Friday, 23 October 2015

Student loan | What this one lawsuit could mean for your student loans - MarketWatch

Student loan | What this one lawsuit could mean for your <b>student loans</b> - MarketWatch


What this one lawsuit could mean for your <b>student loans</b> - MarketWatch

Posted: 23 Oct 2015 05:55 AM PDT

Defaulting on your student loans can haunt you for the rest of your life, making it difficult to secure credit for other purchases and in some cases putting your Social Security benefits or tax refunds at risk. So when Lee Pele, saw that his credit report indicated he defaulted on tens of thousands of dollars in student loans that he claims he never took out or authorized, he took action.

After being hounded by a debt collector in early 2013, Pele, who lives in Fairfax County, Virginia, disputed the defaulted loans with the Pennsylvania Higher Education Assistance Authority, the company servicing them, as well as with the credit reporting agencies, according to court documents. PHEAA's collection agent sent Pele documentation indicating he wasn't responsible for the loans, but PHEAA never removed the mistaken information from his credit report, Pele claimed in court documents.

So in December 2013 he sued.

The company was created by the Pennsylvania General Assembly in 1963, according to its website. In court documents representatives for the company argued that its relationship with the state — its financial decisions require the state's approval and the organization deposits its revenues into the state treasury, the documents claim — entitle the company to sovereign immunity. That's a legal term that means state entities are immune from legal action.

Read: Could Social Security be immune from student loan collection?

A district court agreed. But on Wednesday the fourth circuit court of appeals overturned that ruling, finding that Pele's lawsuit could continue.

The judgment has implications beyond Pele's suit, said Scott Michelman, an attorney with the Public Citizen Litigation Group who argued Pele's case. It opens up PHEAA — which serviced more than $105 billion in student loans in 2013, according to court documents — up to litigation from other borrowers as well as employees or anyone else affected by the company's actions. "This is a victory for the ability of individuals to hold this large and significant corporation accountable," he said in an interview.

The decision also may also be felt by student loan borrowers specifically. PHEAA is one of many student loan servicers affiliated with a state entity. Though the ruling only applies directly to PHEAA, it may set a precedent that other, similar servicers can't use their relationship with the state to protect them from suits or actions from regulators alleging wrongdoing. PHEAA didn't immediately respond to a request for comment.

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Student loan servicers have come under fire from advocates as well as the Consumer Financial Protection Bureau in recent months for making student loan repayment more difficult than it needs to be for borrowers. A CFPB report from last month found that in many cases, servicers aren't providing borrowers with enough information about their repayment options, are putting up barriers when borrowers try to resolve an error, and other issues.

The CFPB — the independent government agency charged with protecting consumer financial rights — the Department of Education and the Treasury Department jointly issued a set of guidelines for servicers last month that could pave the way for rules or enforcement actions down the line. The PHEAA ruling signals that it could be difficult for similar servicers to use their state affiliations as a way to protect themselves from these measures.

"The ruling makes it crystal clear that all student loan companies must follow the law, regardless of their political connections," said Rohit Chopra, the former student loan ombudsman at the CFPB and currently a senior fellow at the Center for American Progress, a left-leaning think tank. "If regulators want to protect consumers from servicing abuses, companies won't have a 'get out of jail free' card."

7 Tactics for Knocking Out <b>Student Loan</b> Debt - Real-time chat for <b>...</b>

Posted: 15 Mar 2012 03:00 AM PDT

As a graduate, you've probably stumbled across a few hard truths about post-college life.  You can't emerge from your cozy bed at noon and be considered a functional member of society. There's no school-sponsored taxi to drive you home after you've knocked back a few too many at happy hour. And, sadly, your annual income is equivalent to the amount you owe on your student loans. Ouch.

While you really should show up to work on time and limit the number of tequila shots you share with your boss, you don't have to suffer through your student loans.

1. Do a little sacrificing

The word "sacrifice" doesn't mean you're miserable.  It simply means you're trading something of lower value for something more valuable.  While you're still adjusting to adult life, continue to live like a student.  Use that ratty bus pass, keep your cheap apartment, eat at home, and watch your bar budget.

2. Work that BA

Student loan debt is something that becomes increasingly less valuable (and, therefore, more expensive) the longer you carry it.  The education your loan paid for is obsolete within six months of graduation.  Taking 25 years to pay off a loan that hasn't enhanced your income is like spending 25 years paying off a car that's stopped running.

To make your degree useful, treat it as leverage. Negotiate for a higher starting salary. If you've already started, then leverage your education in your annual review.  Ask your employer if he'd pay your student loans in lieu of a raise.  Many will consider keeping a valuable employee on by providing loan repayment as a benefit.  (For this to actually work, you have to be a rock star.  You can't half-ass it and expect any favors.)

3. Tap Uncle Sam

If you landed a job with the government after graduation, the Office of Personnel Management can help you.  A portion of your loans can be paid off by the government, up to $10K per year.  (Ahh, that's where our tax dollars go!)

Even if you don't work for the feds, they can still help.  The federal Income-Based Repayment program allows borrowers to pay loans back according to what's affordable, rather than what's owed.  The government realizes that engineering majors and ceramics majors don't make the same income after graduation.

4. Seize tax breaks

You may be eligible to deduct up to $2,500 on the interest you've paid on your student loans.  The result is a smaller tax bill.  Guess where that "extra" money can go?  Yep, to your student loans.

5. Get your side hustle on

Find ways to generate income through businesses, online content generation, or affiliate marketing.  These methods allow you to earn money while you're sleeping or working at your full-time job.  You can manage more than you can ever do.  A second job will suck up whatever free time you have left to achieve your other goals.

Find extra income from prize money, completing surveys, being a secret shopper, completing errands or chores, or spending below "budget." You can do this by pretending you're paid twice a month, rather than bi-weekly.  Budget for 24 checks, and you'll have 2 extra checks per year to devote to your loans.  Mind games are essential to paying off student loans.

6. Go ahead and make extra payments

Once you find extra money, make additional payments.  Whether you can afford an extra $20 or $200, paying down your principal eliminates interest later.  (And let's be honest, an extra $20 now means you'll get to eat steak sometime this decade.)

7. Be realistic

If it's easier to structure a settlement that allows you to rid yourself of it once and for all, then pursue it.  Make sure any settlement includes a letter stating that you paid on time, as agreed.  Ensure that all three credit bureaus get a copy.

Another option is to claim hardship status if things have been difficult for you – divorce, car accident, etc.– so your temporary problems don't compound into long-term problems.  Hardship status can get your debt reduced or eliminated altogether, particularly if you're dealing with a lengthy illness.  Locate the Statement of Financial Status on the Department of Education's website to get started.

Post-college life is full of hard knocks – but student loan debt doesn't have to be one of them.  Pay your loans off to cut them out of your life.  Once you do, you have my permission to toast your achievement with a shot with the boss.

Chris J. Snook has spent over 11 years as an author, entrepreneur, and venture catalyst and has spent the last 5 years in the investment community incubating media startups as the Managing Partner of TLEC Ventures. He co-authored the international best-selling books, "Wealth Matters 2007 and 2011" (2nd Edition) and "Burnout: How to Transform Frustration to Fortune in 2005."

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