Student loan servicers might give you the wrong information

Our team was alarmed to learn that recently, the Consumer Financial Protection Bureau found that many loan servicers actually give student loan borrowers incorrect or insufficient information about public-service loan forgiveness. There are currently several money-saving options for many student loan borrowers. However, if borrowers are unaware of these options, these programs become useless, and the borrower is left missing out on potentially, significant savings on their monthly student loan payments.

In another alarming moment, in the student loan industry, the U.S. Consumer Financial Protection Bureau and the Illinois and Washington attorneys general sued Navient Corp, the nation’s largest student loan servicer, in January. They lawsuits are alleging that it harmed student loan borrowers throughout the repayment process.

Among other things, the CFPB alleges that since at least January 2010, Navient misallocated payments, steered struggling borrowers toward multiple forbearances instead of income-driven repayment plans, and provided unclear information about how to re-enroll in income-driven repayment plans and how to qualify for a co-signer release. The CFPB is asking Navient to compensate the borrowers the agency says were harmed.

The Illinois and Washington suits make similar claims to the CFPB’s allegations and also allege that Navient, when it was part of Sallie Mae, made subprime loans to students, particularly those attending for-profit schools. Navient broke off from Sallie Mae Bank, one of the largest private student loan lenders, in 2014.

Navient has filed motions to dismiss all three cases and says the suits are based on new servicing standards that are being applied retroactively, according to a March 2017 fact sheet.

The lawsuits could potentially take years to play out “because of the sheer amount of evidence” that the CFPB, Illinois, and Washington have gathered during their investigations, says Suzanne Martindale, a staff attorney at Consumers Union, the policy, and action arm of Consumer Reports.

Regardless of the outcomes, it’s a good idea for borrow’s to regularly check their student loan accounts and make sure their student loans are being serviced correctly. Luckily there are a lot of tools and services that can help borrowers get an overview of current loan balances and repayment options. For more information







Keeping Those Part-Time College Jobs In Perspective

Many many young adults are starting college this month. For most of them, this also means, starting their first jobs. One common struggle for new college students is managing school, work, and their new found income. This tends to be a great lesson in prioritization and time management. It can be tempting for young college students to focus on making money in their part-time jobs, but their priority should be on studying and finishing that college degree.

For those that have scholarships, they may lose thousands of dollars in scholarship money if grades don’t meet a high average. No part-time minimum wage job in the world could make up for this type of loss. For others, college tends to get paid primarily through student loans and school-based grants. In this case, these loans and grants also depend on the student’s ability to stay in school and maintain a passing GPA.

Income from a part-time job can quickly become a distraction for college students. This supplemental income can start to provide students with spending power that they’ve never had before. However, it’s important to remember that the bulk of college and living expenses are coming from scholarships, loans, and grants, and all these can depend on the student maintaining high grades and or graduating.

In the case of student loans, if the student doesn’t maintain good grades and remain in school full-time, they can be required to start paying back their loans immediately. These loan payments would more than likely put the student in a position where their part-time job would no longer provide the income they need to live.

The point here is if you or your child is starting college it’s important that they keep those part-time college jobs in perspective. Remember that good grades and staying in school are a much higher priority than a part-time job income. Especially if you are using scholarships, student loans or grants to pay for college and living expenses.

Betsy DeVos Rolls back Obama-Era Student Loan Guidance

Education Secretary Betsy DeVos on Tuesday 4/11/2017 rolled back two Obama-Era memos intended to help protect student loan borrowers.

Student loan contracts aren’t serviced in-house by the Federal Student Aid Office. Instead, they are managed by third-party companies, which are awarded contracts by the government. Before the Obama memos, those contracts went to the companies that were best at collecting the debts.

Rather than rewarding the companies that cashed in on debts, the now-rescinded Obama guidance incentivized a good track record and sought to award contracts to companies with a history of helping borrowers.

While the Obama memos sought to give borrowers more options, transparency and better services as a means to prevent them from defaulting on loans, DeVos said that withdrawing the memos is intended to limit “the cost to taxpayers” and “increase customer service and accountability.”

Devos’ withdrawal memo cited “a lack of consistent objectives” as the reason for rescinding the previous administration’s guidance.

The Department of Education did not immediately respond to NBC News’ request for comment.

So what does DeVos’ mean for those who have loans?

Attorney Adam Minsky, who has dedicated his practice to helping those with student loans, said the withdrawal only creates more frustration for borrowers.

