note: The individual plaintiffs in AFT's lawsuit are: Cynthia Miller, Crystal Adams, Connie Wakefield, Deborah Baker, Janelle Menzel, Kelly Finlaw, Gloria Nolan, and Michael Giambona.




Tuesday, April 30, 2019

Senator Elizabeth's Student-Loan Forgiveness Plan Isn't Radical: The Feds are Already Forgiving Billions of Dollars in Student Debt

Adam Levitin, writing for Credit Slip, made a profound observation about Senator Elizabeth Warren's proposal to forgive massive amounts of student-loan debt.  Her harsh critics, Levitin, writes, moan and grown about the morality of contracts, the unfairness of allowing some student borrowers to escape their legal obligations, and the enormous cost of forgiving billions of dollars of accumulated student-loan debt.

In Levitin's view, these critics are only demonstrating that they don't know anything about how the federal student-loan program works. If they did, Levitin explains, they would know that "we crossed the debt forgiveness Rubicon long, long ago." In fact, enormous debt forgiveness is already "baked into the federal student loan program."

Levitin is absolutely right. Far less than half of student borrowers who have entered into repayment are paying down the principal of their loans. Millions of student-loan debtors have their loans in deferment, which means they aren't paying anything on their debt. Another 7.5 million borrowers are in income-based repayment plans (IBRPs) with their repayment schedules set so low that their monthly payments don't even cover accruing interest on their loan balances.

And then we have the Public Service Loan Forgiveness Program (PSLF), which allows qualified public-service workers to make income-based payments for 10 years, after which their loan balances are forgiven. How many people are in the PSLF  program (or think they are in it)? We don't really know, but well over a million student borrowers have applied to become PSLF eligible.

Even Betsy DeVos, Trump's Secretary of Education, publicly admitted that the student loan program is a mess. As DeVos revealed last November, only one borrower out of four are paying down both principal and interest on their student-loan debt.  Almost one out of five borrowers are delinquent on their loans or in default. And 43 percent of student loans, by DeVos's calculation, are currently "in distress."

As Mr. Levitin succinctly put it:
The only real difference between Senator Warren's proposal and the existing forgiveness  feature in the student loan program is whether the forgiveness comes in a fell swoop or is dribbled out over time. Given the federal government's infinite time horizon, the difference is really just an accounting matter. 
In other words, to baldly state the point, millions of student-loan debtors aren't paying back their loans and never will. Probably half of the $1.56 trillion in outstanding student loans will never be paid back.

Levitin argues that all student borrowers should be enrolled in income-based repayment plans by default when they finish their studies.  But I disagree. Putting every college graduate into a 20- or 25-year repayment plan is basically making these degree recipients indentured servants for the government--bound to pay a percentage of their wages to the Department of Education for a majority of their working lives.  If we do that, we will have basically created a permanent underclass of 21st century sharecroppers.

Moreover, as Levitin correctly points out, there is an enormous psychological benefit to Senator Warren's plan, which grants immediate debt forgiveness rather than dribbling it over over two decades or more in income-based repayment plans. "Consumers feel weighed down by the stock of their debt, even if they won't actually have to repay a large chunk of it." Indeed, it is well established that student-loan debt is preventing Americans from buying homes, having children, or saving for their retirement.

And then there is a rarely discussed problem with  the current debt-forgiveness system: tax liability. People whose loans are forgiven after a quarter century of making income-based payments will get tax bills for the amount of their forgiven debt because the IRS considers forgiven loans as taxable income.  Of course that problem could be easily fixed if Congress would enact legislation making forgiven student-loan debt nontaxable.

But Congress hasn't done that. Why? Because our politicians want to pretend that the federal student loan program isn't broken. It's like that old explanation of the Russian economy during the days of the Soviet Union. "The government pretends to pay us," a proletarian explained, "and we pretend to work."

Student-loan debtors: The new sharecroppers



Friday, April 12, 2019

Democrats are "woke" about Public Service Loan Forgiveness: Senators Kaine and Gillibrand file legislation to overhaul PSLF

The Trump Administration hates the Public Service Loan Forgiveness Program (PSLF). Signed into law by President George W. Bush in 2007, PSLF allows student-loan debtors who work in public-service jobs to have their student loans forgiven if they make 120 student-loan payments in a qualified repayment plan.

The first PSLF participants to have accumulated 120 student-loan payments became eligible for debt relief in 2017--10 years after the program was introduced. As has been widely reported, the Department of Education approved less than 1 percent of the applications for PSLF forgiveness that it had processed as of  September 2018.  In fact, DOE said 70 percent of the applicants were not eligible for PSLF participation.

So far, over one million student-loan borrowers have applied to DOE to have their employment certified as PSLF eligible, and millions more are counting on PSLF for debt relief but haven't applied yet. It's a mess.

