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Rather than rewarding the companies that cashed in on debts, the now-rescinded Obama guidance incentivized a good track record and sought to award contracts to companies with a history of helping borrowers.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

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!

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 www.revealnews.org/studentdebt.
 
Click here to find out more information on the student loan forgiveness programs

How to Maintain Your Sanity and Pay Down Your Student Loans

It pays to understand federal student loan repayment plans especially if you have been making payments on student loans for years or you are just starting to pay them back. You can choose to switch to a new repayment plan even if your loan servicer has already set your monthly payments. This is definitely going to help you if money is tight while you need to lower your payments or if you want to pay off your loan faster than before.
It is important to understand what is available with all the repayment plan options as well as with those that share the same similarities with one another. By so doing, you can make the right choice that best suits your needs.When it comes to repaying federal student loans, you may be out of luck if you took out private student loans too. However, several repayment plan options can be obtained from many private loan servicers. To this end, there is no harm in asking. Also note that with these plans, you are not required to lower your interest rate. You will need to consider private student loans if you want to refinance a student loan to a lower rate. Here are some options to take a look at
Standard Repayment Plan
When setting your monthly payment amounts, you should know that it is the 10-year repayment plan that was most likely defaulted to by your loan servicer. This plan which is set up to repay the loan in 10 years requires you to pay a set amount each month. Your standard repayment plan payback time can take about 30 years if multiple loans are consolidated into one large unit. However, this depends majorly on your consolidated loan amount and terms.
Refinance Loans
Refinancing refers to the act of finding replacement for multiple student loans with a single, new, private loan. Whether it is a private loan, federal loan or a combination of the two, these loans can be replaces by a single loan (private). To get a better rate, you can use a co-signer, however, when it comes to determining your new interest rate, your credit score will be heavily weighed by your lender.
Student Loan Consolidation
This is a smart option to follow if you are looking to combine your federal student loans into a single direct consolidation loan. Instead of paying separate bills to different services, you can apply for student loan consolidation which deals with having a single monthly payment to keep track of.
Unlike refinance loans, the government pays of the loans when you consolidate your federal loans while ensuring that they are being replaced with a direct consolidation loan. Based on your total federal loan balance, a new repayment schedule will be assigned to you by the government after applying for consolidation.