“[The Obama memo] alerted servicers that how they deal with borrowers – the outcomes would be a factor in if they’re awarded a contract,” Minsky told NBC News. “[The memo said,] ‘We’re going to consider that.’ And the idea there was to incentivize the servicers to work harder to help borrowers.”

Now, borrowers are going to have to work much harder to figure out the best way to repay their loan and research programs that might benefit them, he said.

Student loan expert Heather Jarvis said the changes Obama made where long overdue, and walking them back sends a message to borrowers that the government values the businesses over those loans.

“Borrowers don’t get to decide who their servicers are and [the servicers] can make your life miserable if they’re not,” Jarvis told NBC News. “For years, the government was content to award contracts based on the collection success of servicers. But Obama became aware of the problems students and families face and decided we want you to do better.”

Jarvis said because the contracts are lucrative, companies will be responsive to the signals the government is sending.

Another issue Jarvis and Minsky took with the DeVos memo is the justification for the withdrawal.

Minsky said DeVos’ logic doesn’t make sense, as taxpayers aren’t affected by the provisions in the Obama memos, but are affected by borrowers defaulting on loans.

“I don’t understand her reasoning,” Minsky said. “I don’t understand how it’s costly to taxpayers – it costs taxpayer money when borrowers default on loans and don’t pay their loans. She certainly hasn’t, I think, made an effective argument to justify saving money.”

Jarvis called the withdrawal “ridiculous,” adding that student loan borrowers are American taxpayers.

Jarvis and Minsky offered the following advice to those who currently have student loans and could be impacted by DeVos’ withdrawal of the Obama guidance:

Do homework to find out what plans you are eligible for, don’t rely on your servicer to provide you with the correct information
Don’t take advice from your debt collector
Keep meticulous records on your loan
Ask to speak with a member of your servicer’s management, rather than the customer service representative who answers your call
If you have a dispute, try to send it to your servicer in writing
Contact the student loan ombudsmen group at the Department of Education – it’s their job to resolve conflict between borrowers and servicers
Contact your local representative and make them aware of existing problems with your servicer

In a statement, the Consumer Financial Protection Bureau, a government agency charged with protecting consumers from unfair, deceptive, or abusive practices in the financial sector, said borrowers deserve the best possible service from those issuing their loans.

“Borrowers deserve to be treated fairly and should be able to repay their debt without having to deal with illegal loan servicing practices. The CFPB will continue to find ways, working with all of our partners, to support and protect the 44 million Americans with student debt,” a CFPB spokesperson said in an email to NBC News.

Jarvis agreed, saying to treat the borrowers fairly isn’t asking for much.

“[Obama’s memo] was the latest they could do, and it was hardly anything,” Jarvis said. “It wasn’t a requirement, and I think pulling that back – it’s a signal to big businesses that [the government is] on your side. You’re more important to us than student loan borrowers.”

Things To Know About Refinancing Student Loans

Refinancing your student loans is a great way of ensuring you have a debt free future. When taking out a student loan, it is required that prospective borrowers sign a promissory note. This serves as a form of contractual agreement between the individual collecting the loan and the party giving out the loan. This is basically an agreement to pay off the amount collected together with an interest. It also includes other forms of agreements between both parties. A lot of students sign this agreement without putting sufficient thought into it. Borrowing the money is often received with more optimism that repaying the loan. Students, therefore, look for ways to adjust the terms of agreement. This is mostly because the interest rate increases the actual amount owed. This then leads to the issue of refinancing loans. This refinancing is usually at a lower rate of interest. However, it is also possible to go into this blindly. We will be taking a look at some of the things to know about refinancing student loans.


Things to know about refinancing student loans


Consolidating and refinancing your student loans are two different things: A lot of students who borrow funds for college often mistake consolidation for refinancing. While consolidating your student loans would also lower your interest rate, they are not the same thing. Both options are largely similar because they replace your former loan with a new loan on new terms. However, studies show that consolidating your loans would not reduce your interest rate. Consolidating your loan has its benefits, such as choosing the services you would prefer to work with. It also gives you the option of additional repayment on loans, but it will not still give you lower interest rates.


Refinancing your loan changes the terms of your loan: When you refinance your student loans, it changes the terms of the loan you collected. It may decrease the interest rate on your loan, but this depends upon whether you have a good credit score or not. If you have a cosigner, it would also help to reduce your loan’s interest rate. Refinancing basically puts you on a new loan structure, with new terms and new interest rates. A downside of this is that your interest rate could also increase.


