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7 Top Student Loan Moments From the Past Decade

January 6, 2020

2019 has come to an end, which means it’s the end of another decade. The past 10 years have been staggering in terms of changes to the student loan system. From 2010 through 2019, student loan debt reached an all-time high, new repayment plans were introduced, and the Department of Education cracked down on for-profit schools. Here are seven of the most significant student loan moments of the past decade.

1. The government introduces changes to income-driven repayment plans

Income-driven repayment (IDR) plans were first introduced in 1994. With an IDR plan, federal loan borrowers could reduce their monthly payments, making the payments more affordable. But over the past 10 years, the Department of Education made significant changes to IDR plans

  • Pay As You Earn: In 2010, the government introduced Pay As You Earn (PAYE). Under this program, borrowers’ payments would be capped at 10 percent of their discretionary income, and they would receive loan forgiveness after making payments for 20 years. 
  • Income-Based Repayment: The government updated Income-Based Repayment (IBR) in 2014. With the new guidelines, borrowers would pay 10 percent of their discretionary income, and receive loan forgiveness after 20 years. Only available to borrowers who took out loans after July 1, 2014, the payments under the new IBR plan would never exceed what the payment would be under a 10-year Standard Repayment Plan. 
  • Revised Pay As You Earn: The Department of Education launched Revised Pay As You Earn (REPAYE) in 2015. With REPAYE, borrowers’ payments are limited to 10 percent of their discretionary income. For undergraduate borrowers, the loans would be forgiven after making payments for 20 years. For graduate borrowers, the loans would be forgiven after 25 years.

 

2. National default rate reaches 11.5%

In 2014, the national federal student loan cohort default rate — a measure of how many borrowers of Federal Family Education Loans or William D. Ford Federal Direct Loans defaulted on their debt — hit 11.5%, an all-time high. Of the millions of students who entered repayment, hundreds of thousands defaulted on their loans, meaning they didn’t make payments for at least 270 days. 

 

According to the most recent data, the default rate has decreased slightly to 10.8%. However, student loan default remains a major issue for thousands of borrowers amidst the student loan debt crisis.

 

3. Department of Education announces Borrower Defense to Repayment

Over the past 10 years, several for-profit schools have been sued due to misleading tactics. Millions of students were left with student loans and a degree that couldn’t help them secure a job. 

 

In 2016, then-President Obama’s administration announced new regulations that were designed to protect borrowers from institutional misconduct. Called Borrower Defense to Repayment, the new regulations allowed borrowers to have their loans discharged if the school was found guilty of fraud, or if the school gave the borrower misleading information. 

 

Borrowers who think they are eligible can apply for Borrower Defense to Repayment online.

 

4. First borrowers become eligible for loan forgiveness through Public Service Loan Forgiveness

In 2017, the first borrowers became eligible for loan forgiveness under Public Service Loan Forgiveness (PSLF). While the program was launched in 2007, borrowers have to work for a qualifying non-profit organization or government agency for 10 years while making payments on their loans to be eligible for PSLF. 

 

Was the program successful? That depends on your perspective. As of June 2019, over 90,000 borrowers submitted PSLF applications. But to date, only 1,216 applications for loan forgiveness have been approved.  That means 99% of PSLF applicants are rejected. 

 

5. Student loan debt crosses $1.5 trillion mark

In the first quarter of 2018, the national outstanding student loan debt reached $1.5 trillion for the first time in history. If that doesn’t sound that remarkable to you, consider that the total outstanding loan debt was just $600 billion a decade ago. In only 10 years, national student loan debt more than doubled. 

 

Student loans are more prevalent than ever. According to The Institute for College Access & Success, 65 percent of college seniors who graduated from public and private colleges in 2018 had student loan debt. On average, borrowers had $29,200 in student loans.

 

6. Several for-profit schools close down

Over the past decade, for-profit schools have faced increased scrutiny and pressure from the U.S. Department of Education. As a result, several of the biggest for-profit schools closed down. 

