Student Debt Crisis http://studentdebtcrisis.org Your One Stop Hub For Student Debt Issues Tue, 31 Mar 2015 17:58:45 +0000 en-US hourly 1 SDC’s Statement on Senator Elizabeth Warren’s Reintroduction of Bank on Students Emergency Loan Refinancing Act http://studentdebtcrisis.org/sdcs-statement-on-senator-elizabeth-warrens-reintroduction-of-bank-on-students-emergency-loan-refinancing-act/ http://studentdebtcrisis.org/sdcs-statement-on-senator-elizabeth-warrens-reintroduction-of-bank-on-students-emergency-loan-refinancing-act/#comments Wed, 18 Mar 2015 20:00:49 +0000 http://studentdebtcrisis.org/?p=2743 FOR IMMEDIATE RELEASE
March 18, 2015
CONTACT: Natalia Abrams
310-365-1069 – natalia@studentdebtcrisis.org

Student Debt Crisis’ Statement on Senator Elizabeth Warren’s Reintroduction of Bank on Students Emergency Loan Refinancing Act

Today, Senator Elizabeth Warren re-introduced the Bank on Student Refinancing Act. It’s simple, really: Americans can refinance their home loans and car loans, so it’s only right that student loan borrowers be able to do the same. Currently, student loan borrowers are not able to refinance under most programs. Senator Warren’s bill would give over 25 million Americans the option to refinance and make their student loans more affordable.

Last week President Obama introduced the Student Aid Bill of Rights. The President’s proposal states that every borrower is entitled to an affordable repayment program – the ability to refinance student loans is a part of affordable repayment options. Over 55,000 people have signed Student Debt Crisis’ petition – Support the Bill of Rights for Student Loan Borrowers. They have made it clear that Americans want their legislators to create solutions. Senator Warren’s announcement today is exactly the response we hoped to see from our legislators and we look forward to more action from Congress to secure rights for ALL student loan borrowers.

“We are pleased and encouraged by the re-introduction of Senator Elizabeth Warren’s bill: Bank on Students Emergency Loan Refinancing Act. The ability to refinance federal and private student loans at current rates should be a basic right extended to student loan borrowers. There is no reason that you can refinance your home, your car, and other forms of consumer debt, but not your student loans.”  – Natalia Abrams, Executive Director

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Cradle to grave: Student debt now bankrupting seniors http://studentdebtcrisis.org/cradle-to-grave-student-debt-now-bankrupting-seniors/ http://studentdebtcrisis.org/cradle-to-grave-student-debt-now-bankrupting-seniors/#comments Wed, 18 Mar 2015 17:18:24 +0000 http://studentdebtcrisis.org/?p=2740 As if aging in America isn’t hard enough these days, a new government report has uncovered that seniors are facing yet another barrier to a secure retirement: their student debt. Once thought to be a young person’s issue, new data released by the Government Accountability Office shows that older Americans are also finding themselves buried under the weight of their student loans. The data helps paint a much larger picture of the overall economic insecuritythat too many of our country’s seniors face every day.

According to a recent story based on the report, a record number of borrowers are seeing their Social Security payments garnished because their federal student loans are in default. As the story explains, “More than half, or 54 percent, of federal student loans held by borrowers at least 75 years old are in default, according to the federal watchdog. About 27 percent of loans held by borrowers aged 65 to 74 are in default. Among borrowers aged 50 to 64, 19 percent of their loans are in default. The Education Department generally defines a default as being at least 360 days past due.”

The price of an education is quickly becoming too heavy a burden for far too many people, and it’s a burden that’s staying with them forever. College debt looms large as the most difficult debt to get rid of, and these numbers paint a startling picture of exactly how big a toll it’s taking on people as they age. For many, student debt is following them from the cradle to the grave – they’re condemned to a lifetime of payments that stagnant wages and mounting economic insecurity make it nearly impossible to manage.

What’s even scarier is that the health and retirement security of our friends and neighbors was, in many ways, already in jeopardy. In fact, the very idea of retiring has increasingly become a pipe dream for most workers. People are working until they die just to get access to health insurance and because they don’t have enough saved in retirement. If they ever do stop working, too many are living in fear that debt collectors will come garnish their Social Security payments. Student loan debt is just the latest in a long line of threats to the financial well-being of seniors.