Student loans may also come with federal protections: One of the benefits of a student loan is the fact that it comes with a number of federal protections just in case you are finding it hard to keep up with payments. There are some repayment plans that can entirely pause your loan or decrease the amount you have to pay. This, coupled with refinancing your student loans can make it more bearable when dealing with repaying your student loans.


Putting all of these things into consideration would help you make the right decisions when it comes to refinancing your student loans. Refinancing your loans can greatly reduce the amount you have to pay back to the financing party, you just need to go about it wisely.

Busting They Myths of Student Loan Forgiveness

 If you have student loans, you have no doubt heard about student loan forgiveness. You have probably seen ads on TV promising instant ‘student loan relief’ or even received promotional mailers from companies telling you they know the ‘secret’ to eliminating your student loans. Of course, they are willing to share that secret – for a price.
The number of scams involving high-priced student loan debt relief is staggering. It has gotten so bad that awhile back, Illinois Attorney General Lisa Madigan filed suit against two of these so- called student debt relief companies, charging them with deceptive marketing. It is only a matter of time before other states start cracking down.
But with student loan debt over $1.3 trillion and nearly 7 million student loan barrowers in default, there isno doubt borrowers need help finding real solutions. The hard truth is, there are not magical, instant tricks to make student loans disappear, but there are options that can make forgiveness an achievable goal.Take a look at the myths and the facts regarding student loan forgiveness.
MYTH: All student loan barrowers are entitled to enroll in the ‘Obama Forgiveness Program.
FACT: First, there is nothing called the ‘Obama Forgiveness program’ or ‘Obama Loan Forgiveness.’ There are a number of federal student loan repayment programs introduced in recent years that offer the potential for loan forgiveness. These plans include:

Income-Based Repayment (IBR): IBR is a federal repayment plan that allows you to make payments based on your income and family size. Payments are set for 12 months, and you must certify your income annually to stay on the program. Any balance remaining after 25 years on IBR will be forgiven. This forgiven balance may be subject to income taxes.
Pay As You Earn (PAYE): Similar to IBR, PAYE is a federal repayment plan that allows you to make reduced payments based on income. Only certain newer borrowers will qualify for PAYE. You must certify your income annually. Any balance remaining after 20 years on PAYE will be forgive; the forgiven balance may be subject to income taxes.
Public Service Loan Forgiveness (PSLF): This program provides opportunity for you to get out of your student loan debt in 10 years if you work in a public service job.

MYTH:  If I qualify for loan forgiveness, my student loan debt will immediately disappear.
FACT: Most borrowers who qualify for federal student loan forgiveness still have to pay back a portion of their debt – from 10-25 years’ worth – after which the remaining balance is forgive. However, these programs are designed to keep your payments affordable.
MYTH: If I don’t qualify for federal student loan forgiveness, I can just pay someone to arrange student loan forgiveness.
FACT: This is simply not true. Any person or company telling you otherwise is not being honest about what they can offer. Remember – if something seems too good to be true, it proably is.
MYTH: Without student loan forgiveness, I am stuck with whatever repayment terms my loan servicer gives me.
FACT:  Even if you don’t qualify for federal loan forgiveness under one of these plans, there are a number of repayment options, from Graduated and Extended Repayment to federal consolidation, that apply to much wider range of borrowers and may help make repayment more manageable.
Click here for more information on the Student Loan Forgiveness Programs!

Trump’s Plan to Make Student Loans Great Again

If President-elect Donald Trump implements his proposed student loan plan, there may be good news on the horizon for millions of student loan borrowers.

On October 13, 2016, Trump proposed an income-based repayment plan that allows borrowers to cap their monthly student loan payments based on their income and then have their student loans forgiven after a certain period of time.

Under Trump’s plan, if you are a student loan borrower, your monthly student loan payments would be capped at 12.5% of your income. After 15 years of monthly payments, your remaining student loan debt would be forgiven.

“Students should not be asked to pay more on the debt than they can afford,” Trump said. “And the debt should not be an albatross around their necks for the rest of their lives.”

Student Loan Repayment: The Status Quo

Today, the standard federal government student loan repayment period is 10 years. For those borrowers who cannot afford their monthly student loan payments, the federal government created income-driven repayment plans to help make student loan repayments more affordable than the standard 10-year plan.

Under the Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) income-driven repayment plans, you pay 10% of your discretionary income each month towards your federal undergraduate student loans for 20 years, at which point any remaining balance on your federal undergraduate student loan is forgiven. Under REPAYE, if you have graduate school student loan debt, the repayment period is 25 years before your remaining student loan debt is forgiven.