And it is especially a mess for people who borrowed $100,000 or more to get a law degree or other graduate degree. According to the American Bar Association, the average debt load for people who attended a private law school is $122,000. For many of the people who accumulated six-figure student-loan debt to finance their graduate studies, PSLF is the only viable option for debt relief.

Betsy DeVos, Trump's Secretary of Education, apparently does not care that her agency has frightened or angered millions of people who are counting on PSLF to manage their student loans. According to a news report, a senior DOE official said that DOE does not support PSLF and would not implement it if it were not legally obligated to do so.

But the Democrats are "woke" about this problem. This week, Senators Tim Kaine and Kirsten Gillibrand introduced a bill to overhaul the PSLF program. Thirteen Democratic senators signed on as co-sponsors, including all the U.S. Senators running for President (Elizabeth Warren, Kamala Harris, Bernie Sanders, Amy Klobuchar and Cory Booker).

The Kaine-Gillibrand proposal defines eligible public-service organizations broadly to include all federal, state, and local government agencies and all charitable organizations that qualify  for tax-exempt status under 501(c)(3) of the tax code. As Jason Delisle pointed out in a 2016 analysis of PSLF, that definition applies to one quarter of the American workforce.

In fact, the bill's definition of public service differs markedly from the one developed by DeVos's DOE. DOE defines a public service organization as one that is primarily involved in public service,thus excluding organizations like the American Bar Association, which is primarily devoted to serving the legal profession, although it engages in some public service work.

The Kaine-Gillibrand bill also specifies that all student-loan debtors qualify for PSLF, regardless of the federal loan program or repayment plan they are in. This provision also expands eligibility for PSLF participation far beyond what the DeVos DOE permits.

I support passage of the Kaine-Gillibrand bill, and I hope it is enacted by Congress. But we should not deceive ourselves about the cost of PSLF. Thousands of people seeking debt relief under PSLF owe $100,000 or more. Most of these people are making income-based monthly payments on their loans that are not large enough to cover accruing interest. Their debt load is increasing month by month as accrued interest gets capitalized and added to their loan balances. If these people's student-loan debts are forgiven after 10 years, the government will essentially be forgiving the entire amount that was borrowed plus a lot more due to the accrued interest that will also be forgiven.

Remember Josh Mitchell's story in Wall Street Journal about Mike Meru, who borrowed $400,000 to go to dental school? Dr. Meru is making payments of about $2,000 a month in an income-based repayment plan, but his debt has grown to $1 million due to accrued interest. If Meru gets a qualified public-service job and holds it for ten years, DOE will forgive the entire $1 million plus additional interest!

This is a huge problem, and the Kaine-Gillibrand bill won't solve it. Under the GRAD Plus program, graduate students can borrow the total cost of their graduate education--tuition, books, and living expenses--no matter what the cost. It is not surprising then that graduate-school tuition prices went up dramatically after the GRAD Plus program was enacted.

If the bill becomes law, the Kaine-Gillibrand proposal will give relief to millions of student-loan borrowers. But the bill is just a stop-gap measure. As I have said, the only solution to the student-loan crisis is bankruptcy relief for honest debtors who can't pay back their student loans.  More than 45 million Americans have outstanding student loans. I think most of them would vote for a presidential candidate who endorses bankruptcy relief for distressed student-loan debtors.




Tuesday, October 2, 2018

Department of Education slow rolls the Public Service Loan Forgiveness Program: Like a drunk weaving through traffic

For many years, the Department of Education has managed the federal student-loan program like a drunk creeping through heavy traffic. It has stumbled, reeled, dissembled, weaved and bobbed, but always avoided a head-on collision with reality.

But that time is over. Under Betsy DeVos's colossal mismanagement (and her predecessors), DOE has messed up the Public Service Loan Forgiveness Program (PSLF), thereby telegraphing to 44 million student-loan borrowers that Betsy Devos is either fiendishly devious or spectacularly incompetent.

The PSLF program is not complicated.  Under federal law, student-loan borrowers who work for a qualified employer (governmental agency or non-profit) and make 120 student-loan payments under an approved repayment plan are eligible to have remaining student-loan debt cancelled. (It's a little more complicated than that, but not much.)

Almost 1.2 million borrowers have applied to have their employment certified for PSLF eligibility. More than a quarter million applications were denied. That alone is a startling fact.

But it gets worse. About 28,000 people who are in the PSLF program (or at least believe they are in it) applied to have their student loans forgiven based on their representation that they had made the 120 required student-loan payments. How many people have obtained debt relief so far? Less than 100!

What are we to make of this gigantic snarl?

First, DOE has made the PSLF program needlessly complicated. After all, the government only needs to answer two questions to determine who is eligible for debt relief. Did the applicant work for an approved employer for 10 years? Did the applicant make 120 one-time payments on his or her student loans?

