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This Week in Student Loans: November 22

November 22, 2019

Welcome to our weekly roundup on all things student loans. Let’s take a look at some top happenings of the week (click to scroll to the story):

Filing Bankruptcy to Alleviate Student Debt?

LendEDU’s Mike Brown wrote a column for Business Insider regarding the Student Borrower’s Bankruptcy Relief Act, which was proposed in May by Senator Dick Durbin and was cosponsored by Democratic presidential candidates Bernie Sanders, Elizabeth Warren, and Kamala Harris. If passed, the bill would erase the current part of the bankruptcy code that makes private and federal loans non-dischargeable unless “undue hardship” is proven, which has been known to be very difficult.

 

This is especially relevant as a LendEDU study found that 32% of bankruptcy filers carried student loan debt, with student loans making up 49% of their total debt on average.

 

The proposed law would treat student debt the same as other forms of consumer debt in bankruptcy proceedings, which may lead some student loan borrowers to consider filing bankruptcy to start fresh from their debt, despite the negative connotations. Whether that’s a smart move for borrowers is up for debate.

 

Source: Business Insider

Employers Joining in on Student Debt Repayment

In the midst of rising student debt, The Chicago Tribune reported that more employers are launching benefits programs to assist their employees in repaying their student loans.

 

“According to a survey last year of 250 companies by the Employee Benefit Research Institute, 11% offered student-loan repayment subsidies and 13% planned to add it as a way to attract and retain employees,” the article states.

 

Among the corporations following the trend are Hulu®, HP®, and Fidelity Investments®.

 

The types of student loan benefits that are being offered vary from employers making direct payments to lenders, offering tools to manage repayment, and even matching employee’s student loan payments with contributions to their 401(k) retirement plan. Perhaps more businesses will continue to catch on to high demand for debt relief among recent college graduates and implement benefits to attract their talent.

 

Source: Chicago Tribune

Will the College Affordability Act Enable Government Refinancing?

With all the buzz surrounding the College Affordability Act that was introduced by House Democrats in October, it’s worth looking into the details of what the act will change. Forbes writer Zack Friedman explains the three ways this could change repayment, with the first being that the government will enable borrowers to refinance their student loans to “today’s interest rates.”

 

How these rates will compare with top private student loan refinancing lenders is yet to be known. If this plays out like the in-school funding market, well-qualified borrowers may still receive better rates in the private market. In addition, there are some other limitations to the proposed refinancing program, including strict limits on the dollar amount of private loans that could be refinanced through the government. 

 

The proposed program would also eliminate origination fees of federal student loans (joining many private lenders like ELFI, who already do this for borrowers) and would “simplify” student loan repayment by replacing the variety of federal loan repayment plans with just two plans: one fixed student loan repayment plan and one income-based repayment plan. This “simplification” comes at a cost for borrowers who will lose access to:

 

  • Revised Pay As You Earn Repayment Plan (REPAYE) 
  • Pay As You Earn Repayment Plan (PAYE)
  • Income-Contingent Repayment Plan (ICR Plan).

 

Source: Forbes

 

Trump’s Loan Discharges Halted for 24,000 Veterans

In August, President Trump called the U.S. Education Department to forgive student loan debt for veterans who are “totally and permanently” disabled. However, this process has been delayed due to regulatory complications, leaving 24,000 veterans who would qualify without student loan forgiveness. The number of veterans who have received discharges of their loans thus far has reached 3,300.

 

The hang-up is that the Education Department “could not legally move ahead with the automatic loan forgiveness until the agency first rewrote the regulations governing the program,” according to the internal memo. It has been reported that the department is taking steps toward doing so and that new proposed regulations were pending review at the White House.

 

Source: Politico

 

Boston Librarian Upset With Public Service Loan Forgiveness Program

NBC Boston shared an article surrounding Maija Meadows Hasegawa, a Boston librarian who is upset at the lack of information she was provided regarding the qualification requirements for the Public Service Loan Forgiveness Program.

 

“It was almost like unless you knew to ask, nobody would tell you,” she stated in the article.

