Dealing With a Worsening Student Loan Debt Situation

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For a long time there was a problem with student loans, and now it stands at $ 1.4 trillion in the United States . To make matters worse, several recent events have made the situation even bleaker for borrowers. These changes will not affect every debtor student, but they are still worth paying attention to.

Student loan forgiveness is in the air

Forgiving your student loans is not very common, but the government service loan forgiveness program has always been an option. President George W. Bush introduced this program in 2007, and the idea was that if you worked for a nonprofit or government organization, you could be forgiven on a student loan after 120 monthly payments (10 years).

According to the Ministry of Education, these are typical types of work that meet the requirements:

Government organizations at any level (federal, state, local or tribal)

Non-profit organizations exempt from taxes under section 501 (c) (3) of the Internal Revenue Code.

Other types of non-profit organizations that provide certain types of relevant government services

The first payments were to be forgiven this year. Problem? A small group of borrowers received letters stating that their eligibility for assistance had been revoked. It was a small group and some said their eligibility was “mixed “, but people got nervous when four of them filed a lawsuit against the Ministry of Education, and the Ministry of Education responded:

“FedLoan Servicing’s response to ECF does not reflect the agency’s final action on borrower qualifications for PSLF.”

The answer was mostly just because you were told that you are participating in the program does not mean that you are truly qualified. This has left many eligible borrowers wondering, “Oh shit, am I officially eligible?” This will be a huge blow to anyone who takes a job in the public sector while waiting for debt forgiveness, especially if they sacrifice other opportunities.

Now the fate of the program is in the air, but the current administration has hinted at its elimination. Add that to their penchant for eliminating consumer- friendly agencies , and it’s easy to see why people get nervous. But even during the Obama administration, there was a proposal to limit forgiveness at $ 57,500.

What can you do?

Many experts say that those currently in school or considering their career options should think twice before moving into government service just for the sake of forgiveness. Here’s what one financial columnist recommends for Forbes :

Choose Your Employer and Job Type Carefully … While the Public Service Loan Forgiveness program includes work for a 501 (c) (3) nonprofit, not every nonprofit or job type qualifies. Keep this in mind when considering a government service loan forgiveness, your employer and job title. If you are unsure if an employer or position meets the criteria for a government service loan forgiveness, then you may want to consider alternatives that you know will work.

If you are already a member of the program and you are worried that the DOE is not keeping it from ending the deal, it’s not really time to panic, but it doesn’t hurt to know your options . Here are some options for people who are struggling with student loan debt:

Keep in mind that none of these options should be taken lightly. Each of them has at least a couple of disadvantages. Namely, many of them will simply lengthen the payback period of your loan by making your monthly payment lower, but your total repayment amount is even higher due to the interest. However, if you find yourself stranded, they can provide some relief.

Student loan officers are not willing to help you

Let’s say you have a big bonus at work and want to use it responsibly, so you add a little more to your monthly student loan payment. Better to remember to call student loan support and tell them that you want this additional amount to be applied to the main balance, although otherwise they will stealthily spend it on future interest, which will not actually save you money.

But even that doesn’t always work. Student borrowers said Navient, which serves loans to more than 12 million borrowers and was previously part of Sallie Mae, did not listen to clients. Despite being told how to allocate funds, they repeatedly misdirected funds by interest rather than principal or commission.

The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Navient for this and other allegedly illegal activities. Here’s how Navient responded to the attempt to dismiss the claim :

Navient’s borrower relationship is that of a third party loan seller and not a fiduciary advisor. The role of the maintenance staff is to collect payments from borrowers. In this role, the service party acts in the best interest of the lender (in this case, the lender is often the federal government itself), and there is no expectation that the service party will “act in the best interest of the consumer.” Thus, courts generally hold that servicers and lenders “do not have any specific fiduciary responsibilities based on their servicer-borrower relationship.”

So where do consumers get this “expectation”? As Bloomberg points out , this could be because “we’re here to help,” Navient CEO Jack Remondi expressed in a recent blog post:

“At Navient, our priority is to help each of our 12 million clients successfully manage their loans according to their individual circumstances.”

If you are a Navient customer and think so, you are obviously stupid because, as they said, they are not here to act in your best interest.

What can you do?

First of all, find out if you do not already know who is servicing your loan.

The Department of Education is the lender of all federal loans, but they use private companies like Navient to actually service these loans. This way, you can log on to the Federal Student Aid website to find your federal loan officer. Once you know who you are dealing with, you can check the CFPB Consumer Complaints Database to see what specific issues other customers are complaining about. When you know that your service personnel are notorious for dark business practices, you can be vigilant about them.

Second, if you are having problems with your own service center, Navient or otherwise, there are several resources for filing complaints, USA Today notes:

Yes, you can switch services through consolidation or refinancing, but refinancing for this reason alone is probably not a good idea. As one Boston-based student loan lawyer said, “Other service companies are not exactly rainbow and sun.”

However, if you’re buying a service, the CFPB is a good place to start. You can view customer complaints and reviews, as well as find out how (or if) the service center reacted.

Harder to file a FAFSA

If you have not yet taken out a loan but are planning to do so, take a look at a recent change to the FAFSA ( Federal Student Aid Free App ).

Students complete the FAFSA to qualify for Pell grants, student loans, and other forms of financial aid. For a long time, job seekers had to enter information manually, and the form was really complicated. But then the IRS released a tool that made it easy and simple to auto-populate that data.

Unfortunately, this tool is currently suspended for security reasons.

Here’s what the National Association of Student Financial Aid Administrators should know :

… it is important that they know that they can still complete the FAFSA without an IRS DRT. College financial aid offices can help students who do not understand or have difficulty completing the free federal application. No student should refuse to complete the FAFSA despite the loss of the IRS DRT.

In other words, you have to go back to entering information manually, which is time-consuming.

What can you do?

First, you want to know the FAFSA deadlines and make sure you have enough time to complete them.

You also need to be extra careful when entering data manually, because any errors can flag your application. This means you will have to go through a long review, which can make it difficult to meet deadlines for college assistance.

In addition, to enter this information manually, you will need a copy of the previous year’s tax return. If you don’t have one, you can request one from the IRS. If you do this online, you will need the following, according to the IRS:

  • your SSN , date of birth, filing status and mailing address from your most recent tax return,
  • access to your email account,
  • your personal account number of a credit card, mortgage loan, mortgage loan, line of credit or car loan, and
  • mobile phone with your name in the account.

You can also ask your school’s financial aid office what they recommend.

While being in debt isn’t hard enough, student borrowers have faced additional hurdles lately. There is very little you can do with some of these obstacles, but when you know what to expect, it is a little easier to prepare for them.

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