And the problem is only going to get worse. Every eight seconds, someone turns 65 in this country. But as is true for the student-debt crisis, our country has no comprehensive plan to support our aging parents and grandparents and only a very fragmented, fragile system…

Continue Reading at the Hill…

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Sallie Mae Is the Poster Child for the Student Loan Crisis http://studentdebtcrisis.org/sallie-mae-is-the-poster-child-for-the-student-loan-crisis/ http://studentdebtcrisis.org/sallie-mae-is-the-poster-child-for-the-student-loan-crisis/#comments Wed, 18 Mar 2015 17:05:28 +0000 http://studentdebtcrisis.org/?p=2737 NEW YORK (MainStreet) — Liberals and Conservatives, inside the Beltway and out, disagree on immigration, monetary policy, the Affordable Care Act and a host of foreign policy issues. But when it comes to student loans, particularly the private lender Sallie Maenow Navient — they are very often of one mind. Navient, a publicly-traded company established with government money has been portrayed by the Left and Right as a blight on its customers and taxpayers.

 

The Right wing Reason Foundation, funded in part by what are known as the Koch Family Foundations, run by David Koch and his older brother Charles, published “Sallie Mae and Uncle Sam: Cronyism in Higher Education Finance” in July 2013, a scathing critique of Sallie Mae. Last February Kenric Ward posted a similar article on the Libertarian Watchdog.org, complete with his support for Massachusetts Democratic Senator Elizabeth Warren’s opposition to Sallie Mae.

 

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You Can’t Discharge Your Student Loans In Bankruptcy Because Of Panicked 1970s Legislation http://studentdebtcrisis.org/2734/ http://studentdebtcrisis.org/2734/#comments Wed, 18 Mar 2015 16:56:32 +0000 http://studentdebtcrisis.org/?p=2734 Although bankruptcy should only be viewed as the last option for consumers drowning in a sea of debt, even this final-straw course of action won’t help Americans with getting out from under hefty student loans — but it wasn’t always this way.

Students being crushed under the weight of mounting student loan debt havefew options when it comes to receiving forgiveness for their debts, and bankruptcy is often the least obtainable.

Other debts, including your mortgage and auto loans, are dischargeable through bankruptcy filings, but student loans can only be discharged if the borrower proves “undue hardship” through a court determination.

And that process is surprisingly arbitrary, according to the National Consumer Law Center.

It is entirely up to the court to decide whether a borrower meets the standard, and the standard can vary a great deal, because the bankruptcy code does not provide an actual definition of undue hardship.

But for the sake of an example, the NCLC provides this scenario in which a court might decide that student loan discharge is necessary:

However, even under this circumstance, discharge isn’t a foregone conclusion.

While the process to discharge student loan debt in bankruptcy is long and tedious it wasn’t always that way.

Prior to 1976, student loans weren’t protected from bankruptcy proceedings. But that year, amid concern over high default rates, Congress passed legislation intended to safeguard federal investments.

The first version of the law put a ban on bankruptcy discharges for the first five years after a federal student loan was originated. It did include an undue hardship allowance that could discharge the debt earlier.

Two years later, lawmakers proposed a bill that would have returned bankruptcy rights to student loan borrowers. However, that legislation failed, and discharging federal loans through bankruptcy continued to be prohibited during the first five years after loan origination.

The law changed again in 1990, when the five-year rule was extended to seven years. In 1998, the law was revised again to remove any timeframe for allowable discharges, leaving undue hardship as the only way out.

At the time, this only applied to federal student loans. That changed in 2005, when lawmakers included private student loand debt in a comprehensive bankruptcy amendment [PDF].

Consumer advocates, like those at the NCLC, claim there was little need to pass legislation granting this non-dischargeable status to student loans…

Continue Reading at Consumerist…

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SDC’s Statement on Student Aid Bill of Rights http://studentdebtcrisis.org/sdcs-statement-on-student-aid-bill-of-rights/ http://studentdebtcrisis.org/sdcs-statement-on-student-aid-bill-of-rights/#comments Tue, 10 Mar 2015 16:59:45 +0000 http://studentdebtcrisis.org/?p=2713 FOR IMMEDIATE RELEASE
March 10th, 2015
CONTACT: Natalia Abrams
Phone: 310-365-1069
Email: natalia@studentdebtcrisis.org

Student Debt Crisis’ Statement on President Obama’s Student Aid Bill of Rights

Today at Georgia Tech University in Atlanta, President Obama announced his proposal for the Student Aid Bill of Rights. We are finally seeing the hard work of advocates and borrowers pay off with substantive results. This is by far one the most comprehensive proposals for student loan borrowers since the formation of Student Debt Crisis. We believe every borrower deserves access to quality, affordable education and the right to strong consumer protections for their student loans. The White House is making an important step in the right direction, and we urge Congress to stand with borrowers across the nation by adopting this proposal into law.