 

  • Corinthian College: A school that operated 28 campuses across the country, Corinthian College closed in 2015. The closure came after the Department of Education fined the school for misrepresenting job placement rates. Over 16,000 students were affected. 
  • ITT Tech: In 2016, ITT Tech shut down its 130 campuses, impacting over 43,000 students. The closure came after multiple federal sanctions and after the Department of Education prohibited the school from enrolling new students who use federal financial aid. Students affected by the closure could pursue closed-school discharge, with over $500 million in federal student loans at stake. 
  • Education Corporation of America: In 2018, the Education Corporation of America shut down its 70 campuses, leaving over 19,000 students scrambling for solutions. The closure occurred after the Accrediting Council for Independent Colleges and Schools suspended the school’s accreditation over concerns about institutional management and student progress. 

 

7. President Trump grants automatic loan forgiveness to disabled veterans

In 2019, President Trump signed a Presidential Memorandum to help totally and permanently disabled veterans with their student loans. With the new process, the Department of Education would automatically forgive the federal loan balances belonging to eligible veterans under Total and Permanent Disability Discharge

 

Previously, veterans could qualify for Total and Permanent Disability Discharge. However, the process required veterans to know about the program and fill out extensive paperwork. Under President Trump’s order, their loans were eliminated automatically, simplifying the discharge process.

 

timeline of top student loan moments from the 2010s decade Timeline depicting the top student loan moments from the past decade.


 

Looking ahead

The past decade produced major changes to the student loan systems. As the 2020 election nears, more and more politicians will be paying attention to student loan issues since they impact millions of borrowers. Many presidential candidates will be introducing their educational policy proposals, which could signal new changes for borrowers in the next few years.

 


 

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2020-01-21
5 Things to Do Immediately After Graduation

By Kat Tretina

Kat Tretina is a freelance writer based in Orlando, Florida. Her work has been featured in publications like The Huffington Post, Entrepreneur, and more. She is focused on helping people pay down their debt and boost their income.

 

If you’re in your senior year and preparing for graduation — congratulations! Graduating from college is a huge accomplishment.

 

But after the hat toss, you have to start worrying about things like finding a job. And, if you’re like most college students, you probably have student loan debt to manage, too. As you start preparing for graduation, here are five things you should do to handle your student loans.

 

1. Find Your Loan Details

You likely needed to take out several loans to pay for school. It’s common for graduates to have as many as 12 different student loans when they graduate from college. Worse, your loans can be sold and transferred to different servicers, making it difficult to keep track of your debt.

 

After you graduate, look up all of your student loans and figure out who your loan servicers are, what your monthly payment is, and your due dates.

 

Federal Student Loans

To find your federal loans, use the National Student Loan Data System. Just enter your Federal Student Aid ID and password and you can view all of the federal loans under your name. The site will list your loan servicer and loan balance. Once you have that information, you can go to the loan servicer’s website and create an account and start making payments.

 

Private Student Loans

For private loans, you can identify the different loans and lenders by looking up your credit report at AnnualCreditReport.com, which allows you to get one free credit report per year. Your credit report will show what company currently manages your loan. When you find your loan servicer, you can contact the company directly to find out how to open an online account and make payments.

 

2. Create a Budget

Your student loan payments will likely eat up a significant part of your monthly income, especially when you’re just starting out in your career. To make sure you can afford the payments and your other living expenses, spend some time creating a monthly budget.

 

While you can use software like You Need a Budget (YNAB), you can also make a budget with just a simple pen and paper. List all of your monthly income, including earnings from your job and side gigs. Next, list all of your expenses, such as rent, utilities, internet service, student loan payments, car payments, and insurance.

 

Hopefully, your income exceeds your spending. If that’s not the case, you’ll have to look for areas to cut to give you some more breathing room in your monthly budget. Or, you can boost your income by freelancing or launching a side gig.