Second, the PSLF program was poorly designed, and DeVos's DOE has reached the startling realization that the program is astonishingly expensive.  In my opinion, DOE is dragging its feet about processing PSLF claims to postpone the reckoning day, when it will have to publicly admit that PSLF is going to cost taxpayers billions of dollars.

The Government Accountability Office (GAO) released a report almost two years ago that concluded DOE had underestimated the cost of various student-loan repayment options. I'm guessing DOE did not figure on the huge debt loads some PSLF applicants were accumulating from going to graduate school: MBA degrees, medical degrees, law degrees, etc.

According to GAO, the average amount of forgiven debt for the first 55 people who received student-loan forgiveness is almost $58,000. If  this average continues to hold, and all 890,000 people whose loans and employment were certified eventually get debt relief, the cost will be $50 billion! Meanwhile, DOE can expect PSLF requests for certification and debt relief to continue being filed into the indefinite future.

No wonder DOE is slow rolling the PSLF loan-forgiveness process.



 References

Stacy Cowley. 28,000 Public Servants Sought Student Loan Forgiveness. 96 Got It. New York Times, September 27, 2018.



Friday, September 21, 2018

Department of Education's New Report on Student-Loan Casualties: A Dr. Strangelove Moment

You remember that great scene from the movie Dr. Strangelove.  U.S. President Muffley (played by Peter Sellers) worries about the consequences of nuclear war with Russia. "You're talking about mass murder," President Muffley muses.

But General Turgidson (played by George C. Scott) is not concerned. "I'm not saying we wouldn't get our hair mussed. But I do say no more than ten to twenty million killed, tops."

Betsy DeVos is our modern day General Turgidson. The student loan program is shattering the lives of about 20 million Americans.  But in DeVos' mind, that's a small price to pay for a program that enriches her buddies in the for-profit college industry.

And so without further ado, I will summarize the Department of Education's most recent report on the student-loan debacle.

Income-Driven Repayment Plans. As DOE reports, more and more distressed student borrowers are being herded into income-driven repayment plans (IDRPs). As of June, 7.1 million people are enrolled in IDRPs, a 20 percent increase from just a year ago.

Student borrowers in IDRPs are America's new serfs. They pay a percentage of their income for 20 or 25 years to repay the student loans they took on to attend some raggedy-ass college that didn't prepare them for a job.

Of course, IDRP monthly payments are generally low. In fact, IDRP participants who live below the poverty line make monthly payments of zero. But virtually everyone in these plans--7.1 million suckers--will die without ever paying back their loans. In fact, for most of them, their loan balances are going up with each passing month due to unpaid accruing interest.

Borrower Defense to Repayment. According to DOE, 166,000 student borrowers filed so-called "borrower defense" claims. These claimants are seeking loan forgiveness on the grounds they were defrauded by the colleges they attended. Thousands of these claims were filed by people who attended just two for-profit institutions that went bankrupt: Corinthian Colleges and ITT Tech.

As of June 30, two thirds of these claims are still pending, and only 80 percent of the processed claims were approved.  Meanwhile, borrowers who have pending claims are still obligated to make their monthly loan payments.

Delinquency Rates. Delinquency rates are down slightly, DOE assures us, but almost a quarter million borrowers defaulted on their student loans during the third quarter of this year.  That's 2755 people going into default every day.  A high percentage of these defaulters attended for-profit colleges. But apparently those casualties are acceptable to Betsy DeVos.

Public Service Loan Forgiveness Program.

Hundreds of thousands of student debtors have taken jobs in the public sector in belief that their student loans would be forgiven after 10 years under the Public Service Loan Forgiveness Program (PSLF). It now seems they were deluded.

PSLF was enacted by Congress in October 2007, so the first people entitled to PSLF relief became eligible in October 2017. So far, 28,000 people have applied for PSLF relief, but only 300 claims have been approved and only 96 people have actually had their loans forgiven!

If Betsy DeVos and her gang of former for-profit-college hacks continue to refuse to implement PSLF in good faith, hundreds of thousands of college borrowers who relied on PSLF will suffer incalculable hardship.  For example, thousands of people have graduated from third- and fourth-tier law schools with six-figure debt, and they can't find law jobs in the private sector that pay enough to service their student-loan obligations. As Paul Campos pointed out in his book Don't Go to Law School (Unless), PSLF is these people's only viable option for paying off their law-school loans.

Conclusion: The Student Loan Program is in Fine Shape: "10 to 20 Million Casualties, Tops!"

DOE's own data shows us that the federal student loan program is a disaster: high default rates, income-driven repayment plans that don't allow people to pay off their loans,  borrower-defense rules that DOE administers incompetently, and a PSLF program that DOE refuses to implement in good faith. Meanwhile, the for-profit gang is getting rich.