“It is an honor to hear President Obama stand up for the rights of student loan borrowers, and we are thrilled that he announced the Student Aid Bill of Rights today in Atlanta, GA. This all-inclusive proposal, once fully implemented, will go a long way to help struggling borrowers everywhere.” ~ Natalia Abrams, Executive Director – Student Debt Crisis

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The Student Loan Crisis is Really 2 Crises http://studentdebtcrisis.org/the-student-loan-crisis-is-really-2-crises/ http://studentdebtcrisis.org/the-student-loan-crisis-is-really-2-crises/#comments Tue, 03 Mar 2015 23:24:07 +0000 http://studentdebtcrisis.org/?p=2675 This chart, from the New York Fed’s recent look into student loans, shows two entirely different stories about how student loans are affecting young people.

On the left, the two cohorts with relatively small balances, below $10,000, have big problems with default and delinquency. That is likely because, with a balance so low, they didn’t finish college.

For these borrowers, income is lower and so is their likelihood of being able to put anything toward their student loans. Those who defaulted, in addition to probably having a low income, also now have credit problems.

On the right, people with very high debt burdens actually default less.

This implies that these debtors probably finished college and found a decent job. But five years later a huge chunk of them have a debt burden that is higher than it was five years previously, meaning they are probably paying less each month than it would take to cover the interest, which in turn means they are not getting close to paying off their loans — they are in fact making negative progress. This debt burden is…

Continue Reading at Business Insider…

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How Student Debt Stunts Financial Growth http://studentdebtcrisis.org/how-student-debt-stunts-financial-growth/ http://studentdebtcrisis.org/how-student-debt-stunts-financial-growth/#comments Tue, 03 Mar 2015 23:19:08 +0000 http://studentdebtcrisis.org/?p=2672 There was a time when conventional wisdom said that student debt is not a problem in and of itself—rather, “high” debt of $100,000 or more is the more pressing concern. A recent report from the Federal Reserve Bank of New York highlights just how out of touch that view is. A staggering percentage of Americans do not pay their student debt, no matter how big or small.

Analysis reveals that 34 percent of students with just $5,000 of outstanding debt—hardly “high”—default on their student loans. Student debt imperils far more than just individual borrowers’ monthly budgets. It erodes higher education’s ability to deliver on the promise that those who have similar abilities and work equally hard will achieve similar outcomes. Unfortunately, the prevailing  policy response—Income-Based Repayment (IBR) plans—does not address the core of the problem.

Concern about rising default rates has spurred increasing calls for greater access to IBR plans, which set repayment expectations at 15 percent of the federal student-loan borrower’s post-college income. Those who do not pay off their loans within 25 years can have their remaining debt forgiven. These features make IBR schemes less a solution to actual problems and more of a sort of self-soothing device for the American people to feel better about loans. Parents and older Americans don’t want to see young adults default. Student borrowers want some reassurance that they will be able to pay off their student loans and still feed themselves. Policymakers need to say they’re doingsomething on the issue of student debt. In the meantime, the true threat—student indebtedness itself—continues unabated.

The Obama administration has waged a successful campaign to promote access to IBR plans—estimating in 2010 that $6.6 billion in loans would be repaid through IBR, a number that today has risen to $27 billion. This number is likely to grow even more, thanks to recent changes that have expanded “Pay-As-You-Earn” eligibility, another type of IBR scheme which caps the borrower’s monthly payment at about 10 percent of their discretionary income while forgiving their remaining debt after 20 years of making payments.

This is why IBR misses the mark: because it currently doesn’t do enough to address one of the key ways student debt may negatively affect young adults, by limiting their ability to accumulate assets. Students with outstanding student debt, even very small amounts, are more likely to postpone accumulating assets as young adults, as recent research shows. IBR plans may even exacerbate this problem by extending the period of students’ indebtedness.

Asset accumulation is important, because it positions young adults for significantly improved economic outcomes over their lifetimes—something higher education is supposed to do. The consequences of diverting income to debt repayment instead of asset accumulation may worsen the…

Continue Reading at The Atlantic…

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Six Senators: “Department of Ed. Continues to Gouge Borrowers” http://studentdebtcrisis.org/six-senators-department-of-ed-continues-to-gouge-borrowers/ http://studentdebtcrisis.org/six-senators-department-of-ed-continues-to-gouge-borrowers/#comments Tue, 03 Mar 2015 22:21:53 +0000 http://studentdebtcrisis.org/?p=2669 For several years now the government has offered federal student loan forgiveness programs aimed at helping borrowers to avoid defaulting on their debts. While recent reports have shown that thepopularity of the programs has exceeded expectations, a group of six senators say the Department of Education could do more given the billions of dollars in payments it receives from federal loans each year.

Six senators — Sen. Elizabeth Warren (MA), Sen. Sherrod Brown (OH), Sen. Jeff Merkley (OR), Sen. Richard Blumenthal (CT), Sen. Tammy Baldwin (WI), and Sen. Edward Markey (MA) — sent a letter [PDF] to Secretary of Education Arne Duncan scolding the Department for turning federal student loans into a source of revenue while students struggle to make ends meet.

