Thursday, 29 October 2015

Student loan | Ugly Provision in Budget Deal for People with Student Loan Debt

Posted: 29 Oct 2015 12:30 PM PDT

[Content Note: Harassment.]

A provision in the new budget deal will allow federal student loan debt collectors to bypass the Telephone Consumer Protection Act in order to bombard borrowers via auto-dialers:

Consumers with cell phones who haven't given companies permission to bombard their mobile devices with texts, pre-recorded messages or calls made using auto-dialers are typically protected under the Telephone Consumer Protection Act.
But the measure in the potential budget deal (Section 301) would amend existing law to allow companies to use auto-dialers when they call borrowers' cell phones -- even when federal student loan borrowers haven't consented to them, and even if the borrowers will be charged for them. Creditors already have the authority to auto-dial borrowers' land lines without consent.
...Consumer groups have warned that allowing debt collectors and loan servicers to auto-dial borrowers' cell phones would waste precious cell phone minutes, especially for low-income households that rely on prepaid plans, and that even when borrowers manage to get student loan specialists on the phone, they're frequently misled or given incomplete information, including about income-driven repayment plans.

And lest you imagine this is just the work of outgoing Speaker John Boehner, who has close ties to debt collections industry lobbyists, or his pro-corporate, consent-hostile party, President Obama is fully on board, too: "Obama has repeatedly pushed Congress to change the law to allow more of these calls, on the grounds that doing so would lead to higher recoveries on delinquent student loan debt."

This, despite the fact that there is "little, if any, independent evidence that giving debt collectors or loan servicers this power would lead to fewer loan defaults or delinquencies."

Basically, it's an excuse to harass people. People who are frequently already under an enormous amount of stress and pressure because of student loan debt.

Really just fucking thrilled that both parties could find a way to work together in order to devise a way to harass people with student loans, especially after they came together years ago to tell under- and unemployed people to take out those loans and buy themselves an education, instead of creating and keeping onshore for those people jobs with a livable wage.

7 Dos and Donts Of Student Loans For Millennials | Bankrate.com

Posted: 31 Aug 2015 05:00 PM PDT

How to manage student loans

When Philly resident Chenell Tull's grace period ended 6 months after graduation, her $45,000 in private loans turned into $52,000. That's because post-grace period, the student loan companies took the interest that had accrued while Tull was in school and added it to the principal.

She's now paying interest on the interest added to the principal.

"I was never told about this crazy idea and didn't even realize it had happened until 3 years later when I really started taking a closer look at my loans," Tull says.

If she'd truly understood what might happen, she would have eliminated the accrued interest.

"I would have made sure I had every penny paid off before the grace period ended," she says. Today, 27-year-old Tull has repaid more than $18,000 of her total debt, and records her progress on her blog, BrightCents.com.

Some millennial grads like Tull are tackling their student loans, cutting debt and coming out ahead. Today, more than 40 million borrowers with student loans collectively owe more than $1.2 trillion, according to the Consumer Financial Protection Bureau, or CFPB.

Here are some do's and don'ts of managing student loans after graduation.

Don't mistake deferment for default

Deferment allows you to avoid payments on federal student loans while in school, serving in the military or while looking for that first job (although interest will still accrue on unsubsidized loans).

Forbearance works like a deferment, but interest accrues on all loans.

But default? You'll want to avoid it, at all costs. "The majority of people who default have pushed loans under the rug and don't want to deal with the loans," says Jan Miller, an independent student loan consultant who typically works with professionals managing complicated student loan debt.

The Department of Education estimates that 3 million borrowers are at least 30 days past due on 1 or more Federal Direct Loans. After 270 days of delinquency, you go into default. This can lead to garnished wages, ruined credit and an inability to qualify for future aid or deferments. Almost 8 million student loan borrowers are in default, owing more than $110 billion, according to the CFPB.

Make sure your credit is in good shape. Get your free credit score and report from myBankrate.

Do determine repayment strategy

Do strategically determine repayment strategy Â© iStock

No matter how you tackle your loans, do it with consideration. Seven types of repayment plans are available for student loan borrowers. And any millennial who works full time (defined as an annual average of 30 hours or more per week) at a public or nonprofit institution and makes 120 payments could be eligible for student loan debt forgiveness.