Trump said he would combine the existing repayment plans into a single plan to make it less confusing for borrowers. While Trump’s proposal raises the monthly payment cap from 10% to 12.5% of income, his proposal raises the remaining student loan balance 5-10 years sooner than the current income-driven repayment plans. He plans to pay for his student loan plan by reducing federal spending.

The Fate of Public Service Loan Forgiveness

The federal government currently provides student loan forgiveness for public servants and teachers who meet certain qualifications, including a requisite number of monthly student loan payments. Public services, for example, can have 100% of their student loans forgiven after 120 eligible on-time monthly payments.

If Congress were to eliminate Public Service Loan Forgiveness (and place all borrowers into a single income-based repayment plan, for example, existing borrowers likely would be grandfathered in, since they borrowed with the expectation of entering public service and qualifying for loan forgiveness.

Top 5 Questions and Answers

Given Trump’s student loan proposal, what is the impact to you as a student loan borrower and what action steps can you take now?

Here are 5 questions and answers:

1.Will I save more money on my student loans under Trump’s plan compared with the current income-driven repayment plans? All else equal, Trump’s current proposal for borrowers to pay 12.5% of income for 15 years, if elected into law, should save you more money than the current federal government repayment programs (PAYE and REPAYE), which require 10% of discretionary income per year for 20-25 years.

2.How do I apply for student loan forgiveness? You don’t have to wait for Trump’s student loan plan to be implemented to apply for student loan forgiveness.

3. Does student loan forgiveness under Trump’s plan mean I will not owe any more money after my student loan is forgiven? Trump has yet to indicate whether he supports taxes on student loan forgiveness.

4.Will Trump’s plan lower my monthly student loan payment? Trump believes that the federal government should not profit on student loans, but has not indicated whether the current interest rate for student loans will be lowered. However, you don’t have to wait for Trump’s student loan plan to take effect to get a lower interest rate on your student loans. Contact us to find out which programs you are eligible for. 

5. What are the benefits and risks to income-driven repayment plans?  There are benefits and risks to income-driven repayment plans. The benefits: you save money upfront from lowering your monthly student loan payment or extending the repayment period. The risk: you will pay more interest over time because lower monthly payments means you are reducing less principal each month. You also may be required to pay ordinary income tax on the loan amount forgiven. 

Don’t Blow your Student Loan Check

Most student loan borrowers receive a student loan refund check before the beginning of every semester. The check represents the amount left over after the school has taken out what is owed for tuition, fees, and room and board (if applicable). Check amounts can range from a few hundred to several thousand dollars, depending on each students unique situation.
If you (or your child) are about to receive a student loan refund check, here are five things to consider before spending the money.
It is not ‘free money’- It may seem like an effortless, easy windfall, especially to a starving college student. But it is not. You will be paying it back long after it (and whatever you buy with it) is gone, so avoid the temptation to spend freely on bar tabs, exotic travel and that tricked out new game system.You are legally bound to use it for education related expenses- When you signed your FSFSA application and student loan promissory notes, you agreed to spend your loan money only for education- related expenses. Any other use of the funds is considered a violation. Should the student aid office get wind of it, they are required to report it to the Office of the Inspector General at the Department of Education.
You will probably need it later- While it may seem boring to save the money to use for groceries, books and supplies throughout the semester, it is the right thing to do. After all, do you really want to eat beans and rice every night for days at a time? ( Living expenses such as food and transportation are approved uses of student loan funds).
Consider giving it back- This one might be the last thing you think when you receive your check. But if you really don’t need it, don’t keep it. Returning it will lower the total amount of student loan debt you eventually need to pay back. It won’t be very much fun now, but your future self will thank you. Instructions for returning the money should be included with the check.
Use it to establish good financial habits- How you spend your student loan money can be the start of your lifetime financial habits, so use it wisely. Deposit it into savings, establish a budget and only withdraw the amount you budget for each week. Starting and sticking to these habits is a priceless lesson no amount of schooling can teach.