 

Hasegawa notes that the rules of the program sounded simple at first: get a full-time public service or nonprofit job and make 120 qualifying payments. After applying and being rejected, she was surprised to find that she could have switched her loan type to qualify, which she eventually did. She also wasn’t aware that she needed to be in an income-based repayment plan, which she eventually did as well.

 

Hasegawa is like many of the 102,051 applicants who have filed for the PSLF program, of which only 1,216 have been accepted – frustrated.

 

Source: NBC Boston

 

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2020-07-02
Should You Keep Paying Federal Student Loans During CARES Act Suspensions?

You probably already know that the CARES Act has suspended Federal student loan payments for the time being. Until September 30th, you aren’t required to make payments, and the interest rate of your loans is set to 0%. This is primarily to help those with student loans who are struggling during these uncertain times. If your student loans are in forbearance due to the CARES Act suspensions, you have several repayment options based on your financial goals.

 

Option 1: Take Advantage of That 0% Interest

Normally, when making extra payments on student loans, your money is first attributed to any collections charges or late fees, then to accrued interest, then to the principal itself.

 

With the current 0% interest rates, however, if your account doesn’t have any fees or charges, you’ll save some money at that step. The more you can reduce your principal balance, the more money you’ll save over time in interest.

 

For example, let’s say you have $25,000 in student loans at a 4% interest rate and you want to pay it off in the next 10 years. Over that period, you accrue $5,373.54 in interest. However, if you take advantage of the CARES Act 0% interest, you can change the course of your repayment.

 

For instance, if you continue to pay your student loans during this period, the payments will be attributed straight to principal and will save you about $300 in accrued interest over the course of your repayment.

 

Option 2: Wait Until September And Resume Payments

If the coronavirus has affected your finances, don’t worry about paying down your student loans too quickly. Instead, use this time to get your other debts under control. Focus on paying back higher interest rate debt, like credit card debt, which will impact your long-term financial health.

 

Option 3: Refinance and Take Advantage of Low Interest Rates

During this time, many student loan refinancing companies are offering low interest rates. If you’re locked into an unfavorable rate, this would be a great time to consider refinancing student loans to save on interest costs.

 

This is an especially great option for borrowers with private loans, as these types of loans aren’t currently receiving any type of federal forbearance benefit. For a personalized look at how refinancing could improve your financial health, check out the ELFI Student Loan Refinancing Calculator.*

 

So, should you keep paying federal student loans during the CARES Act suspensions? The answer depends on your unique goals. Whether you choose to pay your federal loans, take care of other expenses, or refinance your student loans, this is a great opportunity to eliminate some additional debt before the September 30 deadline. Happy saving!

 
 

*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.

Coronavirus (COVID-19)
2020-06-26
Looking Back on How COVID-19 Has Impacted Student Loans

The COVID-19 pandemic has affected everyone’s life in one way or another. For many Americans, this included their student loans. Whether you are unable to make payments or benefiting from a lower interest rate, it can be confusing to know how all of the ways the pandemic may be affecting your situation.    By Caroline Farhat   The impact on student loans is different depending on whether you have federal or private student loans. If you do not know what type of loans you have, you can log in to your account on the StudentAid.gov site that will show you any federal loans you have borrowed. If you think you have any private loans, be sure to request your free credit report to see the information on them.  

COVID-19 Impact on Federal Student Loans

On March 27, 2020,
the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act impacts most federal student loans, but not all. Perkins Loans and FFELP loans that are not owned by the U.S. Department of Education are not included in the benefits provided by the Act. Most federal student loans are covered. Here’s how the CARES Act affects all other federal student loans:   

Administrative Forbearance

The covered student loans were automatically placed on administrative forbearance from March 13, 2020, through September 30, 2020. This means no payments are required during that period and no action was required to receive this benefit. If you decide to make payments during this time the amount will go towards the principal of the loan after the interest accrued as of March 13 is paid. Any payments made after March 13 through September 30 can be requested for a refund.    

Interest Rate

The interest rate on the covered federal loans is temporarily set at 0% from March 13 through September 30. You do not have to do anything to receive the reduced interest rate. This reduced interest rate is beneficial because your loans will not be increasing during the paused period.    