Literally, there are at least 20 million casualties. Betsy DeVos must think 20 million casualties is acceptable, but I do not. Why don't our  politicians--Republicans and Democrats-- begin to behave like grownups and impeach Betsy DeVos, who is running DOE like a character in Dr. Strangelove.

10 to 20 million casualties--tops!

Thursday, May 24, 2018

The Public Service Loan Forgiveness Program is a train wreck, and $350 million won't fix it.

The Public Service Loan Forgiveness program (PSLF), created by Congress in 2007, allows people in public service jobs to make income-based student-loan payments for ten years. If they make 120 payments, their loan balances will be forgiven and the amount of the forgiven debt isn't taxable to them.

Such a deal!

Thousands of student debtors relied on PSLF to manage huge debt burdens. In fact, as Paul Campos correctly noted in his book Don't Go to Law School (Unless), people who graduate from bottom-tier law schools with six-figure student debt have only one option for paying off their student loans: the PSLF program.

Last fall, the first wave of PSLF participants became eligible to have their loan balances forgiven, but Betsy DeVos' Department of Education put impediments in the way and told some student debtors they were not eligible. The American Bar Association sued DOE after it declined to honor an application by ABA employees for public-service loan forgiveness.

Prompted by Democratic legislators--notably Senator Elizabeth Warren--Congress set aside $350 million to pay off student loans owed by people who failed to qualify for PSLF through no fault of their own.

That's a good first step, but $350 million won't fix this problem. As Jason Delisle explained in a 2016 report for the Brookings Institution, the PSLF program has problems DOE didn't anticipate, and those problems will be expensive to fix.

First of all, public service employment as Congress defined it includes anyone who works for federal, state, or local government and anyone who works for a 501(c)(3) nonprofit entity. As Delisle pointed out  (p. 3), that definition encompasses about one quarter of the American workforce.

In fact, nearly all the doctoral students I've taught over the last 25 years work in public sector jobs; and most of them have student-loan debt, which they expect to shed through the PSLF program. For example, one of my recent doctoral graduates accumulated $140,000 in student-loan debt on her journey to obtaining an Ed.D. degree. PSLF is her only escape hatch for shedding this enormous debt.

Without any question, the PSLF program was poorly designed. The category of eligible participants was defined far too broadly.  Although program defenders say PSLF is intended to aid firefighters, police officers, and teachers, it also benefits public-service lawyers, lobbyists, and accountants.

Furthermore, Congress placed no cap on the amount of student debt that can be forgiven under PSLF. At roughly the same time Congress enacted the PSLF program, it approved the Grad PLUS program, which allows graduate students to borrow the entire cost of their graduate or professional education with no dollar limit.

Apparently DOE was surprised by the enormous debt loads carried by people seeking to shed their student loans through PSLF.  But it should have been obvious to everyone that law-school and business-school graduates with $200,000 in student-loan debt and no prospect of a well-paying private-sector job would look to PSLF to manage their debt.

In short, DOE underestimated the number of people eligible for PSLF and the amount of money they owe. Taxpayers are going to spend a lot more on PSLF than DOE anticipated.

So what to do?

In my view, the Department of Education should forgive student-loan debt for everyone who has accumulated 10 years of public service since the PSLF program was enacted in 2007--regardless of whether the PSLF applicant filled out the proper paperwork. And it should allow everyone currently working in  a public service job to participate in the PSLF program and receive loan forgiveness after they've made 120 payments.

And then Congress needs to amend the program to put a cap on the amount of student-loan debt that can be forgiven under PSLF, and it should limit future participation to people working in hard-to-fill public sector jobs--police officers, fire fighters, teachers, etc.

No doubt about it--PSLF is a colossal train wreck; and it will cost the federal government billions of dollars to fulfill the promises Congress made eleven years ago. The Congressional Budget Office estimates that PSLF and income-based repayment programs together will cost taxpayers $12 billion over the next ten years (as reported by Jason Delisle). The $350 million Congress appropriated last March is but a small down payment.

The Public Service Loan Forgiveness Program is a Train Wreck.

References

Stacy Cowley. Student Loan Forgiveness Program Approval Letters May Be Invalid. New York Times, March 30, 2017. 

 Jason Delisle. The coming Public Service Loan Forgiveness bonanza. Brookings Institution Report, Vol 2(2), September 22, 2016.

Andrew Kreighbaum. New Fix for Public Service Loans. Insider Higher Ed, May 24, 2018.

Andrew Kreighbaum. Senate Democrats want Public Service Loan Forgiveness Fix in budget agreement. Inside Higher Ed, February 16, 2018.

Jordan Weissmann. Betsy DeVos Wants to Kill a Major Student Loan Forgiveness ProgramSlate, May 17, 2017.