 

3. Sign Up for an Income-Driven Repayment Plan

If your starting salary is too low, or if you can’t afford the payments on your federal student loans, consider signing up for an income-driven repayment (IDR) plan.

 

There are four different IDR plans. While the specifics of each plan vary, the general concept is the same: the loan servicer extends your repayment term and caps your monthly payments at a percentage of your discretionary income. Depending on your income and family size, you can dramatically reduce your monthly bill. In fact, some people qualify for payments as low as $0.

 

After 20 to 25 years of making payments, the loan servicer will forgive your remaining loan balance. While the forgiven amount is taxable as income, IDR plan forgiveness can still help you save thousands.

 

You can apply for an IDR plan online.

 

4. Refinance Student Loans

If you have private student loans or a mix of both federal and private loans and want to pay off your debt as quickly as possible, look into student loan refinancing. By working with a private lender to take out a loan for the amount of your existing debt, you could potentially lower your interest rate, helping you save money. Or, you could get a longer repayment term and reduce your monthly payments, making them more affordable.

 

How effective is student loan refinancing? The savings can be significant. According to The Institute for College Access & Success, the average graduate has $29,200 in student loan debt. If you had that much debt with a 10-year repayment term and a 6% interest rate, your monthly payment would be $324. By the end of your loan term, you’d pay a total of $38,902.

 

But if you refinanced your debt and qualified for a 10-year loan at 4% interest, your monthly payment would drop to $296 per month. Over the course of your loan, you’d repay just $35,476. Refinancing your student loans would allow you to save over $3,400.

  chart showing the difference between refinances student loan and original loan

While there are some drawbacks to refinancing your education debt, refinancing can be a smart way to manage your loans. If you decide that student loan refinancing is right for you, use ELFI's Student Loan Refinancing Calculator to get an idea of what your repayment plan could look like. Prequalification is 100% online, free, and won’t affect your credit score*.

 

5. Sign Up for Automatic Payments

Managing your different loans and their various payment due dates can be overwhelming. But missing a payment can hurt your credit, and you could be subject to costly fees and penalties.

 

Signing up for automatic payments is a great way to ensure you never miss a payment and improve your credit history.

 

The Bottom Line

Your college graduation may feel far off, but it’ll be here before you know it. When it comes to preparing for graduation, developing a student loan repayment strategy is essential. By creating a plan now, you can ensure you’re ready to handle your student loan debt when your payments are due.

 
 

*Subject to credit approval. Terms and conditions apply.

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

2020-01-17
This Week in Student Loans: January 17

Please note: Education Loan Finance does not endorse or take positions on any political matters that are mentioned. Our weekly summary is for informational purposes only and is solely intended to bring relevant news to our readers.

  This week in student loans:
House of representatives

House Democrats Overturn DeVos on Student Loan Forgiveness

This Thursday, the Democrat-controlled House voted to overturn regulations introduced by Education Secretary Betsy Devos that eliminate the "borrower defense" rules introduced by the Obama administration. Critics have said the new regulations make it more difficult to get student loan forgiveness if a college suddenly closes. Sources say that the move to overturn Devos' new regulations won't pass the GOP-controlled Senate, however – and Trump is likely to veto the bill even if it does.  

Source: USA Today

 

signing legislation

Could Elizabeth Warren Really Wipe Out $1 Trillion in Student Loans in a Single Stroke?

Democratic Presidential Candidate Elizabeth Warren recently vowed to eliminate hundreds of billions of dollars in student loans on her first day in office if elected president. Her plan was released just before Tuesday night's Democratic primary debate. While the ability to erase debt is typically a decision left to Congress, student loans may be a different story due to a loophole involving the "Higher Education Act" passed in 1965.  