Idaho resident Shannon Brown, 31, and her husband paid off $22,000 in student loan debt in less than 9 months by using the "Debt Snowball Method," paying the loan with the lowest amount owed, regardless of interest rate.

"Paying off the smallest loan first allows you to experience success very early in your journey and is a real motivator to keep on going," says Brown, who documents her approach on her blog, GrowingSlower.com.

Miller tailors repayment strategies to the needs of his clients, often suggesting that clients repay highest-interest loans and private loans first.

Don't jump into consolidation

By consolidating, you could roll all loans into 1 big loan, simplifying a millennial's repayment to once monthly and at 1 interest rate. No more juggling of loan payments.

However, choosing consolidation limits your loan repayment strategies, such as aggressively paying private loans while keeping federal loans in forbearance, or repaying higher-interest loans first, Miller says.

"Consolidation is 1 of your aces in the hole, so don't use it too soon" he says. "Once you consolidate, you can't play around and manipulate loans as much."

As well, if you think you may qualify for a forgiveness program, you may want to wait. "If you feel you may qualify for public student loan forgiveness, and you have already been working for a public-service-qualifying employer, consolidating may eliminate years of eligibility already established, depending on which loan types were already benefiting from the program," Miller says.

Do focus on paying off debt

Once you land that 1st post-college job, don't start blowing cash on cars and condos.

"Start repayment immediately upon graduation and throw all your extra income toward paying off that debt," debt blogger Brown says.

"It can be very tempting to look at your new salary as a windfall and start to increase your lifestyle," she says. "However, if you keep living like a poor college student for just a couple more years, you'll be financially free really fast."

At first, Brown and her husband committed to an extra automatic payment of $39 per month, making additional payments at the end of each month when they were able.

"We were really surprised that once we made a plan to pay off our debt, it went much faster than we could have imagined," she says.

Don't forget about loan co-signers

If your parents co-signed your private student loans, their credit is tied to yours. If you flake out on payments, their credit rating will get hit -- not a great way to repay their generosity.

"Parents forget that they're liable, too," says Reyna Gobel, author of CliffsNotes titled "Graduation Debt: How to Manage Student Loans and Live Your Life."

Sometimes parents may need to chip in to avoid the loan going into default and to save their own credit. If you're having a problem coming up with monthly payments, talk to your parents before you miss an installment.

If possible, pay down private loans as quickly as possible and look into releasing your co-signer, Gobel says. Lenders have different rules around co-signer release, but a history of on-time payments is a critical piece of the loan puzzle.

Do call on the ombudsman

The Federal Student Aid Ombudsman Group of the U.S. Department of Education helps resolve disputes relating to direct loans, guaranteed student loans, Perkins loans and the federal family education loan program loans.

"The federal student loan ombudsman is your secret weapon for federal student loans if your servicer is not giving you the right information or you're facing some sort of problem," Gobel says.

Private student loan holders can turn to the CFPB, which also can help solve problems.

"Either way, whether private or federal, there are people to give you resources and help," she says.

Miller says to be leery of debt-relief agencies, particularly those that consolidate multiple loans and dump them into income-contingent repayment programs -- a one-size-fits-all approach -- while charging you to do so.

If you have a complicated loan history or large loans, seek help from a financial adviser or credit union adviser for budgeting.

"The main strategic advice is basing borrowing and the repayment-plan choice on overall life plans," writer Gobel says.

Don't forget paperwork proof

"It's not a bad idea to get something in writing along with pulling all 3 of your credit reports to make sure it was reported correctly and that you're not missing any other servicers or something who are still out there," says Nick Best, a bankruptcy attorney in Huntington Woods, Michigan.

It's up to you to check your credit history and ensure accuracy. The same holds true even if you've gone into default. Make sure the status of the student loans on your credit report matches what the government is showing at NSLDS.ed.gov, Best says.

Regardless of whether you're missing payments or have finished off the last payment, millennial graduates must be diligent with their student loan records and documents.

"Servicers have recently found themselves in hot water by failing to provide accurate tax information to borrowers, potentially costing unaware millennials up to $2,500 come tax time," Best says.