The Department is “squeezing students who are struggling to get an education” in order to maximize profits, the senators say, pointing to the Congressional Budget Office’s most recent estimates indicating that the federal government is expected to produce $110 billion in profits from its student loans over the next decade.

“Congress did not create federal student loans to generate revenue for the federal government – to the contrary, it gave the Department of Education a host of tools to ensure that federal student loan borrowers are treated fairly and with dignity,” reads the letter.

Instead of using those tools and following Congress’ directives, the senators say the Department has continued to let student loan borrowers be buried in debt.

As an example, the letter cites the Department’s failure to give borrowers a clear idea of how to exercise an option under the Higher Education Act that allows for the cancellation of student loan borrowers’ debts the college acts in a way that hurt the quality of their education or their finances.

“Similarly, the Department of Education has broad authority to compromise, modify, discharge, and cancel student debts,” the letter states. “Instead, the Department continues to gouge borrowers who struggle to meet their payments, subjecting them to debt collection, wage and benefit withholding, and other harsh penalties…

Continue Reading at the Consumerist…

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Student Debt Crisis’ Statement on the Department of Education’s Announcement to End Contracts with Five Debt Collection Agencies. http://studentdebtcrisis.org/student-debt-crisis-statement-on-the-department-of-education/ http://studentdebtcrisis.org/student-debt-crisis-statement-on-the-department-of-education/#comments Mon, 02 Mar 2015 18:01:28 +0000 http://studentdebtcrisis.org/?p=2663 FOR IMMEDIATE RELEASE
March 2nd, 2015
CONTACT: Natalia Abrams
Phone: (646) 820-8037
Email: natalia@studentdebtcrisis.org

Student Debt Crisis’ Statement on the Department of Education’s Announcement to End Contracts with Five Debt Collection Agencies.

“We are enthusiastic about the Department of Education’s announcement to end their contract with five private debt collection companies. These companies have for years taken advantage of student loan borrowers by using unscrupulous practices to harm borrower’s credit and financial stability.  We encourage the Department of Education to take action to complete this proposal.  In addition, we ask that the same scrutiny placed on these predatorial private debt collectors also be applied to ALL student loan servicers”

~ Natalia Abrams, Executive Director

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The Case For Student Loan Debt Forgiveness http://studentdebtcrisis.org/the-case-for-student-loan-debt-forgiveness/ http://studentdebtcrisis.org/the-case-for-student-loan-debt-forgiveness/#comments Wed, 18 Feb 2015 21:05:57 +0000 http://studentdebtcrisis.org/?p=2659 Debt forgiveness exists! It exists in the housing sector in the form of foreclosure. Hospitals routinely agree to reduce or eliminate health care debt. Credit card debt can be forgiven through bankruptcy. It’s time we offered debt forgiveness for student loans.

In 2009, Robert Applebaum jump-started the student debt forgiveness movement when he wrote an essay entitled “Forgive Student Loan Debt to Stimulate the Economy”. Applebaum argued that we could stimulate the economy faster than the hefty bank bailouts by forgiving all of America’s student loan debt. The logic was clear: millions of burdened student loan borrowers are less likely to purchase a home, new car, health care or save for retirement if they instead try to pay off growing debt. With all this student debt hampering the economy, it’s time to answer the question: if we allow the forgiveness of other forms of debt, why not student loan debt?

Even during a period of rapid growth and prosperity, more than 41 million Americans still shoulder the burden of $1.2 trillion in student loan debt. Student debt has grown so quickly that it has surpassed credit card debt, and is now second only to mortgages in the United States. That makes the student debt crisis a major economic problem. It was less than a decade ago that we saw the sub-prime mortgage market spiral unsustainably out of control at a similarly rapid pace. When that bubble inevitably burst, it took the entire economy down with it.

Immediately following the market crash the streets of American neighborhoods were lined with foreclosure signs, a stark reminder of the depressed economy. It’s not a good method of loan forgiveness, but for millions of Americans, foreclosure was their only hope to rid themselves of unpayable debt. Our current economic recovery has been aided because homeowners who were unable to pay their mortgages had an escape.

Today’s student debt crisis may not be visible through signs posted on the street, but it is still severe. Struggling student loan borrowers are defaulting on their debt at an alarming rate of more than 15%. Similarly, by late 2009, 14.4% of all mortgages were delinquent or in foreclosure. Borrowers are finding themselves in the same trap that we saw during the Great Recession — an inability to pay rising debts. Unlike a mortgage, however, a student loan borrower cannot walk away from their debt. Nor can they discharge student loan debt through bankruptcy, as can be done with credit cards…

Read the entire article at Blue Nation Review…

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