Student Debt – Lives On Hold

Millions of Americans who went to college seeking a better future now face crushing debt from student loans—while the industry makes a handsome profit. How a broken system landed so many in this mess…
Almost every American knows an adult burdened by a student loan. Fewer know that growing alongside 42 million indebted students is a formidable private industry that has been enriched by those very loans.
A generation ago, the federal government opened its student loan bank to profit-making corporations. Private-equity companies and Wall Street banks seized on the flow of federal loan dollars, peddling loans students sometimes could not afford and then collecting fees from the government to hound students when they defaulted.
Step by step, one law after another has been enacted by Congress to make student debt the worst kind of debt for Americans—and the best kind for banks and debt collectors.Today, just about everyone involved in the student loan industry makes money off of the students—the banks, private investors, even the federal government.

This is a condensed version of a story by Reveal from The Center for Investigative Reporting.
To read the full investigation from James B. Steele and Lance Williams, visit
Click here to find out more information on the student loan forgiveness programs

How To Eliminate Debt With A Personal Budget

It is a shame that youngsters are not taught more about how to construct a personal budget in the education system. This is a life skill that one should know more about because it can obviously help you on a daily basis and avoid personal debt which accumulates really quickly.
In saying that, it is not difficult to get into a habit of planning your own budget. When you know how much you have spent on a monthly basis, you will be able to see where the money is going and how you can rectify certain situations, depending on your income.These days, personal debt is on the rise, and one only realizes that they have a problem on their hands when they have a financial crisis on their hands. It especially relates to these economic times, where jobs are less stable. It will obviously make the repayment plan a lot more tricky when you are out of work.
A personal budget should consist of a balance between what you are earning and the expenses. Most families go wrong by spending more than what they earn, and this is where personal debt comes into play. One also has to decide on what you want your budget to consist of. In the ideal world, one should look at funds for the future. A repayment plan may need to be compiled, according to your lifestyle and the amount of debt you find yourself in.
A budget should be drawn up for the home, relating to basic expenses such as loans, taxes, insurance and health care. This should also include your daily needs, such as groceries, transport and your lifestyle. Income not only relates to the big pay check, but also the various refunds and bonuses that you may receive.
Once you get used to a budget like this, you will start to see how you can save even more. Over a space of a couple of years you will start to see what you have accomplished, and this is another thing to look forward to. In saying that, one can’t let the budget take over your life. Quality of life is just as important, and this type of balance is something that you have to achieve. Eliminating the stress is obviously important.
There are a variety of programs that you can use to create a budget that is right for you. Some of them will give you a more detailed plan, and others are more basic. You can download apps which are great to take note of what you have spent on a daily basis. You can use a program like excel or another software package which has been designed for budgeting specifically.

Last summer of Freedom? Not From Your Debt!

Alright, summer is officially here, graduation parties are over, the congratulations of relatives are beginning to fade and you are ready for your last summer of freedom. Sounds great, but recent college grads with personal debt to finance their future careers can’t really afford an “I’ll do it tomorrow” attitude.
Along with sun and beaches needs to be careful consideration of the proper way to approach student loan relief or student loan consolidation. This process may take longer than many might expect, unless of course you’re expecting the President to pay for it. Note the sarcasm? Yes you can’t rely on the Obama Student Loan Relief program, because it’s an urban myth.So now you’ve accomplished one task already; crossing the Obama Student Loan Relief idea off your list.
Then what? Well as the past decade has shown personal debt is not something not to be taken lightly. You need to formulate some actions steps now to address your concerns or hopes for student loan consolidation or discover if student loan relief is truly a viable option.
You need to align yourself with a qualified personal debt counselor. Uncle Jerry may have made a bundle, and Grandma has your best interests at heart but unless they head the IRS, they may not be the most qualified on the latest ever changing regulations and programs for student loan consolidation. Do your research and find the right person for you, because according to the Bureau of Labor Statistics there are over 30- thousand credit counselors actively working in the U.S. today as the issues surrounding personal debt continue to spiral and confound the average consumer.
Once you are able to make a connection with one of these qualified credit counselors, then you may actually qualify for student loan relief, though it won’t happen overnight.
These are limited to certain incomes and careers. The federal government does offer a Pay As You Earn option if your student loan monthly payments are in excess of 10% of your expendable income. If you’re headed for a teaching position you may qualify for a teacher loan forgiveness after working for 5-years in an impoverished elementary or secondary school. Additionally careers in public service or the nonprofit sector may be more desirable as there are options there for student loan relief. Some of these government sponsored programs will forgive up to 100% of your personal debt from student loans after five years of service or wipe the slate the completely clean after 10-years in a specified position.
Some things to think about as you enjoy perhaps your last summer of freedom but keep in mind learning how to properly deal with a personal budget now will give you a lifetime of freedom.