"Even though you may have had some valid defenses, you lose those defenses once there is a court order signed by the judge saying you are legally obligated to pay this judgment, regardless of how things went previously," Best says. "Too many times, we don't hear from a potential client until after this turns into a garnishment."

Campaigners fussing over student loan repayments have the wrong ...

Posted: 26 Oct 2015 12:00 AM PDT

Students protesting in 2013. Now new proposals to fix the repayment threshold could mean a graduate repays £6,000 more, a study suggests. Photograph: Pete Riches/Corbis

An impending change to student finance is stoking such fierce opposition that the TV pundit Martin Lewis, founder of MoneySavingExpert.com [pdf], has threatened to go on strike because "we could no longer be sure that what we say is true". The government's proposal [pdf] to freeze the level of earnings at which graduates start repaying their student loans is a "disgrace", "an outrage" and "a breach of trust", he says.

In the past, people with outstanding student debts paid back 9% of earnings above £15,000. However, when the coalition tripled fees to £9,000 from 2012, ministers said the repayment threshold would jump to £21,000 and, crucially, rise each year in line with earnings.

The argument that student finance would be more "progressive" rested on this higher and ever-rising threshold. All students would take on larger debts, but only higher-paid graduates would pay back more.

Now, however, the chancellor, George Osborne, has proposed fixing the £21,000 threshold until at least April 2021 – meaning, according to the Institute for Fiscal Studies, that a typical graduate could repay over £6,000 more in total. Crucially, the proposal to fix the threshold is for existing students as well as future ones. Past changes to student finance, such as the £9,000 fees, were for new students only.

Many students and some universities are furious, claiming student loans have been mis-sold. According to the National Union of Students (NUS), it is "yet another betrayal" by a government that "shows complete disdain to students and their futures". GuildHE, which represents 29 higher education providers, claims it will undermine confidence in the loan system.

On the other side of the fence, people such as David Willetts, former universities and science minister and now executive chair of the Resolution Foundation thinktank, says a tougher threshold reflects public opinion because "slow payback is not particularly popular". Freezing the repayment threshold was a major recommendation of an 80-page report in June 2015 on university finance produced by UniversitiesUK [pdf], which represents 132 vice-chancellors and principals.

The debate is important, not least because of the party politics involved. Linking the repayment threshold to earnings was part of the deal to encourage Liberal Democrat MPs to support tripling fees five years ago. If it disappears, they can no longer claim they softened the blow of higher fees.

Yet no one disputes the government's legal power to make the change. When students take out a loan, they agree the terms and conditions can be altered. The issue is ethical, not legal. Is it morally unacceptable to change student loan terms retrospectively? Are politicians victimising young people? Will today's students warn their younger siblings off university?

The Sutton Trust thinks so, saying the freeze will lead to a catalogue of problems including "failure to complete, reduced academic achievement, delay in graduating or graduation from a less prestigious university".

Perhaps so. On the other hand, it will make the student loan scheme look more sustainable by raising the repayments. That is why the Treasury is so keen on it.

But there are three reasons for thinking the row is smoke without fire. First, loan terms have been changed retrospectively before – for example, the repayment threshold jumped from £10,000 to £15,000 for new and existing borrowers in the 2000s. So retrospective changes are not unprecedented.

Second, it is hard for the NUS and others to stoke the row because they have, until recently, argued for a graduate tax. Under such a tax the repayment terms can be altered in each budget as with other taxes. There would not even be a consultation as there has been this time.

Third, perhaps wrongly, many young people have a relaxed attitude to debt, so a tweak to repayments is unlikely to alter their behaviour.

For these reasons I doubt the vehement opposition to the government's plan to fix the repayment threshold is wise. I do not support the policy, but I worry that the campaign against it is detracting attention from more significant changes. For example, maintenance grants are being abolished. That is less excusable because it means the poorest students will emerge from university with the largest debts. But the abolition of the grants is for new students only, so it is of much less interest to existing students. Where is the big fuss about that?

Opponents to freezing the repayment threshold are almost certainly letting down future students – they are fixing on the wrong target.

Nick Hillman is director of the Higher Education Policy Institute

Student Loan