Source: CBS News

 

can't pay student loans

Study: Barely Anyone is Paying Off Their Student Loans

A recent study revealed that very few people are making progress on paying off their student loans, along with shifting factors in the nation's rising student loan debt. The study found that 51 percent of students who took out loans from 2010-12 haven’t made any progress in paying them off. Additionally, it showed that while in the past higher enrollment and rising tuition costs were the main drivers in the rising debt, slow repayments and amassing interest have now become the primary drivers.  

Source: NY Daily News

 
IRS building

IRS Issues Tax Guidance On Discharged Student Loans

The Internal Revenue Service recently issued guidance for some taxpayers who took out federal or private student loans and qualified to have their loans discharged. Typically, having loans discharged is treated as a taxable event, in which the forgiven amount is treated as income – but the tax break from the IRS allows the discharged amount to not be recognized as taxable income.

 

Source: Forbes

  That wraps things up for this week! Follow us on FacebookInstagramTwitter, or LinkedIn for more news about student loans, refinancing, and achieving financial freedom.  
 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

2020-01-10
This Week in Student Loans: January 10

Please note: Education Loan Finance does not endorse or take positions on any political matters that are mentioned. Our weekly summary is for informational purposes only and is solely intended to bring relevant news to our readers.

  This week in student loans:
Income-Driven Repayment Borrowers After Missed Deadlines to Recertify

Half of Income-Driven Repayment Borrowers Miss Recertification Deadlines

Over 8 million student loan borrowers use the Federal Income-Driven Repayment plan to help afford monthly payments. The plan can drop payments as low as $0 per month, depending on the borrower's income and family size. However, in order to stay in these plans, borrowers must recertify annually to avoid consequences such as increased payments, a larger loan balance, and potentially defaulting on the loans. ABC News reported that according to Department of Education data, more than half of borrowers miss the deadline to recertify.   While they will likely have to recertify annually, a new law is being put in place to allow borrowers to opt into automatic recertification. The article encourages borrowers with income-driven repayment plans to watch for the option to become available.  

Source: ABC News

 

Colorado weighs "get on your feet" bill to help in-state graduated with student loans

Colorado Weighs "Get On Your Feet" Bill to Assist College Graduates in State

New graduates of public colleges in Colorado may have more incentive to stay in-state following graduation due to a new bill in the works that could mandate the state to pay their student loan payments for two years. If passed, the "Get On Your Feet" bill will take effect for public college graduates who commit to staying in Colorado and enroll in an income-based repayment program.  

Source: Denver Post

 

college student panicking because of FAFSA rumors

Filling Out FAFSA Won't Get You Drafted, Experts Say

With tensions rising between the U.S. and Iran this week, a misinterpretation of the fine print within the FAFSA application led some college students to panic over the potential of being drafted. Despite the widespread social media panic, experts say that the federal form won't actually increase your chances of being drafted.  

Source: USA Today

 
student loan forgiveness tax implications

The Student Loan Forgiveness Tax Bomb

Forbes writer Robert Farrington published an article on January 6 highlighting the tax liabilities that borrowers who receive loan forgiveness through income-driven repayment plans will face. While it's not widely known, forgiven debt is treated as taxable income during the year that debt is forgiven through an income-based repayment plan. The article outlines the surprising amount that borrowers might pay in taxes when having their loans forgiven.

 

Source: Forbes

 
ELFI team celebrates $1 billion in refinanced student loans

ELFI Surpasses $1 Billion in Student Loan Refinancing

Education Loan Finance (ELFI), a division of SouthEast Bank, announced the successful funding of over $1 billion in student loan refinancing and consolidation loans. This funding has positively impacted over 14,500 graduates, parents, and cosigners since they began offering student loan refinance products in December of 2015. ELFI maintains an industry-leading “Excellent” 4.8/5 rating on Trustpilot.com and has been named one of NerdWallet's Best Student Loan Refi Companies for Customer Service for 2019.

 

Source: Education Loan Finance

  That wraps things up for this week! Follow us on FacebookInstagramTwitter, or LinkedIn for more news about student loans, refinancing, and achieving financial freedom.  
 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.