Student Loan Forgiveness

The non-payments during the March 13 to September 30 timeframe count towards payments made for student loan forgiveness. This is especially beneficial if you are in the Public Service Loan Forgiveness (PSLF) program. As long as you are employed at a qualifying employer, you do not have to make any payments during the period and the months will still qualify towards your required number of payments. 
  • For example: if you have 48 payments remaining until you are eligible for loan forgiveness under the PSLF and you do not make any payments from March 13 to September 30, your required number of payments until forgiveness will be reduced to 42 payments.
 

Collection on Defaulted Loans

If you currently have federal defaulted student loans, the collection on those loans is paused from March 13 through September 30, 2020. You should not receive letters or phone calls regarding the collection of these debts. In addition, your tax refund, social security benefits and wages cannot be garnished during this time. However, keep in mind after this paused period, collections will resume on your defaulted loan.  

Rehabilitating Defaulted Loan

If you are in a rehabilitation agreement for your defaulted loan, the suspended payments will count toward your rehabilitation during the suspended payments period.  

Employer Educational Assistance Programs

The CARES Act allows employers to contribute up to $5,250 per year towards an employee’s student loans tax-free through December 31, 2020. This is a savings for the employee who can have extra money paid on their student loans with no taxes owed on the money. This provision of the Act allows employers to use student loan assistance as a benefit to offer to employees, while not having to pay payroll taxes on the money. Corporations looking to add this benefit for their employees can find out more information here.  

COVID-19 Impact on Private Student Loans

Private student loans are not covered by the CARES Act, however, you may still be eligible for some relief if you have been financially impacted by COVID-19.  

Lender Relief Measures

Many lenders are providing relief measures, such as forbearance, in which you will not be required to make payments for a certain period. Every lender is different so be sure to check with your provider if you need any assistance.  

State Relief

Some states’ attorney general offices have made agreements with private student loan lenders to provide relief to borrowers impacted by the pandemic. As of this writing, nine states plus Washington D.C. have made agreements with lenders. Some of the benefits in the agreements may include:
  • 90 days forbearance, which means no payments would be due 
  • Waiver of late fees 
  • No negative reporting to credit bureaus 
If you do not live in a state that is helping to provide relief, refinancing your student loans may be a great option for you. Refinancing can reduce your monthly payment to make it more affordable for you. Refinancing allows you to borrow a new loan to pay off your old student loan. The new loan can save you money by having a lower interest rate or obtaining a new loan with a longer term length to lower the payments, but extend the number of months you have to pay. Check out our Student Loan Refinance Calculator to see how much you may be able to save.*     During this unprecedented time, it’s helpful to have some relief from student loan payments if you are unable to make them. Explore all your options to see what works best for your financial situation.   
  *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.
student loan news
2020-06-18
This Week in Student Loans: June 18, 2020

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:
photo saying legislation

NAACP And 60 Other Groups Call On Congress To Cancel Student Debt

After the federal government has provided student loan relief to all federal student loan borrowers through the CARES Act, a coalition of over 60 organizations including the NAACP, American Federation of Teachers, and the National Consumer Law Center are now calling Congress to cancel student loan debt altogether in their next stimulus package.  

Source: Forbes

 

low rates on federal student loans

Student Loans: 3 Ways To Get A Lower Interest Rate

This Forbes article lays out the three ways to get a lower interest rate on your student loans, covering options such as refinancing, borrowing a new student loan, or even switching to a variable rate loan.  

Source: Forbes

 

question mark

How to Pay Off Student Loans When You’re Broke

With many individuals struggling to pay off their student loans due to lack or income or overwhelming expenses, this Fox Business article lays out options for paying down student debt when faced with difficult financial circumstances.  

Source: Fox Business

 

student debt in america

How Student Loans Became a $1.6 Trillion Problem

With the cost of college increasing almost 25% in the past decade and total student loan debt reaching $1.6 trillion, this CNBC video offers a historical view of the path the U.S. took to arrive at this state.  

Source: CNBC

    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.